CANYON RESOURCES CORP - 10-K Annual Report

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

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

Commission file number 1-11887

CANYON RESOURCES CORPORATION
(a Delaware corporation)

84-0800747
(I.R.S. Employer Identification No.)

14142 Denver West Parkway, Suite 250, Golden, Colorado 80401

Registrant's telephone number: (303) 278-8464

Securities registered on The American Stock Exchange
Pursuant to Section 12(b) of the Act:

Common Stock, $.01 par value

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 than 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. [X]

Indicate by check mark whether the registrant is an accelerated filter (as
defined in Rule 12b-2 of the Exchange Act.) Yes No X
--- ---

The aggregate market value of the 19,300,805 shares of the registrant's voting
stock held by non-affiliates on June 28, 2002 was approximately $41,496,731.

At February 21, 2003, there were 20,996,591 shares of the registrant's common
stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of Form 10-K is incorporated herein by
reference to the registrant's definitive Proxy Statement relating to its 2003
Annual Meeting of Stockholders, which will be filed with the Commission within
120 days after the end of the registrant's fiscal year.
Total Number of Pages: 79
Exhibit Index: Page 74

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CANYON RESOURCES CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

GLOSSARY OF SELECTED MINING TERMS

CUT-OFF GRADE: The minimum grade of ore used to establish reserves.

DORE: Unrefined gold and silver bullion consisting of approximately 90% precious
metals that will be further refined to almost pure metal.

FEASIBILITY STUDY: An engineering study designed to define the technical,
economic, and legal viability of a mining project with a high degree of
reliability.

GRADE: The metal content of ore, usually expressed in troy ounces per ton.

HEAP LEACHING: A method of recovering gold or other precious metals from a heap
of ore placed on an impervious pad, whereby a dilute leaching solution is
allowed to percolate through the heap, dissolving the precious metal, which is
subsequently captured and recovered.

MINERALIZED MATERIAL: Rock containing minerals or metals of potential economic
significance.

NET SMELTER RETURN ROYALTY: A defined percentage of the gross revenue from a
resource extraction operation, less a proportionate share of transportation,
insurance, and processing costs.

PROBABLE RESERVES: Reserves for which quantity and grade and/or quality are
computed from information similar to that used for Proven Reserves, but the
sites for inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower than
that for Proven Reserves, is high enough to assume continuity between points of
observation.

PROVEN RESERVES: Reserves for which (a) quantity is computed from dimensions
revealed in outcrops, trenches, workings or drill holes; grade and/or quality
are computed from the results of detailed sampling, and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well-defined that size, shape, depth and mineral content of
reserves are well-established.

RECLAMATION: The process of returning land to another use after mining is
completed.

RECOVERABLE: That portion of metal contained in ore that can be extracted by
processing.

RESERVES: That part of a mineral deposit which could be economically and legally
extracted or produced at the time of reserve determination.

RUN-OF-MINE: Mined ore of a size that can be processed without further crushing.

STRIP RATIO: The ratio between tonnage of waste and ore in an open pit mine.

UNPATENTED MINING CLAIM: A parcel of property located on federal lands pursuant
to the General Mining Law and the requirements of the state in which the
unpatented claim is located, the paramount title of which remains with the
federal government. The holder of a valid, unpatented lode-mining claim is
granted certain rights including the right to explore and mine such claim under
the General Mining Law.

WASTE: Barren rock or mineralized material that is too low in grade to be
economically processed.

1

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

The matters discussed in this report on Form 10-K, when not historical
matters, are forward-looking statements that involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results. Such factors include, among others, the speculative nature of
mineral exploration, commodity prices, production and reserve estimates,
environmental and governmental regulations, availability of financing, force
majeure events, and other risk factors as described from time to time in the
Company's filings with the Securities and Exchange Commission. Many of these
factors are beyond the Company's ability to control or predict. The Company
disclaims any intent or obligation to update its forward-looking statements,
whether as a result of receiving new information, the occurrence of future
events, or otherwise.

GENERAL

Canyon Resources Corporation, a Delaware corporation (the Company or
Canyon), is a Colorado-based company, which was organized in 1979 to explore,
acquire, develop, and mine precious metal and other mineral properties. The
Company or Canyon is used herein to refer to all of the wholly-owned and
majority-owned subsidiaries of Canyon Resources Corporation. (See organizational
chart on next page.) Since 1986, the Company has been a reporting company. Its
securities were traded on NASDAQ until August 16, 1996. On August 19, 1996, the
Company listed its shares for trading on The American Stock Exchange.

The Company is involved in all phases of the mining business from early
stage exploration, exploration drilling, development drilling, feasibility
studies and permitting, through construction, operation and final closure of
mining properties.

Canyon has gold production operations in the western United States, and
has conducted exploration activities in the search for additional valuable
mineral properties in the western United States and in a number of areas in
Latin America and Africa. The Company's exploration and development efforts
emphasize precious metals (gold and silver).

Once acquired, mineral properties are evaluated by means of geologic
mapping, rock sampling, and geochemical analyses. Properties having favorable
geologic conditions and anomalous geochemical results usually warrant further
exploration by the Company. In almost all cases, exploration or development
drilling is required to further test the mineral potential of a property.

Properties which have a demonstrated inventory of mineralized rock of a
potentially economic nature are further evaluated by conducting various studies
including calculation of tonnage and grade, metallurgical testing, development
of a mine plan, environmental baseline studies and economic feasibility studies.
If economics of a project are favorable, a plan of operations is developed and
submitted to the required governmental agencies for review. Depending on the
magnitude of the proposed project and its expected environmental impact, a
vigorous environmental review may be required prior to issuance of permits for
the construction of a mining operation.

The organizational chart on the following page reflects the Company's
legal ownership of subsidiaries and ownership interests in various gold
properties as of 12/31/02.

2

--------------------------------
| |
| Canyon Resources Corporation |
| |
--------------------------------
|
- -------------------------------------------------------------------------------|
| --------------------- ------------- |
| 100% | CR Kendall | 100% | Kendall | | 36.125%(1)
|------------------| Corporation |--------------------| Mine | |
| --------------------- ------------- |
| |
| --------------------- ------------- |
| 100% | Judith Gold | | Kendall | |
|------------------| Corporation | | Lands | |
| --------------------- ------------- |
| |
| ------------------- -----------------
| 63.875%(1) | Seven-Up Pete | 100% | McDonald Gold |
| ------------------------------------------| Venture |-----------| Project |
| | ------------------- -----------------
| |
| ---------------------
| 100% | CR Montana |--------------------------------
|------------------| Corporation | |
| --------------------- 100% |
| ---------------------
| --------------------- | 900,000 acres |
| 100% | CR Minerals | | Western Montana |
|------------------| Corporation | ---------------------
| | (Inactive) |
| ---------------------
| ------------------------------------------------------
| | | |
| --------------------- 100% | 100% |
| 100% | CR Briggs | --------------- -----------------------------------
|------------------| Corporation | | Briggs Mine | | Panamint Exploration Properties |
| --------------------- --------------- -----------------------------------
|
| ---------------------
| | CR Brazil | -----------------------------------
| 100% | Corporation | 100% | Canyon Mineracao do Brasil Ltda |
|------------------| (Inactive) |---------------| (Inactive) |
| --------------------- -----------------------------------
|
| --------------------------
| | |
| --------------------- ------------------
| 100% | CR International | | Mina Cancha(2) |
|------------------| | ------------------
| ---------------------
|
| ---------------------
| 100% | Canyon Resources |
|------------------| (Chile) S.A. |
| | (Inactive) |
| ---------------------
|
| ---------------------
| 100% | Canyon De Panama |
|------------------| S.A. |
| | (Inactive) |
| ---------------------
|
| ---------------------
| 90%(3) | Canyon Resources |
|------------------| Venezuela C.A. |
| | (Inactive) |
| ---------------------
|
| ---------------------
| 90%(3) | Canyon Resources |
|------------------| Africa Ltd |
| | (Inactive) |
| ---------------------
|
| ---------------------
| 90%(3) | Canyon Resources |
|------------------| Tanzania Limited |
| (Inactive) |
---------------------

(1) Subject to provisions of a purchase agreement.

(2) Property has been sold with a retained 2.5% NSR royalty.

(3) Subject to dilution by 10% owner after $5 million of expenditures.

3

The Company has conducted a portion of its mineral exploration and
development through joint ventures with other companies. The Company has also
independently financed the acquisition of mineral properties and conducted
exploration and drilling programs and implemented mine development and
production from mineral properties in the western United States and exploration
programs in Latin America and Africa. (See "Item 2 - Properties.")

The Company is continually evaluating its properties and other
properties, which are available for acquisition, and will acquire, joint
venture, market to other companies, or abandon properties in the ordinary course
of business subsequent to the date hereof.

OPERATIONS

During 2002, the Briggs Mine, located in southeastern California,
produced 57,058 ounces of gold and 14,914 ounces of silver. (See "Item 2 -
Properties - Production Properties - Briggs Mine.")

During 2002, the Kendall Mine, located near Lewistown, Montana,
continued with closure activities, principally relating to collection, treatment
and disposal of water contained in the process system and mine area. (See "Item
2 - Properties - Production Properties - Kendall Mine.")

During 2002, all of the Company's revenues (gold and silver) were
generated by its Briggs Mine in California. In addition, proceeds were realized
on the sales of certain property interests and other equipment in 2002. In 2003
and subsequent years, the Company anticipates that all of its revenues will be
derived from precious metals. The Company also anticipates the sale of certain
property interests in 2003.

FINANCING

SALE OF DEBENTURES

In March 2003, the Company completed a private placement financing of
6%, two year convertible debentures, raising approximately $3.3 million.
Approximately $1.2 million of the proceeds were used to pay off the existing
Briggs Mine debt, with the remaining amount retained for general corporate
purposes. The debentures require quarterly interest payments, and the holders
have the right to convert the principal to common stock of the Company at any
time at a conversion rate, subject to certain adjustments, of $1.38 per share of
common stock.

ASSET SALES

In June 2002, the Company sold its crushing equipment at the Briggs
Mine for approximately $2.6 million. Approximately $1.5 million of the proceeds
were applied to the Briggs Mine debt.

During 2002, the Company received approximately $1.5 million in
connection with the sale of a foreign exploration property and approximately
$0.3 million from the sale of certain fee lands and mineral rights in western
Montana. The Company anticipates closing on an additional $0.3 million of
mineral rights and fee land sales in 2003, however, these funds have been
sequestered by court order. (See " Item 3 - Legal Proceedings - CR Kendall -
Water Rights Lawsuit.")

EQUITY TRANSACTIONS

In February 2002, the Company issued 49,351 shares of common stock in
connection with certain stock option exercises at $1.00 per share.

4

During the period March through April 2002, the Company raised a total
of $2.0 million through the sale of 1,602,860 units consisting of one share of
common stock and a warrant to purchase one share of common stock at a price of
$1.67 per share. The warrants expire on September 30, 2003.

In June 2002, the Company issued 567,622 shares of common stock with a
fair market value of $0.7 million to certain creditors of the Briggs Mine as
payment for goods and services.

In August 2002, the Company issued 2,500 shares of common stock as
consideration for a mining lease.

During 2002, the Company issued 94,502 shares to an employee as
compensation for services.

During the period December 2001 through January 2002, the Company
raised a total of $1.85 million ($1.65 million in 2001 and $0.2 million in 2002)
through the sale of 2,127,016 shares of common stock.

BRIGGS MINE LOAN FACILITY

On December 6, 1995, the Company's wholly-owned subsidiary, CR Briggs
Corporation, obtained a $34.0 million loan facility to finance the capital
requirements of mine construction and working capital for its Briggs Mine in
California. The Company is guaranteeing the loan obligations of CR Briggs
Corporation, and the loan facility is collateralized by a first mortgage lien on
the property, non-leased assets of CR Briggs Corporation, and a pledge of the
Company's stock in CR Briggs Corporation.

The following table summarizes principal payments and weighted average
interest rates on the loan facility during the last three years:

1. Net to Canyon's interest in the property.

2. Subject to sales contracts expected to close in 2003.

3. To date - an additional amount of $10 million will be paid to Phelps Dodge
when all permits have been achieved or construction commences.

4. See discussion at "Development Properties - Seven-Up Pete Venture - Legal
Status."

5. Property has been sold with a retained 2.5% nsr royalty.

PRODUCTION PROPERTIES

BRIGGS MINE

GENERAL

The Briggs Mine, located on the west side of the Panamint Range near
Death Valley, California, was acquired by the Company in 1990. It is 16 miles
northeast of Trona and 35 miles northeast of Ridgecrest in Inyo County,
California. Access from Trona is by 33 miles of paved and graded gravel roads.
The Company owns or controls, through leasehold interests, 100% of the Briggs
Mine, subject to a 3% net smelter returns royalty on gold produced from April 1,
2001 onward in excess of 175,000 ounces.

9

Briggs' holdings include 347 unpatented mining claims and 2 patented
mining claims that comprise an area of approximately 4,800 acres. The passage of
the California Desert Protection Act in 1994 removed all of the Company's
holdings from Wilderness Study Areas. The Company's mining claims are now
located on land prescribed for multiple use management by the U.S. Bureau of
Land Management. Patent applications were filed for certain claims on the Briggs
deposit during 1993; however, no assurances can be made that these patent
applications will be issued.

OPERATIONS

The Briggs Mine is an open-pit, heap leach operation, initially
designed to produce an average of 75,000 ounces of gold per year over a
seven-year life. During the past five years, the ore has been crushed in three
stages to a minus 1/4 inch size and conveyor stacked on the leach pad. Gold is
recovered from leach solutions in a carbon adsorption plant and refined into
dore bars on site. The Company increased the initial design production rate to
approximately 85,000 ounces per year in 1999.

The Briggs Mine was constructed in 1996 and, through December 31, 2002,
has produced 476,991 ounces of gold and 132,362 ounces of silver. Since 1996, a
total of 66.9 million tons of rock have been mined by open-pit methods,
including 44.8 million tons of waste. Of the 22.1 million tons of ore mined,
18.3 million tons have been crushed and, along with 3.7 million tons of
run-of-mine ore and 0.1 million tons of underground ore, have been placed on the
leach pad. A total of 668,128 ounces of gold has been placed on the leach pad
during this period. Recoverable ounces in leach-pad inventory at December 31,
2002, were 33,360 ounces of gold.

During 1997, 9.3 million tons were mined, of which 2.8 million tons
were ore with an average grade of 0.033 ounce of gold per ton and a waste-to-ore
strip ratio of 2.3 to 1. The Briggs Mine produced 66,769 ounces of gold and
19,215 ounces of silver in 1997.

Lower crushing throughput and higher than expected operating costs were
experienced in 1997, principally relating to unsatisfactory performance of the
tertiary stage vertical shaft impact crushers. In early 1998, these units were
replaced with three cone crushers with the objective of reducing costs and
increasing throughput. A scheduled expansion of the leach pad was completed
during 1997 at a cost of $2.1 million. This expansion was financed by drawing on
the final $4.0 million tranche of the Company's loan facility. (See "Item 1 -
Business - Financing.")

During 1998, 10.5 million tons were mined, of which 3.4 million tons
were crusher ore with an average grade of 0.030 ounce of gold per ton and a
waste-to-ore strip ratio of 2.0 to 1. The Briggs Mine produced 80,316 ounces of
gold and 22,138 ounces of silver in 1998.

During 1999, 9.8 million tons were mined, of which 4.3 million tons
were crusher ore with an average grade of 0.028 ounce of gold per ton and 0.9
million tons were run-of-mine (non-crusher) ore with an average grade of 0.012
ounce of gold per ton. The average waste-to-ore strip ratio was 0.9 to 1. The
Briggs Mine produced 86,669 ounces of gold and 24,044 ounces of silver in 1999.

During 2000, 11.4 million tons were mined, of which 3.6 million tons
were crusher ore with an average grade of 0.025 ounce of gold per ton and 0.5
million tons of run-of-mine (non-crusher) ore with an average grade of 0.014
ounce of gold per ton, as well as 1.8 million tons of waste rock that was
pre-stripped from the North Briggs deposit. The average waste-to-ore strip ratio
within the Briggs deposit for the year was 1.3 to 1. The Briggs Mine produced
86,621 ounces of gold and 23,220 ounces of silver in 2000.

During 2001, a total of 11.5 million tons of waste and ore was open-pit
mined from the main Briggs, North Briggs, and Goldtooth deposits. Ore crushed
and placed on leach pad totaled 3.4 million tons with an average grade of 0.036
opt gold. In addition, 0.3 million tons of lower grade (0.023 opt gold) ore were
placed on pad without crushing, as run-of-mine ore. A total of 137,797 ounces of
gold contained in ores was placed on the leach pad during the year. Included in
these totals are 21,700 tons of rock from the underground development workings
(both ore and subore) with an average grade of 0.193 opt gold. The Briggs Mine
produced 96,141 ounces of gold and 28,177 ounces of silver in 2001.

10

During 2001, mining of ore continued from the main Briggs pit and was
commenced from the North Briggs and Goldtooth deposits. In addition, underground
development work was started in the high-grade (greater than 0.20 opt gold) zone
of the eastern portion of the North Briggs deposit. An expansion of the capacity
of the leach pad by 4.5 million tons was constructed, bringing the total pad
capacity to 22.7 million tons. In addition, a pad recirculation system was
installed in 2001, whereby barrens solution is applied first to previously
leached areas of the pad and then applied to fresh ore. This technique is used
to accelerate recovery of residual gold inventory from earlier ores placed on
the leach pad.

Underground development work by an underground mining contractor began
in October 2001 on a 10- to 20-foot thick, high-grade (greater than 0.20 opt
gold) zone of the North Briggs deposit, with portal access from the high wall at
the eastern edge of the North Briggs open pit. Through September 2002, the
underground workings produced 111,400 tons of ore with an average grade of 0.188
opt gold, containing 20,980 ounces.

In mid-January 2002, the Company shut down its three stage crushing
unit and mined and placed only run-of-mine ore on the leach pad for the
remainder of the year. During 2002, a total of 8.9 million tons of waste and
run-of-mine ore was open pit mined from the Briggs, North Briggs and Goldtooth
deposits. Run-of-mine ore totaled 1.8 million tons at an average grade of 0.036
opt gold. In addition, 89,700 tons of ore from the North Briggs underground
workings were contract mined with an average grade of 0.187 opt gold. The Briggs
Mine produced 57,058 ounces of gold and 14,914 ounces of silver in 2002.

Statistical production and financial data for the last five years for
the Briggs Mine are shown on the following table.

11

BRIGGS MINE OPERATIONS

(1) Commencing mid-January 2002, all ore processed was run-of mine.

(2) As calculated under The Gold Institute's Production Cost Standard.

(3) Prior to asset write-down, interest income (expense) and other
non-operating items.

(4) Excludes exploration and development drilling and permitting costs for
reserve expansion.

Proven and probable reserves for the Briggs Mine, which includes the
Goldtooth pit, the North Briggs layback and the Briggs South Ultimate area, as
calculated by the Company at a gold price of $325 per ounce are shown on the
following table.

(1) Tons and grade include a 5% dilution factor. Heap leach gold
recovery ranges from 55% to 80% depending on ore type.

(2) Includes 33,360 ounces of recoverable gold in leach pad and plant
inventory.

ENVIRONMENTAL REGULATION

The Briggs Mine operates under the requirements of the following
permits and agencies: 1) Plan of Operations, U.S. Bureau of Land Management; 2)
Mining and Reclamation Plan, Inyo County; 3) Waste Discharge Requirements,
Lahontan Regional Water Quality Control Board; 4) Permits to Operate, Great
Basin Unified Air Pollution Control District; and 5) Section 404 Dredge and Fill
Permit, Army Corps of Engineers. In January 2000, the Briggs Mine obtained an
amendment to its operating permit that allows mining of the North

12

Briggs and Goldtooth deposits. The amendment was obtained through an
Environmental Assessment conducted by the U.S. Bureau of Land Management and an
equivalent document approved by the Inyo County Planning Commission. In December
2000, the Briggs Mine obtained an amendment which allows increase of the leach
pad total height to 190 feet, from the previous limit of 150 feet, approved by
the U.S. Bureau of Land Management, the Inyo County Planning Commission, and
Lahontan Regional Water Quality Board. The permits issued to date are adequate
for all mine operations involving currently identified mineable reserves in the
Briggs deposit.

The BLM, Inyo County, the California Department of Conservation, and
the Lahontan Regional Water Quality Control Board (Lahontan) have jointly
required the Company to maintain a $3,030,000 reclamation bond to ensure
appropriate reclamation of the Briggs Mine. Additionally, Lahontan requires that
the Company maintain a $1,010,000 bond to ensure adequate funds to mitigate any
"foreseeable release" of pollutants to state waters. The principal amounts of
the bonds are subject to annual review and adjustment, and the Company has
partially collateralized the bonds as follows: (i) $0.149 million held directly
by the Surety; (ii) a bank Letter of Credit in the amount of $0.249 million
which is collateralized with cash; and (iii) a security interest in 28,000 acres
of real property mineral interests in Montana. In 2000, the Company agreed to
make additional cash deposits with the Surety totaling $1.5 million over a three
year period at the rate of $0.5 million per year, commencing June 30, 2001. The
Company has not made the $0.5 million deposit due on June 30, 2001, nor the $0.5
million deposit due on June 30, 2002, and is in discussions with the Surety to
reschedule the deposit requirements. If an acceptable rescheduling of the
deposit requirements cannot be agreed to, the Surety could seek to terminate the
bonds which could result in the Company becoming liable for the principal
amounts under its collateral agreement with the Surety.

KENDALL MINE

GENERAL

The Kendall Mining District is located approximately 20 miles north of
Lewistown, Montana, and is accessible by paved U.S. highway and graded dirt
roads. The property rights controlled by the Company include approximately 1,052
acres in 70 patented claims and fee land. The Company acquired most of the
patented mining claims (approximately 981 acres) through the purchase of all of
the shares of Judith Gold Corporation in January 2001.

The Kendall Mine was developed as an open-pit, heap-leach gold mine in
September 1988, under the management of the Kendall Venture, a joint venture
between the Company and Addwest Gold, Inc. (Addwest). On January 26, 1990, the
Company acquired all of the issued and outstanding common stock of Addwest and
through its wholly-owned subsidiary, CR Kendall Corporation, became the operator
and sole owner of the operating interest in the Kendall Mine.

OPERATIONS

Through 1995, the Kendall Mine operation leached gold and silver from
crushed ore on a year-round basis. Mining and crushing of all remaining ore was
completed in January 1995. Leaching of the remaining gold in the heap leach pads
continued through early 1998. All economic gold has now been recovered, and the
mine is currently in a reclamation and closure mode. The Kendall Mine produced
approximately 302,000 ounces of gold and approximately 136,000 ounces of silver
from 1988 through 1998.

During 1997, the two heap leach pads were rinsed of residual cyanide by
continuous circulation of water and a treatment plant using reverse osmosis
technology was installed to reduce dissolved metals so that water from the
process system could be discharged.

During 1998 and 1999, the Company tested the efficiency of a biocell in
removal of constituents from water of the Barnes King drainage. This passive
water-treatment system performed better than expectations. As

13

a result of the success of the test, biocells have been designed specifically
for each drainage so that they would remove the constituents and allow the clean
water to flow unimpeded downstream.

During 2000, the Company advanced investigation and planning for the
beneficial use of site waters in irrigation of down-drainage ranchlands. A
detailed proposal of such a plan was submitted to the Montana Department of
Environmental Quality in March 2001. If approved by the DEQ, this plan, instead
of the biocell installation, would be implemented.

During 2001 and 2002, the Company continued with closure activities,
principally relating to collection, treatment and disposal of water contained in
the process system and mine area, and revegetation of waste rock dump surfaces.

ENVIRONMENTAL REGULATION & RECLAMATION

The Kendall Mine operates under permits issued by the Montana
Department of Environmental Quality (DEQ) and other regulatory agencies. A life
of mine permit was granted by the DEQ on November 1, 1989. The Company is
negotiating details of final mine closure with the DEQ. The DEQ has approved the
portions of the closure plan related to recontouring, revegetation, drainage and
heap dewatering. Discussions of long-term water handling and heap closure
methods continue.

In early 1996, the Company installed a system to capture and collect
drainage from certain mine facilities. The DEQ, the Environmental Protection
Agency, and the Company have inspected the system subsequent to its initial
installation and have agreed on system improvements which have been completed.
The Company will maintain, monitor, and, if necessary, improve the system until
the DEQ determines that the system is no longer needed. In October 1997, the
Company applied for a Montana Pollutant Discharge Elimination System (MPDES)
permit to cover seepage from waste rock piles. The DEQ is reviewing the permit
application.

Reclamation has been ongoing throughout the life of the operation.
Disturbed areas are contoured and topsoil is replaced and reseeded as soon as
possible. Over the last several years, more than 200,000 trees and shrubs have
been planted and reclamation has been completed on three quarters of the
disturbed area of the Kendall mine site. The Company's reclamation and closure
expenditures in 2002 were approximately $0.2 million, primarily related to
treatment and disposal of process water, and capture and treatment of waste rock
dump seepage. Final reclamation will require recontouring of spent ore heaps,
roads and other areas and redistribution of topsoil, reseeding of some disturbed
areas, and implementation of long term water management system. The Company has
spent approximately $7.6 million on reclamation and closure activities at the
Kendall mine site through December 31, 2002, and expects to spend an additional
$1.5 million through mine closure. The Company has $1,896,300 on deposit in an
interest bearing account with the DEQ for reclamation at the Kendall Mine.

In February 2002, the DEQ issued a decision that a comprehensive
Environmental Impact Statement (EIS) is needed for completion of reclamation at
Kendall. The Company feels that it is crucial that reclamation proceed at
Kendall without further delay and, therefore, disagrees with the agency
decision, and is presently evaluating its course of action with respect to the
DEQ's decision.

Regulatory agencies must give final approval to all closure measures
and be satisfied that the mine has met all reclamation requirements. There is no
assurance of agency satisfaction with mine closure.

The Kendall Mine uses internal and external technical and legal experts
to monitor and ensure environmental compliance. The Company believes the
operation is currently in material compliance with all environmental and safety
regulations.

14

DEVELOPMENT PROPERTIES

SEVEN-UP PETE VENTURE

GENERAL

Prior to September 25, 1997, through its wholly-owned subsidiary, CR
Montana Corporation (CR Montana), the Company owned a 27.75% interest in the
Seven-Up Pete Venture (SPV) which includes the Seven-Up Pete gold deposit, the
McDonald gold deposit, and the Keep Cool exploration property. Phelps Dodge
Mining Company, a subsidiary of Phelps Dodge Corporation (Phelps Dodge), was the
operator of the SPV.

On September 25, 1997, Canyon and CR Montana purchased the 72.25%
participating interest in the Seven-Up Pete Venture, including the McDonald Gold
Project, from Phelps Dodge. The purchase increased Canyon's effective ownership
in the project to 100%. Canyon made an initial payment of $5 million to Phelps
Dodge, as part of a purchase price which was to be no less than $100 million and
no more than $150 million. No additional payment is required until after all
permits have been achieved or construction commences. In September 1999, Phelps
Dodge subsequently agreed to amend the purchase agreement which lowered the
residual payment obligation to $10 million, or, alternatively, one-third of any
award received by the Seven-Up Pete Venture as a result of a taking lawsuit
against the State of Montana. The purchase payment is collateralized only by the
72.25% participating interest and underlying assets transferred from Phelps
Dodge to Canyon.

The Seven-Up Pete and McDonald properties are located six to eight
miles east of Lincoln and 45 miles northwest of Helena, in Lewis and Clark
County, Montana. Access to the properties is by dirt roads from a paved highway
that crosses the property. The SPV consists of approximately 21 square miles of
patented and unpatented mining claims and mineral leases of fee and state land,
in general subject to a 5% net smelter returns royalty. During 1994, the state
lease upon which substantially all of the currently identified McDonald ore body
is located was amended. The amendment extended the primary ten-year term of the
lease for the time required for review and approval of permit applications for
development of the property, including the time required to resolve any appeals
of permit approvals. In addition, the lease may also be held thereafter by the
production of minerals in paying quantities or the payment of a delay rental of
$150,000 per month. The amendment also, along with similar amendments to five
other adjacent state leases, provides for cross-mining on all six leases and the
consolidation of the six leases under a single management unit.

In September 1999, the SPV obtained $3.5 million in funding from
Franco-Nevada Mining Corporation. The funding was in the form of $3.0 million in
cash and a commitment to maintain an existing $0.5 million reclamation bond. For
providing the funding, Franco-Nevada was to receive a 4% net smelter return
royalty from any mineral production from properties of the SPV or,
alternatively, one-third of any proceeds received by the SPV resulting from any
takings lawsuit. (See "Legal Status" below.)

In July 2000, Franco-Nevada Mining Company withdrew from all of its
interests in the SPV. Franco-Nevada transferred back to the SPV its 4% net
smelter return royalty and 1/3 of any property takings award, in exchange for
the return of $1 million of the $3 million paid earlier by Franco-Nevada to SPV.

LEGAL STATUS

On November 3, 1998, an anti-mining initiative, I-137, passed 52% to
48% by a vote of the Montana electorate, effectively bringing permitting work on
the SPV to a standstill. This bill bans development of new gold and silver mines
which use open-pit mining and cyanide in the treatment and recovery process in
the State of Montana. For most of the campaign period leading up to the vote,
mining companies and employees were prevented from campaigning due to a
previously passed initiative (I-125) which prohibited campaign expenditures by
"for-profit" entities. Just 10 days prior to the election, a federal judge
declared the prohibition "unconstitutional."

15

On September 24, 1998, the Montana Department of Natural Resources
(DNRC), the entity that administers state mineral leases, unilaterally decided
to cancel the permitting extension of the 10-year lease term of the state leases
that pertain to the McDonald Gold Project. This was provoked by Canyon's
inability to continue permitting at McDonald due to the anti-mining initiative,
I-137, and would require the Company, after a period of approximately seventeen
months, to commence paying a delay rental of $150,000 per month in order to
maintain the leases. In February 2000, pursuant to its September 1998 decision,
the DNRC determined that the primary terms of the mineral leases had expired. In
August 2000, the SPV filed a report with the DNRC, containing technical
analyses, conducted by 12 individuals and research laboratories with extensive
experience in environmental chemistry, extractive metallurgy and mineral
processing technology, underground mining technologies, and mining engineering
and economic analyses, which demonstrates conclusively that the Venture's
proposed open-pit mining and cyanide heap-leach processing is the only
technology that can be applied economically to the McDonald and Seven-Up Pete
gold/silver deposits. Further, the analyses demonstrate that the proposed
open-pit, cyanide heap leaching technology results in maximum resource
conservation of this valuable and unique deposit (McDonald) and poses far less
risk to human health and the environment than any of the alternative
technologies. All alternative existing technologies for development of the
deposits within the constraints of I-137 were investigated and analyzed. In
February 2001, on the basis of the allegation that the SPV had terminated
permitted activities under the leases, the DNRC declared the leases invalid. The
Company has initiated judicial review of the agency's decisions and has added
the judicial review to its lawsuit against the State of Montana, described
below. It is the Company's position that the permitting process has been
interrupted by the threat and passage of I-137 and, thus, the permit extension
and leases are continued until the governmental impediment is resolved.

The SPV filed two lawsuits in April 2000 against the State of Montana
seeking to have I-137 declared unconstitutional or, alternatively, seeking to
obtain a "takings" or damage award for the lost value of the McDonald, Seven-Up
Pete and Keep Cool mineral properties. These lawsuits are based on, amongst
others, (i) the right not to be deprived of property without due process of law;
(ii) the right to equal protection under the laws; and (iii) the right to be
protected against laws which impair the obligations of existing contracts. The
suit further asserts that the State, by enacting I-137, has breached its
contractual obligations and its covenant of good faith and fair dealing with the
SPV. Since 1989, the SPV had expended more than $70 million in exploration and
development of the properties which include six mineral leases granted by the
State for the purpose of mining metalliferous minerals. For purposes of the
takings aspect of the lawsuit, alternative technology analyses submitted to the
DNRC (and the court) demonstrate that enactment of I-137 has "taken" the total
value of the properties from the SPV. The amount of a takings reward would be
the value of taken property as determined by the court. The Company expects to
present evidence that the value of the taken property could be as high as
several hundred million dollars before litigation and related expenses.

The United States District Court issued a ruling August 30, 2001, in
which the Court dismissed the SPV's substantive due process claim but, as
requested by the SPV, ruled that the remainder of the SPV's claims could be
pursued at such time as the State lawsuit was concluded. The Montana State
District Court issued a ruling November 1, 2001 in response to a Motion to
Dismiss and a Motion for Summary Judgment by the State of Montana. In this
ruling, the Court dismissed four of the SPV's fourteen counts, including its
substantive due process and equal protection challenges to I-137's validity. The
decision maintained for adjudication the contract impairment validity challenge,
contract damage claims, and all of the takings claims. Following the November
2001 ruling by the State District Court, the State filed a new Motion for
Summary Judgment as to all claims. In an Order dated December 9, 2002, the Court
granted the State Summary Judgment on all of the remaining legal claims of the
Company's lawsuit and denied the Company's Petition for Judicial Review of the
DNRC's actions regarding termination of the state leases. On January 14, 2003,
the Company filed an appeal with the Montana Supreme Court of the State District
Court Order.

In March 2001, the Sieben Ranch Company (SRC) announced that it is
suing the State of Montana to overturn I-137 and to seek a takings damage award
caused by the enactment of I-137. The SRC lawsuit closely parallels the lawsuits
filed against the State by Canyon Resources and the SPV. The SRC owns lands that
checkerboard the State mineral leases of the McDonald gold project. Under
contracts with SPV, SRC is the recipient of mineral lease rental payments and
potentially royalty payments should I-137 be overturned, permits achieved, and
mine development occur.

16

GEOLOGY AND EXPLORATION

The McDonald and Seven-Up Pete deposits, described below, cannot be
developed as operating mines unless and until the anti-mining initiative, I-137,
previously described under Legal Status, is overturned, set aside, or modified.
As a result, neither the McDonald nor Seven-Up Pete deposits constitute
"reserves" as defined in Industry Guide No. 7, which stipulates the requirement
for legal extraction in the definition of proven and probable reserves. No
additional information which has been or may be issued by the Company with
respect to these properties should be deemed "reserves" as such are defined by
the Securities and Exchange Commission.

McDonald Property

During 1989 and 1990, exploration conducted on the McDonald property
included geophysical and geochemical surveys, preliminary metallurgical testing,
and drilling of 76 holes for a total of 41,331 feet. This early exploration
drilling discovered a sizeable gold deposit. The McDonald property is partially
covered by a siliceous sinter deposited by an ancient hot spring system. The
sinter overlies shallow dipping volcanic units which have been strongly
fractured and mineralized. The gold mineralization occurs primarily in a
favorable rhyolitic volcanic unit. Drilling on the McDonald property continued
from 1991 through 1994.

In 1993, the SPV commissioned Davy International to complete a
Feasibility Study. The study indicated that 205.1 million tons of the McDonald
deposit, with an average grade of 0.025 opt, could be mined economically (at a
gold price of $375/oz.) in an open-pit, heap-leaching operation. The study
indicated that mining and crushing of 121 million tons of mineralized material
above a 0.016 opt cutoff grade (with an average grade of 0.034 opt) and mining
and direct loading onto the leach pad of an additional 84 million tons of lower
grade mineralized material (averaging 0.012 opt) all could be mined, with an
expected average 72% recovery of the contained gold.

Through the end of 1996, the McDonald gold deposit had been delineated
through the drilling of 609 drillholes, containing 469,000 feet, over an area of
approximately 8,000 feet in east-west dimension and 5,000 feet in north-south
dimension. Seventy-nine of these drillholes, including 56,300 feet, were
coreholes. This data base includes 168 holes drilled since the 1993 Feasibility
Study. Every five foot sample interval has been assayed by outside commercial
labs for its gold content, with routine check assays. The rock obtained in the
coreholes was used extensively for metallurgical testing of leaching
characteristics of the deposit.

In spite of the prohibition of development and mining the McDonald
deposit posed by I-137, but because of the need for an updated design of the
project should I-137 be overturned, in late 2001, the Company commenced a
redesign of the McDonald Gold Project to integrate the results of additional
metallurgical and drilling data, the lower gold price, and information obtained
from public hearings on the Plan of Operations submitted in 1994, all changed
conditions since the 1993 Davy International Feasibility Study. These factors
were combined with the objective of producing a redesign which could obtain
lower capital and operating costs.

The resulting redesign of the McDonald Gold Project, conducted by the
Company's engineering staff (at a $275/oz gold price), has produced a
pre-feasibility study for an open-pit mining operation utilizing a dedicated
leach pad with in-pad solution storage. If I-137 were to be overturned and
development of the project were legally possible, Canyon's redesign
pre-feasibility indicates that gold and silver can be produced profitably from
the McDonald deposit at a $275/oz gold price. The redesign utilizes average
recovery factors of 68.4% and 28.3% for gold and silver, respectively, of the
total content of each metal in the run-of-mine ore placed on leach pad. The
redesign integrates the following environmental advantages over the 1993 design:

17

-no facilities located on the alluvial valley of the Blackfoot River

-in-pad solution storage, therefore, no open ponds

-no relocation of State Highway 200

-mine buildings and facilities located out of sight and away from the
highway

-waste rock dumps lined for fluid containment

MCDONALD GOLD DEPOSIT(1)
MINERALIZED MATERIAL

(1) Currently constrained from development due to the Montana anti-mining law,
I-137, the validity of which has been challenged by several lawsuits (See
"Legal Status" above).

(2) Cutoff grade is the lowest grade of gold that is included in each category
of tons and grade of mineralized material.

Environmental baseline studies have been conducted since 1989,
providing the necessary information to design and locate facilities for the
proposed McDonald gold mine. Baseline studies include air quality, meteorology,
surface water, groundwater, wildlife, fisheries, aquatics, vegetation, soils,
recreation, transportation, visual resources, wetlands, cultural resources, and
socioeconomics.

In 1994, the SPV completed environmental baseline and engineering
studies that demonstrate that the proposed McDonald gold mine can be operated in
an environmentally sound manner. This information was used to prepare and file
an application for Plan of Operations with the Montana Department of
Environmental Quality (DEQ) in November 1994. The DEQ declared the application
complete in 1996 and was preparing an Environmental Impact Statement (EIS) with
the Montana Department of Natural Resources and Conservation (DNRC) and the U.S.
Army Corps of Engineers (COE) as co-lead agencies.

The agencies hired experienced consulting firms to prepare the EIS. The
consultants were to complete the EIS under supervision of the lead agencies with
the SPV bearing all costs through an arrangement with the lead agencies. The
lead agencies were actively preparing the EIS when the threat of the anti-mining
initiative, I-137, was proposed mid-year 1998. (See "Legal Status."). With the
threat of passage and the actual passage of I-137 in November 1998, all
permitting work on the McDonald project was suspended.

Most of the McDonald gold deposit occurs on land owned by the State of
Montana and is subject to a 5% net smelter return royalty payable to the state
school lands trust, the principal beneficiary of which is Montana Tech, part of
the state university system. A minor portion of the McDonald gold deposit occurs
on land owned by the Sieben Ranch Company (SRC) and is subject to a 5% net
smelter return royalty

Seven-Up Pete Property

There are no current plans to develop or mine the Seven-Up Pete deposit
at this time, in that I-137 currently prohibits its development. Prior to its
development at any time in the future, an Environmental Impact

18

Statement for Seven-Up Pete would have to be prepared, which would consider the
cumulative impact of simultaneous operation of this property and the McDonald
operation.

Between 1989 and 1993, exploration, bulk sampling, development studies,
metallurgical testing, and environmental baseline studies were conducted on the
Seven-Up Pete property. By 1993, the total drilling on the property was 378
holes for 159,410 feet of drilling. A draft Preliminary Feasibility Study was
completed in January 1993, updating an earlier 1991 study. The 1993 Preliminary
Feasibility Study indicates that the Seven-Up Pete gold deposit contains 10.3
million tons of mineralized rock with an average grade of 0.058 ounce of gold
per ton.

A comprehensive Pre-Feasibility Study completed in early 1999 documents
that the Seven-Up Pete deposit is economically viable at gold prices between
$300 per ounce and $350 per ounce when developed in conjunction with the nearby
McDonald Gold Project. The Seven-Up Pete mineralized material would be mined in
an open pit, hauled by truck to the McDonald site, and crushed and heap leached
at the McDonald facility. Using a dilution factor of 25%, the Seven-Up Pete
deposit contains 11.7 million tons of mineralized material, with an average
grade of 0.051 ounce of gold per ton and 0.24 ounce of silver per ton.

The Seven-Up Pete property is covered by middle Tertiary andesitic
volcanic rocks. The most important controls on mineralization at Seven-Up Pete
are north to northwest-trending faults that have localized
quartz-pyrite-precious metal mineralization. The structures generally dip to the
west and can be up to 150 feet wide. Gold and silver occur in high grade quartz
veins that are localized near the margins of the shear zone, as well as in lower
grade shattered zones between the high grade veins. Gold mineralization occurs
as free gold as well as submicroscopic particles associated with pyrite.

ENVIRONMENTAL REGULATION

The McDonald deposit occurs on private and state lands. There are no
federal lands involved in the Plan of Operations for the McDonald project. The
Seven-Up Pete deposit occurs on patented mining claims within a U.S. National
Forest. As with all mining projects, careful environmental study and permitting
will be required before a mine can be developed on either property. There are no
assurances that all needed permits will be issued nor that, in the event they
are issued, such issuance will be timely, nor that conditions contained in
permits issued by the agencies will not be so onerous as to preclude
construction and operation of the project.

Mining activity in the United States is subject to the granting of
numerous permits under applicable Federal and State statutes, including, but not
limited to, the National Environmental Policy Act, the Clean Water Act, the
Clean Air Act, and the Montana Environmental Policy Act. It is not legal to
engage in mining activity without securing the permits required by these and
other statutes. Initiation of gold production at the McDonald project will thus
require the granting of numerous permits, some of which are discretionary.

Major permits include the Operating Permit from the DEQ, the Operating
Plan from the DNRC, the Air Quality Permit (DEQ), the Montana Pollutant
Discharge Elimination System Permit (DEQ), a Non-Degradation Authorization
(DEQ), a Stormwater Discharge Permit (DEQ), a Water Rights Permit (DNRC), a
Section 404 Dredge and Fill Permit from the U.S. Army COE, and a Fiscal Impact
Plan which must be approved by the Montana Hard Rock Impact Board and numerous
local government units.

An EIS was being prepared by three co-lead agencies, DEQ, DNRC, and
COE, when the anti-mining initiative, I-137, was passed, thus suspending active
work on the EIS. This EIS would be used to support all of the major permit
decisions. No assurance can be given that such permits will be issued, or if
issued, in what time frame such issuance would occur.

The SPV currently has a $0.5 million exploration reclamation bond fully
collateralized with cash.

19

PRINCIPAL EXPLORATION PROPERTIES

The status of exploration activities on the Company's major exploration
properties is described below. The properties described are believed to be the
most significant of the Company's current inventory. However, that inventory is
constantly changing and it is to be expected that some of the properties
discussed will eventually be joint-ventured, marketed or abandoned, and that
other properties owned or acquired by the Company will become the object of more
intensive exploration activities.

BRIGGS/PANAMINT PROPERTIES

GENERAL

Outside the Briggs Mine, the Company has defined several advanced stage
exploration targets within its 4,800 acre claim block. The Briggs gold deposit
is hosted by Precambrian quartz and amphibolite gneisses that have been severely
deformed by faults of Tertiary age. High-angle faults and shear zones have acted
as vertical conduits that channeled gold-bearing hydrothermal fluids upwards
into a series of stacked low-angle faults. Since the discovery of the Briggs
gold deposit, the Company had developed a detailed geological understanding of
this deposit type. Using this knowledge, the Company has identified significant
gold mineralization within the Briggs claim block extending for 10 miles along
the western flank of the Panamint Mountain Range. Areas identified within this
block (from south to north) with indicated potential to host gold mineralization
include Goldtooth, Briggs, North Briggs, Jackson, Cecil R, Pleasant Canyon, and
Jackpot. In 1991, considerable drilling was conducted on the Goldtooth, Jackson
and Cecil R areas. Access to many parts of the claim block for drilling was
severely hampered by the presence of Wilderness Study Areas. In 1994, the WSA
designation was removed from the entire claim block.

The last holes drilled in the greater Briggs area in 1997 were ore
holes drilled at North Briggs. The mineralized feeder zone at North Briggs has
not yet been located. There is a strong opportunity that the mineralization at
North Briggs was introduced along the same vertical feeder structures that
introduced the mineralization to the south at the Briggs and Goldtooth deposits.
Thus, the first priority exploration target in the Panamint District is to test
offsets to the north and east at North Briggs.

In addition, a separate, relatively undrilled target of significant
gold mineralization is the Cecil R/Jackson area located two to four miles north
of the Briggs Mine and within the Company's claims in the Panamint District.
Earlier drilling delineated 220,000 tons of mineralized rock with an average
grade of 0.038 opt at Cecil R. A cluster of holes drilled at the Jackson area,
8,000 feet south of Cecil R, encountered 30 to 75-foot thicknesses of 0.06 opt
to 0.116 opt gold grades along a structural zone which extends to the north
beyond the area of drilling. A large area of anomalous gold values has been
sampled in surface rocks along 2,000 feet of this structural zone north of
Jackson to the location where the gold-bearing structural zone passes beneath
gravel cover. This same structural zone may be the feeder conduit for the gold
mineralization at Cecil R, 8,000 feet to the north. The Cecil R/Jackson area
represents a significant target for further exploration drilling by the Company
in efforts to develop the next mineable gold deposit in the Panamint District.

The Company has conducted reconnaissance and detailed mapping and
geochemical sampling of nearly the entire claim block. An aerial geophysical
program was conducted across the entire claim block in 1996 and was followed up
with ground reconnaissance in 1997. The geophysical and geochemical data will be
used to assist further exploration for concealed gold deposits on the property.

ENVIRONMENTAL REGULATION

In December 2002, the Company's Briggs Mine obtained a permit from the
US Bureau of Land Management to conduct exploration activities in and around the
Cecil R and Jackson gold occurrences. In January 2003, two environmental groups
filed an Appeal and Request for Stay of Approval of the exploration

20

permit. The appeal will be heard by the Interior Board of Land Appeal (IBLA).
The Company is opposing the appeal and request for stay of the exploration
permit.

In April 2003, the California Legislature passed a bill which
stipulates that, if a project is located within one mile of a Native American
sacred site and on limited use lands within the California Desert Conservation
Area (CDCA), new open-pit metal mine projects must be backfilled during
reclamation and any disturbances to sacred sites must be mitigated to the sole
satisfaction of the Native American tribe. The Company's Briggs project is
located in the Panamint Range within the designated limited use land of the CDCA
and the nearby Timbisha Shoshone Native American tribe has stated that they
consider the entire project area to be sacred. The Company could be prohibited
from developing any additional gold deposits in the Panamint Range due to
passage of this law.

On December 12, 2002, the California State Mining and Geology Board
(CSMGB) enacted an Emergency Backfill Regulation, for 120 days, that essentially
requires that all future metal mines be backfilled to the original contour of
the landscape. On April 10, 2003, the CSMGB made this Backfill Regulation
permanent. Because of the high cost of backfilling, this regulation essentially
eliminates any potential new mines on the Company's properties in the Panamint
Range.

MONTANA PROPERTIES

The Company, through its wholly-owned subsidiary, CR Montana
Corporation, owns approximately 900,000 acres of mineral rights and fee lands in
western Montana. The fee mineral rights underlie surface rights owned by other
parties. The lands and mineral rights are comprised primarily of lands assembled
in the early 1900s by The Anaconda Company for their timber and mineral
potential. The lands occur in fourteen counties in the mountainous terrain west
of the Continental Divide, with most of the lands being located within fifty
miles east and west of Missoula, extending to the Idaho State line, and within
sixty miles west of Kalispell in northwestern Montana. The mineral rights and
fee lands contain many know occurrences of gold, silver, copper, barite,
phosphate, and other mineral commodities. During 2002, the Company sold several
parcels of mineral rights and fee lands, realizing proceeds of approximately
$0.2 million.

LATIN AMERICAN EXPLORATION

ARGENTINA

In July 1997, CR International Corporation (CRIC), a wholly-owned
subsidiary of the Company, entered into a Purchase and Sales Agreement with
Minera El Desquite S.A. (Minera) for its Mina Cancha property. The agreement
initially required Minera to pay CRIC $2.0 million over five years and a 2.5%
net smelter return on any production from the property. In 1998, the purchase
terms were modified to lower the payments in the first three years, but increase
the total purchase price to $2.42 million. Through 2001, CRIC had received
payments totaling approximately $0.6 million under the agreement. In 2002, CRIC
received approximately $1.5 million in negotiated final payments of the initial
purchase price, with the retention of a 2.5% net smelter return on any
production from the property. The Mina Cancha property is an epithermal gold
exploration prospect in highly altered volcanic rocks, and is part of the Esquel
property now being actively developed by Meridian Gold Inc.

TITLE TO PROPERTY

U.S. MINERAL PROPERTIES

The Company's U.S. mineral properties consist of fee mineral rights,
leases covering state and private lands, leases of unpatented mining claims, and
unpatented mining claims located or otherwise acquired by the Company. Many of
the Company's mining properties in the United States are unpatented mining
claims to which the Company has only possessory title. Because title to
unpatented mining claims is subject to inherent

21

uncertainties, it is difficult to determine conclusively ownership of such
claims. These uncertainties relate to such things as sufficiency of mineral
discovery, proper posting and marking of boundaries, and possible conflicts with
other claims not determinable from descriptions of record. Since a substantial
portion of all mineral exploration, development and mining in the United States
now occurs on unpatented mining claims, this uncertainty is inherent in the
mining industry. In addition, in order to retain title to an unpatented mining
claim, a claim holder must have met annual assessment work requirements ($100
per claim) through September 1, 1992, and must have complied with stringent
state and federal regulations pertaining to the filing of assessment work
affidavits. Moreover, after September 1, 1992, a holder of an unpatented mining
claim, mill or tunnel site claim must pay a maintenance fee to the United States
of $100 per claim per year for each assessment year instead of performing
assessment work. In addition, a payment of $100 per claim is required for each
new claim located. State law may, in some instances, still require performance
of assessment work.

The present status of the Company's unpatented mining claims located on
public lands of the U.S. allows the claimant the exclusive right to mine and
remove valuable minerals, such as precious and base metals and industrial
minerals, found therein, and also to use the surface of the land solely for
purposes related to mining and processing the mineral-bearing ores. However,
legal ownership of the land remains with the U.S. The Company remains at risk
that the claims may be forfeited either to the U.S. or to rival private
claimants due to failure to comply with statutory requirements as to location
and maintenance of the claims.

LEASED PROPERTY

The Company leases approximately 2,567 square feet of office space at
14142 Denver West Parkway, Golden, Colorado 80401, under a lease which expires
July 31, 2004. Rent is presently $3,900 per month. The Company maintains storage
and/or facilities in Lincoln, Montana, and Ridgecrest, California, on a
month-to-month basis.

ITEM 3. LEGAL PROCEEDINGS

CR KENDALL - WATER RIGHTS LAWSUIT

In October 2001, a Plaintiff group including members of the Shammel,
Ruckman, and Harrell families, filed suit in Montana District Court against the
Company and its wholly-owned subsidiary, CR Kendall Corporation. The Complaint
alleges violation of water rights, property damage, trespass and negligence in
connection with the operation of the Kendall Mine and seeks unspecified damages
and punitive damages. The Company believes the allegations are completely
without merit and that the Company will prevail in this matter.

In August 2002, a Preliminary Injunction was issued in Montana District
Court on behalf of the Plaintiff group in connection with the Company's auction
of certain mineral rights and fee lands in western Montana. In October 2002, the
Court issued a Supplemental Order which will sequester up to $528,000 of any
proceeds realized from the auction until such time as the lawsuit is concluded.
As of December 31, 2002, $182,000 had been remitted to the Court as required by
the Order. The Company has filed an appeal to this Order with the Montana State
Supreme Court.

MCDONALD GOLD PROJECT - MONTANA DEPARTMENT OF NATURAL RESOURCES
METALIFEROUS MINERAL LEASES

On September 24, 1998, the Montana Department of Natural Resources
(DNRC), the entity that administers state mineral leases, unilaterally decided
to cancel the permitting extension of the 10-year lease term of the state leases
that pertain to the McDonald Gold Project. This was provoked by Canyon's
inability to continue permitting at McDonald due to the anti-mining initiative,
I-137, and would require the Company, after a period of approximately seventeen
months, to commence paying a delay rental of $150,000 per month in order to
maintain the leases. In February 2000, pursuant to its September 1998 decision,
the DNRC determined that the primary terms of the mineral leases had expired. In
August 2000, the SPV filed a report with the DNRC,

22

containing technical analyses, conducted by 12 individuals and research
laboratories with extensive experience in environmental chemistry, extractive
metallurgy and mineral processing technology, underground mining technologies,
and mining engineering and economic analyses, which demonstrates conclusively
that the Venture's proposed open-pit mining and cyanide heap-leach processing is
the only technology that can be applied economically to the McDonald and
Seven-Up Pete gold/silver deposits. Further, the analyses demonstrate that the
proposed open-pit, cyanide heap leaching technology results in maximum resource
conservation of this valuable and unique deposit (McDonald) and poses far less
risk to human health and the environment than any of the alternative
technologies. All alternative existing technologies for development of the
deposits within the constraints of I-137 were investigated and analyzed. In
February 2001, on the basis of the allegation that the SPV had terminated
permitted activities under the leases, the DNRC declared the leases invalid. The
Company has initiated judicial review of the agency's decisions and has added
the judicial review to its lawsuit against the Sate of Montana, described below.
It is the Company's position that the permitting process has been interrupted by
the threat and passage of I-137 and, thus, the permit extension and leases are
continued until the governmental impediment is resolved.

SEVEN-UP PETE VENTURE - I-137 LAWSUIT

On November 3, 1998, an anti-mining initiative, I-137, passed 52% to
48% by a vote of the Montana electorate, effectively bringing permitting work on
the Seven-Up Pete Venture (SPV) to a standstill. This law bans development of
new gold and silver mines which use open-pit mining and cyanide in the treatment
and recovery process in the State of Montana. For most of the campaign period
leading up to the vote, mining companies and employees were prevented from
campaigning due to a previously passed initiative (I-125) which prohibited
campaign expenditures by "for-profit" entities. Just 10 days prior to the
election, a federal judge declared the prohibition "unconstitutional."

The SPV filed two lawsuits in April 2000 against the State of Montana
seeking to have I-137 declared unconstitutional or, alternatively, seeking to
obtain a "takings" or damage award for the lost value of the McDonald, Seven-Up
Pete and Keep Cool mineral properties. These lawsuits are based on, amongst
others, (i) the right not to be deprived of property without due process of law;
(ii) the right to equal protection under the laws; and (iii) the right to be
protected against laws which impair the obligations of existing contracts. The
suit further asserts that the State, by enacting I-137, has breached its
contractual obligations and its covenant of good faith and fair dealing with the
SPV. Since 1989, the SPV had expended more than $70 million in exploration and
development of the properties which include six mineral leases granted by the
State for the purpose of mining metalliferous minerals. For purposes of the
takings aspect of the lawsuit, the alternative technology analyses submitted to
the DNRC (and the court), demonstrate that enactment of I-137 has "taken" the
total value of the properties from the SPV. The amount of a takings reward would
be the value of taken property as determined by the court. The Company expects
to present evidence that the value of the taken property could be as high as
several hundred million dollars before litigation and related expenses.

The United States District Court issued a ruling August 30, 2001, in
which the Court dismissed the SPV's substantive due process claim but, as
requested by the SPV, ruled that the remainder of the SPV's claims could be
pursued at such time as the State lawsuit was concluded. The Montana State
District Court issued a ruling November 1, 2001 in response to a Motion to
Dismiss and a Motion for Summary Judgment by the State of Montana. In this
ruling, the Court dismissed four of the SPV's fourteen counts, including its
substantive due process and equal protection challenges to I-137's validity. The
decision maintained for adjudication the contract impairment validity challenge,
contract damage claims, and all of the takings claims. Following the November
2001 ruling by the State District Court, the State filed a new Motion for
Summary Judgment as to all claims. In an Order dated December 9, 2002, the Court
granted the State Summary Judgment on all of the remaining legal claims of the
Company's lawsuit and denied the Company's Petition for Judicial Review of the
DNRC's actions regarding termination of the state leases. On January 14, 2003,
the Company filed an appeal with the Montana Supreme Court.

23

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were brought to a vote of security holders in the last
quarter of 2002.

24

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is traded on The American Stock Exchange
(AMEX) under the symbol CAU. Canyon's common stock was first included on the
National Association of Securities Dealers Automated Quotation System (NASDAQ)
on February 9, 1986, following the completion of the Company's initial public
offering and on the NASDAQ National Market on May 15, 1990. Canyon subsequently
moved to AMEX on August 19, 1996. The following table reflects the high and low
prices for the Company's common stock during 2002 and 2001.

On February 21, 2003, the high and low prices for the Company's common
stock were $1.61 and $1.45, respectively.

As of February 21, 2003, there were approximately 1,267 holders of
record of the Company's common stock. The number of shareholders of the Company
who beneficially own shares in nominee or "street" name or through similar
arrangements is estimated by the Company to be approximately 5,000.

As of February 21, 2003, there were outstanding 20,996,591 shares of
common stock.

EQUITY COMPENSATION PLANS

The following table provides information with respect to the Company's
equity compensation plans as of December 31, 2002:

(1) Excluding securities reflected in first column.

(2) See Note 16 to Consolidated Financial Statements for information regarding
these plans.

25

DIVIDENDS

Since the Company's inception, no cash dividends have been paid. For
the foreseeable future, it is anticipated that the Company will use any earnings
to finance its growth and that dividends will not be paid to shareholders.

ISSUES OF UNREGISTERED SECURITIES

During the fourth quarter of 2002, the Company issued 27,900
unregistered shares of its $0.01 par value common stock as compensation for
services to a single sophisticated employee. The shares were issued pursuant to
the exemption provided by Section 4(2) of the Securities and Exchange Act of
1933, as amended.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected information regarding the
Company's financial condition and results of operations over the past five
years. (1)

(1) Prior financial information for the years 2001, 2000, 1999 and 1998 have
been restated. See Note 19 to the Consolidated Financial Statements.

(2) The Company wrote-down the carrying value of its Briggs Mine assets to fair
market value in 2000. See Note 9 to the Consolidated Financial Statements.

(3) The Company changed its methods of accounting for exploration costs on
unproven properties and accounting for costs of start-up activities in
1998.

(4) Per share amounts in 1999 and 1998 have been restated to give effect to the
Company's March 24, 2000 1/4 reverse split.

(5) Potential common shares had no effect on per share amounts in 1999 and
would be antidilutive during 2002, 2001, 2000, and 1998, respectively, as
the Company recorded net losses.

26

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

The matters discussed in this report on Form 10-K, when not historical
matters, are forward-looking statements that involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results. Such factors include, among others, the speculative nature of
mineral exploration, commodity prices, production and reserve estimates,
environmental and government regulations, availability of financing, force
majeure events, and other risk factors as described from time to time in the
Company's filings with the Securities and Exchange Commission. Many of these
factors are beyond the Company's ability to control or predict. The Company
disclaims any intent or obligation to update its forward-looking statements,
whether as a result of receiving new information, the occurrence of future
events, or otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The ensuing discussion and analysis of financial condition and results
of operations are based on the Company's consolidated financial statements,
prepared in accordance with accounting principles generally accepted in the
United States of America and contained within this report on Form 10-K. Certain
amounts included in or affecting the Company's financial statements and related
disclosures must be estimated, requiring that certain assumptions be made with
respect to values or conditions which cannot be made with certainty at the time
the financial statements are prepared. Therefore, the reported amounts of the
Company's assets and liabilities, revenues and expenses, and associated
disclosures with respect to contingent assets and obligations are necessarily
affected by these estimates. The more significant areas requiring the use of
management estimates and assumptions relate to mineral reserves that are the
basis for future cash flow estimates and units-of-production amortization
determination; recoverability and timing of gold production from the heap
leaching process; environmental, reclamation and closure obligations; asset
impairments (including estimates of future cash flows); useful lives and
residual values of intangible assets; fair value of financial instruments;
valuation allowances for deferred tax assets; and contingencies and litigation.
The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates under different assumptions or
conditions.

The Company believes the following significant assumptions and
estimates affect its more critical practices and accounting policies used in the
preparation of its consolidated financial statements.

At least annually, the Company estimates its ore reserves at its
producing properties. There are a number of uncertainties inherent in estimating
quantities of reserves, including many factors beyond the control of the
Company. Ore reserve estimates are based upon engineering evaluations of assay
values derived from samplings of drill holes and other openings. Additionally,
declines in the market price of gold may render certain reserves containing
relatively lower grades of mineralization uneconomic to mine. Further,
availability of permits, changes in operating and capital costs, and other
factors could materially and adversely affect ore reserves. The Company uses its
ore reserve estimates in determining the unit basis for mine depreciation and
closure rates, as well as in evaluating mine asset impairments. Changes in ore
reserve estimates could significantly affect these items.

The Company produces gold at its Briggs Mine using the heap leaching
process. This process involves the application of cyanide solutions by drip
irrigation to ore stacked on an impervious pad. As the solution percolates
through the heap, gold is dissolved from the ore into solution. This solution is
collected and processed with activated carbon, which precipitates the gold out
of solution and onto the carbon. Through the subsequent processes of acid
washing and pressure stripping, the gold is returned to solution in a more
highly concentrated state. This concentrated solution of gold is then processed
in an electrowinning circuit, which re-precipitates the gold onto cathodes for
melting into gold dore bars. The Company must make certain estimates regarding
this

27

overall process, the most significant of which are the amount and timing of gold
to be recovered. Although the Company can calculate with reasonable certainty
the tonnage and grades of ore placed under leach by engineering survey and
laboratory analysis of drill hole samples, the recovery and timing factors are
influenced by the size of the ore under leach (crushed or run-of-mine) and the
particular mineralogy of a deposit being mined. The Company bases its estimates
on laboratory leaching models, which approximates the ore under leach on the
heap. From this data, the Company estimates the amount of gold that can be
recovered and the time it will take for recovery. The Company continually
monitors the actual monthly and cumulative recovery from the heap as a check
against the laboratory models, however, ultimate recovery will not be known with
certainty until active leaching has stopped and pad rinsing is completed.
Because it is impossible to physically measure the amount of gold under leach,
the Company calculates, or derives the amount, by taking the difference between
- -the cumulative estimated recoverable gold placed on the heap and the known
amount of gold cumulatively produced as dore. Based on a gold price of $350 per
ounce, if 5% less gold is recovered than the Company estimates exists on the
heap at 12/31/02, this would have an impact on net income and cash flow of
approximately $0.9 million and $0.6 million, respectively. Similar financial
impacts would be recognized for varying recovery changes on a pro rata basis.
The Company must capture and classify its inventory related costs to achieve the
"matching concept" of expenses and revenues as required by generally accepted
accounting principles. Costs capitalized to inventory relating to the heap leach
pad include i) the direct costs incurred in the mining and crushing of the rock
and delivery of the ore onto the heap leach pad, ii) applicable depreciation,
depletion and amortization, and iii) allocated indirect mine general and
administrative overhead costs. These costs are relieved from this inventory when
gold is produced as dore, and added to i) all direct costs incurred in the
leaching and refining processes, ii) applicable depreciation, depletion and
amortization, and iii) allocated indirect mine general and administrative
overhead costs for determining the cost of inventory related to dore. As the
Company's estimate of time to recover gold from first being placed under leach
to dore production is twelve months, inventory costs are considered a current
asset. Based on current reserves, the Briggs Mine will stop loading ore on the
heap leach pad in the fourth quarter of 2003 and active leaching with cyanide
will end in the fourth quarter of 2004.

The Company must estimate reclamation and site closure obligations well
in advance of actual activities. Estimates are based primarily on environmental
and regulatory requirements and are accrued and charged to expense over the
expected economic life of the operation. As additional information is obtained,
revised estimates for producing operations are applied prospectively while
revisions to estimates for operations already in the reclamation phase are
reflected in net income in the period in which the revisions occur.

The Company assesses its producing properties and undeveloped mineral
claims and leases for impairment when events or changes in circumstances warrant
and at least annually. For producing properties and equipment, an impairment is
recognized when the estimated future cash flows (undiscounted and without
interest) expected to result in the use of the asset are less than the carrying
amount of that asset. Measurement of the impairment loss is based on discounted
cash flows. Undeveloped mineral claims and leases are measured on a fair value
basis. Fair value with respect to such mineral interests, pursuant to Statement
of Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, effective January 1, 2002, would generally be
assessed with reference to comparable property sales transactions in the market
place. However, the Company is pursuing litigation and other courses of action
to overturn, modify, or exempt the application of an anti-mining initiative,
I-137, passed in Montana that is restricting development of the McDonald and
Seven-Up Pete mineral properties. As an active market for regulatory overturns
or exemptions and minerals takings lawsuits does not exist, and given the
multiple potential outcomes of the litigation and other actions, the use of a
decision-analysis technique for estimating fair value is appropriate. This
approach combines the projected monetary values (rewards and losses) for each of
the possible material outcomes with the estimated probability of occurrence. The
expected values associated with potential property development and certain
takings outcomes are estimated using the traditional net present value analysis
of revenues, costs and capital investment cash flow projections discounted at a
risk-adjusted rate reflective of the time periods associated with each possible
outcome. Other ending values related to potential takings outcomes are estimated
based on takings settlements that have occurred in other market situations.
Based on this approach undertaken for the Company by independent consultants,
management believes that a reasonable estimate of a

28

fair value in excess of the carrying value of $18,703,300 at December 31, 2002,
has been appropriately determined. Assumptions underlying future cash flows
estimates are subject to risks and uncertainties. Also, the occurrence of past
market transactions does not mean that such comparable amounts would be
applicable to the Company's situation. Any differences between significant
assumptions and market conditions could have a material effect on the fair value
estimate. There is also no assurance that the Company will be successful in its
litigation or other actions.

The Company must estimate useful lives and residual values to establish
amortization amounts for the carrying values of its intangible assets. These
assets, which are comprised of the Company's McDonald and Seven-Up Pete
properties, are presently legally constrained from development due to the
anti-mining initiative, I-137. The Company has filed lawsuits seeking to have
I-137 declared unconstitutional, or alternatively, to obtain a "takings" or
damage award for the lost value of the properties. The Company must use
considerable judgment in establishing a litigation timeline and possible
monetary outcomes, and utilizes external counsel and other consultants to
establish these parameters. The Company has currently established an
amortization period of eight years applied to the carrying values of the
properties (as restated).

The Company utilizes derivative instruments to mitigate gold price risk
for its operations. These transactions are accounted for in accordance with
authoritative guidelines, and require the Company to estimate fair values of its
derivatives at each reporting date. The unrealized gains and losses resulting
from the calculations are included in net income currently, and can result in
significant swings from one reporting period to the next depending on the then
market price of gold.

The Company must use significant judgment in assessing its ability to
generate future taxable income to realize the benefit of its deferred tax
assets, which are principally in the form of net operating loss carryforwards
and in applying a valuation allowance to all or part of these deferred tax
assets using a "more likely than not" criterion.

The Company is subject to litigation as the result of its business
operations and transactions. The Company utilizes external counsel in evaluating
potential exposure to adverse outcomes from judgments or settlements. To the
extent that actual outcomes differ from the Company's estimates, or additional
facts and circumstances cause the Company to revise its estimates, net income
will be affected.

RESTATEMENT OF PRIOR FINANCIAL INFORMATION

As further discussed in Note 19 to the Consolidated Financial
Statements, the Company has identified certain accounting matters that require
restatement to its Consolidated Financial Statements for the years ended
December 31, 2001 and 2000 and prior. For the year ended December 31, 2001, the
impact of the adjustments was to increase the Company's net loss by $1,706,100,
or $0.12 per share. For the year ended December 31, 2000, the impact of the
adjustments was to increase the Company's net loss by $1,350,000, or $0.12 per
share. The cumulative effect of these adjustments as of January 1, 2000 was to
increase Retained Deficit at that date by $155,600. The adjustment were i) to
expense previously capitalized costs for the Company's McDonald Gold Project
(incurred since November 1998) and, ii) to include depreciation, depletion and
amortization as a cost in inventories at the Company's Briggs Mine. The Company
also determined that with the passage of the anti-mining initiative, I-137, in
Montana in 1998, certain mineral property assets previously included in Property
and Equipment in the Consolidated Balance Sheet should have been reclassified to
a separate intangible assets caption. This change had no effect on reported
results of operations or cash flows. The amount reclassified was $21,375,200 at
December 31, 2001. The Company has also restated its results of operations for
each of the quarters in 2002 and 2001 as discussed under "Selected Quarterly
Financial Data" on page 71. Prior period amounts in the ensuing discussion have
been adjusted for these restatements where applicable.

29

RESULTS OF OPERATIONS

2002 COMPARED TO 2001

The Company recorded a net loss of $5,373,500, or $0.29 per share, on
revenues of $17,377,100 in 2002. This compares to a net loss of $7,446,200, or
$0.54 per share, on revenues of $28,126,000 in 2001. The 2002 results include
the benefit of gains on certain asset dispositions of approximately $2.8
million.

During 2002, the Company sold 57,838 ounces of gold and 14,554 ounces
of silver at an average realized price of $300 per equivalent gold ounce. During
2001, the Company sold 97,443 ounces of gold and 26,800 ounces of silver at an
average realized price of $289 per equivalent gold ounce. The New York Commodity
Exchange (COMEX) daily closing gold prices averaged $310 per ounce in 2002 and
$271 per ounce in 2001. All of the Company's revenues in 2002 and 2001 were from
domestic activities.

The following table summarizes the Company's gold deliveries and
revenues in 2002 and 2001.

Cost of sales was $15.5 million in 2002 compared to $23.3 million in
2001. Cost of sales includes all direct and indirect costs of mining, crushing,
processing, and overhead expenses of the Company's production operations,
including provisions for estimated site reclamation costs accrued on a
units-of-production basis. In addition, during 2002 and 2001, the Company wrote
down inventories at the Briggs Mine to net realizable value. These write downs
($253,800 in 2002 and $1,561,800 in 2001) are also included in cost of sales.

Per ounce cost of gold production at the Briggs Mine as computed under
the Gold Institute's Production Cost Standard, was as follows:

The Company recorded an unrealized mark-to-market gain on its forward
gold contracts of $110,000 during 2002, and an unrealized mark-to-market loss of
$597,600 during 2001. These amounts are shown as a separate line item in the
other income (expense) section in the Statement of Operations.

During 2001, the Company entered into a 20,000 ounces forward position
and financially settled the contract with its counterparty, which resulted in a
gain of $164,600. This amount is included in other income in the Statement of
Operations. There was no comparable activity in 2002.

There was no current or deferred provision for income taxes during 2002
or 2001. Additionally, although the Company has significant deferred tax assets,
principally in the form of operating loss carryforwards, the Company has
recorded a full valuation allowance on its net deferred tax assets in 2002 and
2001 due to an assessment of the "more likely than not" realization criteria
required by Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.

31

Inflation did not have a material impact on operations in 2002 or 2001.
Management of the Company does not anticipate that inflation will have a
significant impact on continuing operations.

2001 COMPARED TO 2000

The Company recorded a net loss of $7,446,200 or $0.54 per share, on
revenues of $28,126,000 in 2001. This compares to a net loss of $13,422,800, or
$1.15 per share, on revenues of $34,726,300 in 2000. The 2000 results include
charges of approximately $10.8 million in connection with asset impairments at
the Briggs Mine.

During 2001, the Company sold 97,443 ounces of gold and 26,800 ounces
of silver at an average realized price of $289 per equivalent gold ounce. During
2000, the Company sold 87,397 ounces of gold and 23,500 ounces of silver at an
average realized price of $397 per equivalent gold ounce. The New York Commodity
Exchange (COMEX) daily closing gold prices averaged $271 per ounce in 2001 and
$279 per ounce in 2000. All of the Company's revenues in 2001 and 2000 were from
domestic activities.

The following table summarizes the Company's gold deliveries and
revenues in 2001 and 2000.

Cost of sales was $23.3 million in 2001 compared to $27.9 million in
2000. Cost of sales includes all direct and indirect costs of mining, crushing,
processing, and overhead expenses of the Company's production operations,
including provisions for estimated site reclamation costs accrued on a
units-of-production basis. During 2001 and 2000, the Company wrote down its
inventories at the Briggs Mine to net realizable value. The write downs
($1,561,800 in 2001 and $3,288,900 in 2000) are also included in cost of sales.

Per ounce cost of gold production at the Briggs Mine as computed under
the Gold Institute's Production Cost Standard, was as follows:

(1) As per cost of sales description above, excluding royalties, accruals for
site reclamation and inventory write downs to net realizable value.

(2) Cash operating cost plus royalties.

(3) Total cash costs plus depreciation, depletion, amortization and accruals
for site reclamation.

32

Cash costs per ounce were lower in 2001 due to higher gold production
from higher grades of ore mined.

Depreciation, depletion, and amortization was lower in 2001 due to a
write down of $7,463,100 of the carrying value of the Briggs Mine property and
equipment assets at December 31, 2000.

Selling, general, and administration expenses were higher in 2001 due
primarily to the settlement of a water quality matter at the Company's Kendall
Mine in Montana.

Exploration and development costs were lower in 2001 due primarily to
lower costs at the Company's McDonald Gold Project.

Interest income was lower in 2001 due to lower cash balances and
yields. Interest expense was lower due to lower principal balances and interest
rates.

On January 1, 2001, the Company became subject to the accounting and
reporting requirements of Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133), as
subsequently amended for certain derivative instruments and hedging activities
with the issuance of SFAS No. 138. These standards require that all derivatives
be recognized as assets or liabilities and be measured at fair value. Gains or
losses resulting from changes in the values of those derivatives are accounted
for depending on the use of the derivatives and whether they qualify for hedge
accounting as either a fair value hedge or a cash flow hedge. The key criterion
for hedge accounting is that the hedging relationship must be highly effective
in achieving offsetting changes in fair value or cash flows of the hedging
instruments and the hedged items. The fair market value of the Company's gold
hedges as of the adoption date of approximately $0.3 million was recognized as a
cumulative effect adjustment in other comprehensive income. In addition,
approximately $2.8 million of deferred income arising from the deferral of gains
realized in 1999 on the monetization of a gold loan and of certain gold forward
contracts that were liquidated, and reported as liabilities in the consolidated
balance sheet, were reclassified as a cumulative effect adjustment in other
comprehensive income. During the first quarter of 2001, the Company closed out
all forward contracts that existed on the adoption date at scheduled delivery
dates with its counterparties. The net gain of approximately $0.3 million
associated with the contracts was subsequently reclassified from accumulated
other comprehensive income and included in revenues in the Statement of
Operations. During the second quarter of 2001, the Company entered into
additional floating rate forward contracts and, at December 31, 2001, had
outstanding contracts on 51,600 ounces of gold at an average price of
approximately $268 per ounce. The fair market value of the forward contracts was
approximately $0.6 million less than contractual amounts. The unrealized
mark-to-market loss is shown as a separate line item in the other income
(expense) section in the Statement of Operations.

During the first quarter of 2001, the Company entered into a 20,000
ounce forward position and financially settled the contract with its
counterparty, which resulted in a gain of approximately $0.2 million. This
amount is included in other income in the Statement of Operations.

The Company recognized gains of $0.3 million in 2001 and $0.1 million
in 2000 in connection with the sale of a foreign exploration property.

During the fourth quarter of 2000, the Company recorded an impairment
loss of approximately $7.5 million in connection with a reduction in the
carrying value of long-lived assets at its Briggs Mine to fair market value of
approximately $17 million. Fair market value was determined by discounted cash
flow analysis utilizing an assumed future gold price of $275 per ounce and a
risk adjusted discount rate of approximately 9%. The impairment was principally
due to (i) the Company's forecast for a lower gold price than was estimated in
prior periods; and (ii) the Company's minimal hedge position relative to
remaining reserves.

33

There was no current or deferred provision for income taxes during 2001
or 2000. Additionally, although the Company maintains significant deferred tax
assets, principally in the form of operating loss carryforwards, the Company has
recorded a full valuation allowance on its net deferred tax assets in 2001 and
2000 due to an assessment of the "more likely than not" realization criteria
required by Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.

Inflation did not have a material impact on operations in 2001 or 2000.

LIQUIDITY & CAPITAL RESOURCES

LIQUIDITY:

At December 31, 2002, the Briggs Mine did not make a scheduled debt
payment of $0.2 million. On January 31, 2003, an additional scheduled payment of
approximately $0.4 million was not made. During February - March 2003, the
Company raised approximately $3.3 million through the sale of 6%, two year
convertible debentures of which approximately $1.2 million was used to pay off
the remaining Briggs Mine debt. The Company believes that its cash requirements
over the next 12 months can be funded through a combination of (i) existing
cash; (ii) cash flow from operations; and (iii) cash raised in connection with
the sale of the aforementioned debentures, net of the amount used to pay off the
existing Briggs Mine debt. If management's plans are not successful, operations
and liquidity may be adversely impacted.

The Company's long-term liquidity may be impacted by the scheduled wind
down of operations at the Briggs Mine during 2004-2005, which is currently the
only internal source of cash flow. The Company is continually evaluating
business opportunities with the objective of creating cash flow to sustain the
corporation and advance its remaining principal asset, the McDonald Gold
Project, however there are no assurances of success in this regard or in the
Company's ability to secure additional financing through capital markets in the
future.

SUMMARY OF 2002 CASH FLOWS:

The Company's cash and cash equivalents decreased $1.2 million during
2002 to $0.4 million at year-end. The decrease was a result of net cash used in
operations of $2.8 million, net cash provided by investing activities of $2.7
million and $1.1 million of net cash used in financing activities.

OPERATING ACTIVITIES:

Operations used $2.8 million of cash in 2002 as compared to providing
$3.5 million in 2001 and $0.5 million in 2000. Operating cash flow in 2002 was
negatively impacted by lower gold sales.

INVESTING ACTIVITIES:

Capital Expenditures

Capital expenditures in 2002 totaled $1.1 million - essentially to
complete development of the Goldtooth deposit at the Briggs Mine.

Capital expenditures in 2001 totaled $3.5 million. Major components
were development of the North Briggs deposit, and expansion of the leach pad
capacity to accommodate all currently known reserves to be mined.

Capital expenditures in 2000 totaled $1.9 million essentially for
projects at the Briggs Mine, the principal component being development of the
North Briggs deposit.

34

Asset Dispositions

During 2002, the Company received proceeds of approximately $2.6
million from the sale of the Briggs Mine crusher.

During 2002, 2001, and 2000, the Company received proceeds of
approximately $1.5 million, $0.3 million and $0.1 million, respectively, in
connection with the sale of an exploration property.

During 2001, the Company received proceeds of approximately $0.4
million through the sale of certain non-mineralized lands from the McDonald Gold
Project.

FINANCING ACTIVITIES:

Common Stock Issues

During the period January through April 2002, the Company issued
1,832,746 shares in private placements, raising approximately $2.2 million.

In December 2001, the Company issued 1,897,130 shares in a private
placement, raising approximately $1.7 million.

During the period December 2000 through February 2001, the Company
issued 1,473,052 shares in a private placement, raising approximately $1.2
million (approximately $0.8 million in December 2000).

Credit Arrangements

PURCHASE OF THE MCDONALD GOLD PROJECT

On September 25, 1997, the Company, together with its wholly-owned
subsidiary CR Montana Corporation (CR Montana), purchased a 72.25% participating
interest and underlying assets in the SPV from CR Montana's partner in the SPV,
Phelps Dodge Corporation (Phelps Dodge). The Company and its wholly-owned
subsidiary now own 100% of the SPV. The SPV includes the McDonald Gold Project
near Lincoln, Montana. The Company made an initial payment of $5 million and is
required to make a final payment of $10.0 million upon issuance of all permits
required for construction of the McDonald Gold Project, or alternatively,
one-third of any proceeds received from a takings lawsuit. (See "Other Matters -
McDonald Gold Project - Anti-Mining Initiative").The purchase payments are
collateralized only by the 72.25% participating interest and underlying assets
in the SPV transferred from Phelps Dodge to the Company and CR Montana in this
transaction, and the 50% co-tenancy interest in certain real property also
transferred to the Company and CR Montana.

CR BRIGGS LOAN FACILITY

On December 6, 1995, the Company's wholly-owned subsidiary, CR Briggs
Corporation, obtained a $34.0 million loan facility to finance the capital
requirements of mine construction and working capital for its Briggs Mine in
California. The Company is guaranteeing the loan obligations of CR Briggs
Corporation, and the loan facility is collateralized by a first mortgage lien on
the property, non-leased assets of CR Briggs Corporation, and a pledge of the
Company's stock in CR Briggs Corporation.

The following table summarizes principal payments and weighted average
interest rates on the loan facility during the last three years:

35

At December 31, 2002, the Briggs Mine did not make a scheduled debt
payment of $0.2 million. On January 31, 2003, an additional scheduled payment of
approximately $0.4 million was not made. During February - March 2003, the
Company raised approximately $3.3 million through the sale of 6% two year
convertible debentures (See Note 21 to Consolidated Financial Statements), of
which approximately $1.2 million was used to pay off the remaining Briggs Mine
debt.

EQUIPMENT LEASE BUYOUTS

The Company has arranged from time-to-time to finance certain equipment
lease buy-outs with Caterpillar Finance. Financing terms through July 2002
required payments of approximately $10,000 per month at an interest rate of
9.9%. Principal payments of $68,100, $102,000, and $30,700 were made during
2002, 2001, and 2000, respectively, in connection with the financings.

In January 2003, the Company exercised a lease purchase option to buy
the mining fleet at the Briggs Mine for approximately $1.6 million and has
arranged to finance the purchase price with Caterpillar Finance for one year at
an interest rate of 6.75%.

SURETY BONDS

Certain bonds have been issued aggregating $4.0 million for the
performance of reclamation obligations and other contingent events at the Briggs
Mine. At December 31, 2002, the Surety held the following collateral for such
bonds: (i) cash in the amount of $149,400; (ii) a bank Letter of Credit in the
amount of $249,000 which is collateralized with cash; and (iii) a security
interest in 28,000 acres of real property mineral interests in Montana. In 2000,
the Company agreed to make additional cash deposits with the Surety totaling
$1.5 million over a three year period at the rate of $0.5 million per year,
commencing June 30, 2001. The Company has not made the $0.5 million deposit due
on June 30, 2001, nor the $0.5 million deposit due on June 30, 2002, and is in
discussions with the Surety to reschedule the deposit requirements. If an
acceptable rescheduling of the deposit requirements cannot be agreed to, the
Surety could seek to terminate the bonds which could result in the Company
becoming liable for the principal amounts under its collateral agreement with
the Surety.

OUTLOOK:

Operations

The Briggs Mine is expected to produce approximately 56,000 ounces of
gold in 2003 at cash operating costs in the range of $140-$150 per ounce.
Capital spending of approximately $2.8 million is anticipated to develop the
North Briggs layback reserve. The Company's hedge position as of December 31,
2002 consists of 6,300 ounces of floating rate forward contracts at an average
price of $270 per ounce. These contracts were settled during the first quarter
of 2003.

The Company expects to spend approximately $0.2 million on closure
activities at the Kendall Mine during 2003. This estimate is based on the
likelihood that no substantive reclamation work will be undertaken in 2003 as a
result of the Montana Department of Environmental Quality's decision in February
2002 to require an Environmental Impact Statement before proceeding with
reclamation activities. See "Other Matters- Environmental Regulation."

Expenditures at the McDonald Gold Project are expected to be
approximately $0.5 million in 2003.

36

Asset Disposals

The Company anticipates closing approximately $0.3 million of mineral
rights and fee land sales in 2003 in connection with an August 2002 auction,
however, these funds have been sequestered by court order. (See "Other Matters -
Kendall Mine - Lawsuit and Preliminary Injunction.")

Financing

In March 2003, the Company completed a private placement financing of
6%, two year convertible debentures, raising approximately $3.3 million.
Interest on the debentures is payable quarterly, and the holders have the right
to convert the principal to common stock of the Company at any time, subject to
certain adjustments, at a conversion rate of $1.38 per share of common stock.

The Company's financing obligations and commitments in 2003 include the
following: (i) debt and interest payments of approximately $1.7 million (after
repayment of the Briggs Mine debt as described in the preceding paragraph), and
(ii) capital lease payments of approximately $0.2 million. In addition, the
Company may be required to deposit collateral in support of certain reclamation
and other bonds as more fully described under the caption "Credit Arrangements -
Surety Bonds".

OTHER MATTERS:

McDonald Gold Project

ANTI-MINING INITIATIVE

In November 1998, the Montana electorate passed an anti-mining
initiative (I-137) by a vote of 52% to 48%. I-137, as modified by the State
Legislature in April 1999, bans development of new gold and silver mines, which
use open-pit mining methods and cyanide in the treatment and recovery process.
In April 2000, the SPV filed lawsuits in Montana State District Court and in the
United States District Court, seeking to have I-137 declared unconstitutional,
or, alternatively, to obtain a "takings" or damage award for the lost value of
the McDonald, Seven-Up Pete and Keep Cool mineral properties. These lawsuits are
based on, amongst others, (i) the right not to be deprived of property without
due process of law; (ii) the right to equal protection under the laws; and (iii)
the right to be protected against laws which impair the obligations of existing
contracts. The United States District Court issued a ruling August 30, 2001 in
which the Court dismissed the SPV's substantive due process claim but, as
requested by the SPV, ruled that the remainder of the SPV's claims could be
pursued at such time as the State lawsuit was concluded. The Montana State
District Court issued a ruling November 1, 2001 in response to a Motion to
Dismiss and a Motion For Summary Judgment by the State of Montana. In this
ruling, the Court dismissed four of the SPV's fourteen counts, including its
substantive due process and equal protection challenges to I-137's validity. The
decision maintained for adjudication the contract impairment validity challenge,
contract damage claims, and all of the takings claims. Following the November
2001 ruling by the State District Court, the State filed a new Motion for
Summary Judgment as to all claims. In an Order dated December 9, 2002, the Court
granted the State Summary Judgment on all of the remaining legal claims of the
Company's lawsuit. On January 14, 2003, the Company filed an appeal with the
Montana State Supreme Court of the State District Court Order.

STATE LEASES

On September 24, 1998, the Montana Department of Natural Resources
(DNRC), the entity that administers state mineral leases, unilaterally decided
to cancel the permitting extension of the 10-year lease term of the state leases
that pertain to the McDonald Gold Project which would require the Company, after
a period of approximately seventeen months, to commence paying a delay rental of
$150,000 per month in order to maintain the leases. In February 2000, pursuant
to its September 1998 decision, the DNRC determined that the

37

primary terms of the mineral leases had expired. The Company appealed the action
of the DNRC in an administrative hearing process and the DNRC Hearing Examiner
affirmed the DNRC action. It is the Company's position that the permitting
process has been interrupted by the threat and passage of I-137 and, thus, the
permit extension is continued until the governmental impediment is resolved. As
part of the I-137 lawsuit filed in April 2000 against the State of Montana, the
Company asked the court to review and invalidate the DNRC's action, however, the
court, in its December 9, 2002 order as described in the preceding paragraph,
denied the Company's petition for judicial review. On January 14, 2003, the
Company filed an appeal with the Montana Supreme Court.

Kendall Mine

LAWSUIT AND PRELIMINARY INJUNCTION

In October 2001, a Plaintiff group filed suit in Montana District Court
against the Company and its wholly-owned subsidiary, CR Kendall Corporation,
alleging violation of water rights and other torts in connection with the
operation of the Kendall Mine. The Complaint seeks unspecified damages and
punitive damages. The Company believes the allegations are completely without
merit and that the Company will prevail in this matter.

In August 2002, a Preliminary Injunction was issued in Montana District
Court on behalf of the Plaintiff group in connection with the Company's auction
of certain mineral rights and fee lands in western Montana. In October 2002, the
Court issued a Supplemental Order which will sequester up to $528,000 of any
proceeds realized from the auction until such time as the lawsuit is concluded.
As of December 31, 2002, $182,000 had been remitted to the Court as required by
the Order. The Company has filed an appeal to this Order with the Montana State
Supreme Court.

Environmental Regulation

In 1995, the Montana State Legislature passed legislation which
streamlined the permitting process of new industrial projects by reorganizing
the several state agencies that had jurisdiction over environmental permitting
into one new central agency, the Department of Environmental Quality (DEQ). This
agency is responsible for acting on an application for a Hard Rock Mining
Operating Permit in connection with a Plan of Operations filed by the Seven-Up
Pete Joint Venture for the McDonald Gold Project. This permit, as well as
several other local, state and federal permits, including a joint state and
federal Environmental Impact Statement (EIS), will be required before permits
can be issued. There are no assurances that all permits will be issued nor that,
in the event they are issued, such issuances will be timely, nor that conditions
contained in the permits will not be so onerous as to preclude construction and
operation of the project. Moreover, with the passage of I-137 in November 1998,
the Company cannot presently proceed with permitting and development of the
McDonald Gold Project.

The Kendall Mine operates under permits granted by the Montana
Department of Environmental Quality (DEQ). Costs incurred for reclamation and
closure activities at the Kendall Mine in 2002, 2001, and 2000 were $0.2
million, $0.5 million, and $0.6 million, respectively. Costs to date total $7.6
million and the Company's estimate of total costs to achieve mine closure is
$9.1 million. The Company has $1,896,300 on deposit in an interest bearing
account with the DEQ for reclamation at the Kendall Mine. In February 2002, the
DEQ issued a decision that a comprehensive Environmental Impact Statement (EIS)
is needed for completion of reclamation at Kendall. The Company feels that it is
crucial that reclamation proceed at Kendall without further delay and,
therefore, disagrees with the agency decision, and is presently evaluating its
course of action with regard to the DEQ's action. The Company's estimate to
achieve mine closure could be impacted by the outcome of an agency decision
following an EIS.

38

The Briggs Mine operates under permits granted by various agencies
including the U.S. Bureau of Land Management (BLM), Inyo County, the California
Department of Conservation, and the Lahontan Regional Water equality Control
Board (Lahontan). These agencies have jointly required the Company to post a
reclamation bond in the amount of $3,030,000 to ensure appropriate reclamation.
Additionally, the Company was required by Lahontan to post a $1,010,000 bond to
ensure adequate funds to mitigate any "foreseeable release" of pollutants to
state waters. Both bonds are subject to annual review and adjustment.

In April 2003, the California Legislature passed a bill which
stipulates that, if a project is located within one mile of a Native American
sacred site and on limited use lands within the California Desert Conservation
Area (CDCA), new open-pit metal mine projects must be backfilled during
reclamation and any disturbances to sacred sites must be mitigated to the sole
satisfaction of the Native American tribe. The Company's Briggs project is
located in the Panamint Range within the designated limited use land of the CDCA
and the nearby Timbisha Shoshone Native American tribe has stated that they
consider the entire project area to be sacred. The Company could be prohibited
from developing any additional gold deposits in the Panamint Range due to
passage of this law.

On December 12, 2002, the California State Mining and Geology Board
(CSMGB) enacted an Emergency Backfill Regulation, for 120 days, that essentially
requires that all future metal mines be backfilled to the original contour of
the landscape. On April 10, 2003, the CSMGB made this Backfill Regulation
permanent. Because of the high cost of backfilling, this regulation essentially
eliminates any potential new mines on the Company's properties in the Panamint
Range.

Based upon current knowledge, the Company believes that it is in
material compliance with all applicable environmental laws and regulations as
currently promulgated. However, the exact nature of environmental control
problems, if any, which the Company may encounter in the future cannot be
predicted primarily because of the increasing number, complexity and changing
character of environmental requirements that may be enacted or of the standards
being promulgated by federal and state authorities.

Federal Legislation

Legislation has been introduced in prior sessions of the United States
Congress to modify the requirements applicable to mining claims on federal lands
under the Mining Law of 1872. To date, no such legislation has been enacted. The
timing and exact nature of any mining law changes cannot presently be predicted,
however, the Company will continue its active role in industry efforts to work
with Congress to achieve responsible changes to mining law. The Company is also
continuing its present efforts to patent the Briggs claims into private
ownership in accordance with the provisions of currently applicable law.

Gold Prices, Price Protection Arrangements, and Associated Risks

The Company's revenues, earnings and cash flow are strongly influenced
by world gold prices, which fluctuate widely and over which the Company has no
control. The Company's price protection strategy is to provide an acceptable
floor price for a portion of its production in order to meet minimum coverage
ratios as required by loan facilities while providing participation in
potentially higher prices. Production not subject to loan covenants has
historically been sold at spot prices. The risks associated with price
protection arrangements include opportunity risk by limiting unilateral
participation in upward prices; production risk associated with the requirement
to deliver physical ounces against a forward commitment; and credit risk
associated with counterparties to the hedged transaction. The Company believes
its production risk is minimal, and furthermore, has the flexibility to
selectively extend maturity dates on its forward commitments. With regard to
credit risk, the Company uses only creditworthy counterparties and does not
anticipate any non-performance by such counterparties. The Company, however,
could be subject to cash margin calls by its counterparties if the market price
of gold significantly exceeds the forward contract price which would create
additional financial obligations.

39

Recently Issued Accounting Standards

In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143). SFAS No.143 establishes accounting and reporting
standards for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 contains disclosure
requirements that provide descriptions of asset retirement obligations and
reconciliations of changes in the components of those obligations. SFAS No. 143
is effective for fiscal years beginning after June 15, 2002 (January 1, 2003 for
the Company). The Company's adoption of SFAS No. 143 will not have a material
impact on the Company's results of operations or financial position.

In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS No. 145) which is generally effective for transactions
occurring after May 15, 2002. Through the rescission of FASB Statements 4 and
64, SFAS No. 145 eliminates the requirement that gains and losses from
extinguishment of debt be aggregated and, if material, be classified as an
extraordinary item net of any income tax effect. SFAS No. 145 made several other
technical corrections to existing pronouncements that may change accounting
practice. The Company does not believe SFAS No. 145 will have a material impact
on its results of operations or financial position.

In June 2002, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 146, Accounting for Costs Associated with Exit or
Disposal Activities (SFAS No. 146). SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. This Statement
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The Company does not believe that SFAS No. 146 will have a
material impact on its results of operations or financial position.

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN No.
45). FIN No. 45 elaborates on the disclosures to be made by the guarantor about
its obligations under certain guarantees. FIN No. 45 also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. As
required by FIN No. 45, the Company has adopted the disclosure requirements
effective December 31, 2002. The Company believes that the initial recognition
and measurement provisions of FIN No. 45 on a prospective basis for guarantees
issued or modified after December 31, 2002, will not have a material impact on
its results of operations or financial position.

In December 2002, the Financial Accounting Standards Board issued
Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation
- - Transition and Disclosure (SFAS No. 148). SFAS No. 148, amends SFAS No. 123,
Accounting for Stock-Based Compensation, (SFAS No. 128) to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The amendments to SFAS No. 123 are effective for
financial statements for fiscal years ending after December 15, 2002. As the
Company accounts for stock-based employee compensation using the intrinsic value
method in accordance with APB No. 25, Accounting for Stock Issued to Employees,
the Company has adopted the disclosure requirements of SFAS No. 148, effective
December 31, 2002.

40

Dividends

Since the Company's inception, no cash dividends have been paid. For
the foreseeable future, it is anticipated that the Company will use any earnings
to finance its growth and that dividends will not be paid to shareholders.

ITEM 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Prices

The Company's earnings and cash flow are significantly impacted by
changes in the market price of gold. Gold prices can fluctuate widely and are
affected by numerous factors, such as demand, production levels, economic
policies of central banks, producer hedging, and the strength of the U.S. dollar
relative to other currencies. During the last five years, the average annual
market price has fluctuated between $271 per ounce and $331 per ounce.

The Company, as required by its Briggs Mine loan facility, utilizes
forward sales contracts to limit or reduce market exposure from the sale of gold
from the Briggs Mine. As of December 31, 2002, the Company had outstanding fixed
and floating forward gold contracts on 6,300 ounces at an average price of $270
per ounce, approximately 11% of anticipated production in 2003. A floating rate
forward contract allows the Company the flexibility to (i) deliver gold and
receive the contract price if the market price is below the contract price or
(ii) extend the maturity date of the forward contract and sell at the market
price if the contract price is below the market price. For purposes of
illustrating the potential impact of a change in gold price on the Company's
annual profitability and cash flow, if 11% of its estimated production for 2003
was delivered against forward contracts, a $10 change in the price of gold would
have an impact of approximately $0.5 million. Similarly, a forward position of
50% with a $10 change in the price of gold would impact the Company's annual
profitability and cash flow by approximately $0.3 million.

There are certain market risks associated with the forward gold
contracts utilized by the Company. If the Company's counterparties fail to honor
their contractual obligation to purchase gold at agreed-upon prices, the Company
may be exposed to market price risk by having to sell gold in the open market at
prevailing prices. Similarly, if the Company fails to produce sufficient
quantities of gold to meet its forward commitments, the Company would have to
purchase the shortfall in the open market at prevailing prices. In addition, the
Company could be subject to cash margin calls by counterparties if the market
price of gold significantly exceeds the forward contract price which would
create additional financial obligations.

At December 31, 2002, the fair value of the Company's forward gold
contracts was approximately $0.5 million less than contractual amounts.

Interest Rates

At December 31, 2002, the Company's debt, all relating to the Briggs
Mine loan facility, was approximately $1.4 million. The Company is required to
periodically reset the rate on the loan facility for periods that the Company
may choose which range in duration from one to six months. During 2002, 2001,
and 2000, respectively, the interest rate on the Company's cash loans for the
loan facility averaged 4.3%, 6.8%, and 8.9%, respectively. A 100 basis point
change in the rate would have an impact on annual earnings and cash flow of less
than $15,000, based on the outstanding loan amount of approximately $1.4 million
at December 31, 2002.

Foreign Currency

The price of gold is denominated in U.S. dollars, and the Company's
gold production operations are in the United States. The Company conducts only a
minor amount of exploration activity in foreign countries and has minimal
foreign currency exposure.

41

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Report of Independent Accountants ........................................ 43
Consolidated Balance Sheets .............................................. 44
Consolidated Statements of Operations .................................... 45
Consolidated Statements of Changes in Stockholders' Equity ............... 46
Consolidated Statements of Cash Flows .................................... 47-48
Notes to Consolidated Financial Statements ............................... 49-70
Selected Quarterly Financial Data (Unaudited) ............................ 71

42

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders of
Canyon Resources Corporation:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows present fairly, in all material respects, the financial position of Canyon
Resources Corporation and its subsidiaries at December 31, 2002 and 2001, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As discussed in Notes 2 and 19 to the consolidated financial statements, the
Company has restated its financial statements for the years ended December 31,
2001 and 2000.

Also, as discussed in Note 5 to the consolidated financial statements, the
Company has changed its method of accounting for intangible assets effective
January 1, 2002 with the adoption of Statement of Financial Accounting Standard
No. 142.

/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado

April 15, 2003

43

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

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

44

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

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

45

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(1) See Note 19 for further discussion of the restatements of net (loss) for
the years ended December 31, 2001 and 2000 and Retained Deficit at January
1, 2000.

(2) Fair market value of the Company's forward gold contracts and deferred
hedging gains derecogonized as liabilities upon adoption of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities.

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

46

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

47

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(Unaudited)

Supplemental disclosures of cash flow information:

1. The Company paid $177,100, $489,900 and $575,200 of interest during
2002, 2001, and 2000, respectively. Interest in the amount of $50,100
was capitalized during 2001. There was no interest capitalized during
2002 and 2000.

2. The Company paid no income taxes during 2002, 2001, and 2000.

Supplemental schedule of noncash investing and financing activities:

1. The Company issued 567,600 shares of common stock with a fair market
value of $726,600 to certain creditors as payment for goods and
services in 2002.

2. The Company issued 94,500 shares of common stock with a fair market
value of $87,100 to an employee as compensation for services in 2002.

3. The Company issued 2,500 shares of common stock with a fair market
value of $5,000 as consideration for a mining lease in 2002.

4. The Company purchased a net smelter returns royalty in 2001 by issuing
1,050,000 shares of its common stock with a fair market value of
$1,207,500.

5. The Company acquired certain real property interests in 2001 by
issuing 200,000 shares of its common stock with a fair market value of
$200,000.

6. The Company financed an equipment lease buy-out in the amount of
$167,400 during 2001.

7. Capital lease obligations of $35,100, $443,900, and $313,300 were
incurred for equipment in 2002, 2001, and 2000, respectively.

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

48

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND LIQUIDITY:

Canyon Resources Corporation (the Company or Canyon) is a United States
based corporation involved in all phases of the mining business including
exploration, permitting, developing, operating and final closure of mining
projects. The Company has gold production operations in the western United
States and conducts exploration activities in search of additional mineral
properties (emphasizing precious metals) in the western United States and in
Latin America. The principal market for the Company's precious metals products
are European-based bullion trading concerns.

At December 31, 2002, the Briggs Mine did not make a scheduled debt
payment of $0.2 million. On January 31, 2003, an additional scheduled payment of
approximately $0.4 million was not made. In February 2003, the Company raised
approximately $3.3 million through the sale of 6%, two year convertible
debentures (See Note 21), of which approximately $1.2 million was used to pay
off the existing Briggs Mine debt. The Company believes that its cash
requirements over the next 12 months can be funded through a combination of (i)
existing cash; (ii) cash flow from operations; and (iii) cash raised in
connection with the sale of the aforementioned debentures, net of the amount
used to pay off the existing Briggs Mine debt. If management's plans are not
successful, operations and liquidity may be adversely impacted.

2. RESTATEMENTS:

As further discussed in Note 19, the Company has identified certain
accounting matters that require restatement to its Consolidated Financial
Statements for the years ended December 31, 2001 and 2000 and prior. For the
year ended December 31, 2001, the impact of the adjustments was to increase the
Company's net loss by $1,706,100, or $0.12 per share. For the year ended
December 31, 2000, the impact of the adjustments was to increase the Company's
net loss by $1,350,000, or $0.12 per share. The cumulative effect of these
adjustments as of January 1, 2000 was to increase Retained Deficit at that date
by $155,600. The adjustments were i) to expense previously capitalized costs for
the Company's McDonald Gold Project (incurred since November 1998) and, ii) to
include depreciation, depletion and amortization as a cost in inventories at the
Company's Briggs Mine. The Company also determined that with the passage of the
anti-mining initiative, I-137, in Montana in 1998, certain mineral property
assets previously included in Property and Equipment in the Consolidated Balance
Sheet should have been reclassified to a separate intangible asset caption. This
change had no effect on reported results of operations or cash flows. The amount
reclassified was $21,375,200 at December 31, 2001. Prior period amounts in the
accompanying footnotes have been adjusted for these restatements where
applicable.

3. BASIS OF PRESENTATION:

MANAGEMENT ESTIMATES AND ASSUMPTIONS: Certain amounts included in or affecting
the Company's financial statements and related disclosures must be estimated,
requiring that certain assumptions be made with respect to values or conditions
which cannot be made with certainty at the time the financial statements are
prepared. Therefore, the reported amounts of the Company's assets and
liabilities, revenues and expenses, and associated disclosures with respect to
contingent assets and obligations are necessarily affected by these estimates.
The Company evaluates these estimates on an ongoing basis, utilizing historical
experience, consultation with experts, and other methods considered reasonable
in the particular circumstances. Nevertheless, actual results may differ
significantly from the Company's estimates.

CONSOLIDATION PRINCIPLES: The consolidated financial settlements of the Company
include the accounts of Canyon and its wholly-owned subsidiaries: CR Kendall
Corporation; CR Minerals Corporation; CR Briggs Corporation; CR Montana
Corporation; CR International Corporation; Canyon Resources (Chile) S.A.; Canyon
De Panama, S.A.; CR Brazil Corporation; Judith Gold Corporation, and its 90%
owned subsidiaries: Canyon Resources Venezuela, C.A.; Canyon Resources Africa
Ltd.; and Canyon Resources Tanzania Limited. All intercompany balances and
transactions have been eliminated in the consolidated financial statements.

49

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. BASIS OF PRESENTATION, CONTINUED:

REVERSE STOCK SPLIT: On March 9, 2000, the Board of Directors approved a
resolution to implement a 1/4 reverse split of the Company's common stock,
reduce the Company's authorized shares of common stock from 100 million to 50
million, eliminate the Company's authorized preferred stock, and modify the
numbers of outstanding warrants and options and their exercise price in accord
with the 1/4 reverse split. These actions were effective on March 24, 2000. Per
share calculations for all periods presented in the Company's Statements of
Operations and all references to per share amounts or common stock equivalents
in the notes hereto have been adjusted to give effect to the reverse split.

PRIOR PERIOD RECLASSIFICATIONS: Certain prior period items have been
reclassified in the consolidated financial statements to conform with the
current year presentation.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS: Cash and cash equivalents include highly liquid
investments with original maturities of three months or less at the date of
purchase and which are not subject to significant risk from changes in interest
rates. The Company maintained at December 31, 2002 and 2001, a significant
portion of its cash in two financial institutions. See Note 12.

RESTRICTED CASH: Cash held as collateral for reclamation bonds is classified
based on the expected release or use of such collateral. Cash held in trust and
restricted to specific use is classified as current when expected to be used in
current operations or noncurrent when expected to be used in the acquisition,
maintenance, or development of noncurrent assets.

INVENTORIES: In-process and finished goods inventory are stated at the lower of
average cost or net realizable value. In-process material includes the estimated
recoverable ounces of gold contained in broken-ore under leach on the heap leach
pad. Costs capitalized to inventory for in-process material include i) the
direct costs incurred in the mining and crushing of the rock and delivery of the
ore onto the heap leach pad, ii) applicable depreciation, depletion and
amortization, and iii) allocated indirect mine general and administrative
overhead costs. Finished goods represent contained ounces of gold in unsold
dore. Costs capitalized to inventory for finished goods include i) all of the
costs included in in-process materials, ii) all direct costs incurred in the
leaching and refining processes, iii) applicable depreciation, depletion and
amortization, and iv) allocated indirect mine general and administrative
overhead costs. Materials and supplies are stated at cost.

AVAILABLE FOR SALE SECURITIES: Investments in securities that have readily
determinable fair values are classified as available-for-sale investments.
Unrealized gains and losses on these investments are recorded in accumulated
other comprehensive income as a separate component of Stockholders' Equity,
except that declines in market value judged to be other than temporary are
recognized in determining net income. Realized gains and losses on these
investments are included in determining net income.

MINING CLAIMS AND LEASES:

Developed Mineral Interests: All costs, other than acquisition costs, are
expensed prior to the establishment of proven and probable reserves. Reserves
designated as proven and probable are supported by a final feasibility study,
indicating that the reserves have had the requisite geologic, technical and
economic work performed and are legally extractable at the time of reserve
determination. Once proven and probable reserves are established, all
development and other site specific costs are capitalized, including general and
administrative charges for actual time and expenses incurred in connection with
site supervision. If subsequent events or circumstances arise which would
preclude further development of the reserves under then existing laws and
regulations, no on-going costs are capitalized until the impediments have been
removed.

50

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

Undeveloped Mineral Interests: The Company's McDonald and Seven-Up Pete mineral
property interests represent intangible assets with definite lives. The lives of
these assets is dependent on whether the Company is able to further develop and
mine the properties. Pending the outcome of legal proceedings more fully
discussed in Note 11(e), the Company has determined the useful lives to be eight
years based on the time frame that it may take to conclude all legal
proceedings. Accordingly, the carrying values of these properties are being
amortized on a straight-line basis over this period commencing January 1, 2002
(See Note 5). If at such time these properties are reclassified as having proven
and probable reserves, any remaining unamortized carrying values will be
amortized on a units-of-production basis when the properties are brought into
production.

PRODUCING PROPERTIES AND EQUIPMENT: Acquisition and development costs associated
with properties brought into production, including the costs necessary for
constructing and readying a heap leach pad, are charged to operations using the
units-of-production method based on the estimated gold which can be recovered
from the ore reserves processed on the heap leach pad. Costs of start-up
activities and on-going costs to maintain production are expensed as incurred.
Production facilities and equipment are stated at cost and are amortized over
the estimated proven and probable reserves which can be recovered from the
related property. Vehicles and office equipment are stated at cost and are
depreciated using the straight-line method over estimated useful lives of three
to five years. Maintenance and repairs are charged to expense as incurred. Gains
or losses on dispositions are included in operations.

IMPAIRMENTS: The Company evaluates the carrying value of its producing
properties and equipment when events or changes in circumstances warrant. For
these assets, an impairment loss is recognized when the estimated future cash
flows (undiscounted and without interest) expected to result from the use of the
asset are less than the carrying amount of the asset. Measurement of the
impairment loss is based on discounted cash flows.

Undeveloped mineral interests are assessed for impairment at least annually, or
more frequently when changes in market conditions or other events occur.
Impairments are measured based on a fair value basis. Fair value with respect to
such mineral interests, pursuant to Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
effective January 1, 2002, would generally be assessed with reference to
comparable property sales transactions in the market place. However, the Company
is pursuing litigation and other courses of action to overturn, modify, or
exempt the application of an anti-mining initiative, I-137, passed in Montana
that is restricting development of the McDonald and Seven-Up Peter mineral
properties. As an active market for regulatory overturns or exemptions and
minerals takings lawsuits does not exist, and given the multiple potential
outcomes of the litigation and other actions, the use of a decision-analysis
technique for estimating fair value is appropriate. This approach combines the
projected monetary values (rewards and losses) for each of the possible material
outcomes with the estimated probability of occurrence. The expected values
associated with potential property development and certain takings outcomes are
estimated using the traditional net present value analysis of revenues, costs
and capital investment cash flow projections discounted at a risk-adjusted rate
reflective of the time periods associated with each possible outcome. Other
ending values related to potential takings outcomes are estimated based on
takings settlements that have occurred in other market situations. Based on this
approach undertaken for the Company by independent consultants, management
believes that a reasonable estimate of a fair value in excess of the carrying
value of $18,703,300 at December 31, 2002, has been appropriately determined.
Assumptions underlying future cash flow estimates are subject to risks and
uncertainties. Also, the occurrence of past market transactions does not mean
that such comparable amounts would be applicable to the Company's situation. Any
differences between significant assumptions and market conditions could have a
material effect on the fair value estimate. There is also no assurance that the
Company will be successful in its litigation or other actions.

51

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

SITE RECLAMATION: Costs (undiscounted) are estimated based primarily upon
environmental and regulatory requirements and are accrued and charged to expense
over the expected economic life of the operation using the units of production
method based upon proven and probable reserves which can be recovered.

REVENUE RECOGNITION: Revenue from the sale of gold is recognized when title and
risk of loss passes to the buyer. Gold sales are made in accordance with
standard sales contracts that the Company executes with major financial
institutions and smelters.

DERIVATIVE INSTRUMENTS: The Company uses derivative financial instruments to
manage well defined market risks associated with fluctuating gold prices. The
Company primarily enters into floating rate forward sales contracts on a portion
of future gold production for this purpose. The Company uses forward sales
contracts to manage its exposure to gold prices. Contract prices on forward
sales contracts are recognized in product sales as the designated production is
sold.

Under these contracts, the Company has the option on maturity to deliver
production, net financial settle in the market place, or roll the contract
forward to a later maturity date and at new pricing terms. Consequently, the
Company does not designate the contracts against specific future gold production
and accordingly, these derivative instruments do not qualify for hedge
accounting under Statement of Financial Account Standards No. 133, Accounting
for Derivative Instruments and Hedging Activities ("SFAS No. 133").

These derivative instruments are recognized as assets or liabilities at fair
value and are measured at least quarterly. Changes in fair value are recorded in
earnings. On settlement of a contract, against which the Company has delivered
gold production, the contract price is recognized as revenue from the gold sale.
If financially settled, the resulting gain or loss is included in revenue if the
Company had sufficient gold production to otherwise settle the contract by
delivery. Gains or losses resulting from all other financially settled contracts
are recorded as other income (expense). See Note 4 for a discussion on the
Company's adoption of SFAS No. 133 effective January 1, 2001.

DEFERRED FINANCING COSTS: Costs incurred to obtain debt financing are
capitalized and amortized over the life of the debt facilities using the
effective interest rate method.

EARNINGS PER SHARE: The Company computes earnings per share (EPS) by applying
the provisions of Statement of Financial Accounting Standards No. 128, Earnings
per Share. Basic EPS is computed by dividing income available to common
shareholders (net income less any dividends declared on preferred stock and any
dividends accumulated on cumulative preferred stock) by the weighted average
number of common shares outstanding. Diluted EPS requires an adjustment to the
denominator to include the number of additional common shares that would have
been outstanding if dilutive potential common shares had been issued. The
numerator is adjusted to add back any convertible preferred dividends and the
after-tax amount of interest recognized with any convertible debt.

STOCK COMPENSATION: In accordance with the provisions of SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123), the Company measures
compensation cost using the intrinsic value based method prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations to account for its stock option plans. As
a result, no compensation cost has been recognized in the accompanying financial
statements as the exercise price of all stock option grants is at least equal to
100% of the market price of the Company's common stock at the date of grant. In
December 2002, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure (SFAS No. 148). SFAS No. 148 amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for

52

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The amendments to SFAS No. 123 are effective for financial statements
for fiscal years ending after December 15, 2002. Had compensation cost been
determined under the provisions of SFAS No. 123, the following pro forma net
loss and per share amounts would have been recorded.

The weighted average fair value for options granted in 2002, 2001, and 2000 was
$0.66 per share, $0.56 per share, and $0.60 per share, respectively. The pro
forma amounts were determined using the Black-Scholes model with the following
assumptions:

INCOME TAXES: The Company computes deferred income taxes under the asset and
liability method prescribed by Statement of Financial Account Standards No. 109,
Accounting for Income Taxes. This method recognizes the tax consequences of
temporary differences between the financial statement amounts and the tax bases
of certain assets and liabilities by applying statutory rates in effect when the
temporary differences are expected to reverse.

5. ADOPTION OF NEW ACCOUNTING STANDARDS:

On January 1, 2002, the Company became subject to the accounting and
reporting requirements of Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets (SFAS No. 142). SFAS No. 142 supersedes APB
Opinion No. 17, Intangible Assets and addresses financial accounting and
reporting for intangible assets, acquired individually or with a group of other
assets at acquisition. SFAS No. 142

53

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. ADOPTION OF NEW ACCOUNTING STANDARDS CONTINUED:

also addresses financial accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. As the Company's mineral
interests in the McDonald and Seven-Up Pete properties represent intangible
assets as defined in this new standard, the Company has commenced amortizing the
carrying values of these properties taking into account residual values over
their useful lives. The carrying values reflect the costs of acquiring the
property interests and additional development activity up to the date of the
anti-mining initiative passed by the Montana electorate in November 1998. (See
Note 8). Additionally, as discussed in Note 2, the Company reclassified the
carrying values of $21,375,200 at December 31, 2001 to a separate Undeveloped
Mineral Claims and Leases caption in its Consolidated Balance Sheet.

On January 1, 2002, the Company became subject to the accounting and
reporting requirements of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144
supercedes Statement of Financial Accounting Standards No. 121 but retains the
requirement to recognize an impairment loss only if the carrying amount of a
long-lived asset is not recoverable from its undiscounted cash flows and to
measure an impairment loss as the difference between the carrying amount and
fair value of the asset. SFAS No. 144 eliminates the requirement to allocate
goodwill to long-lived assets to be tested for impairment. SFAS No. 144 also
requires that a long-lived asset to be abandoned, exchanged for a similar
productive asset, or distributed to owners in a spin off, be considered held and
used until it is disposed of by sale, whether previously held and used or newly
acquired. SFAS No. 144 additionally broadens the presentation of discontinued
operations in the income statement to include a component of an entity rather
than a segment of a business. Upon adoption, there was no impact on the
Company's results of operations or financial position.

On January 1, 2001, the Company became subject to the accounting and
reporting requirements of Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities, as subsequently
amended for certain derivative instruments and hedging activities with the
issuance of SFAS No. 138. These standards require that all derivatives be
recognized as assets or liabilities and be measured at fair value. Gains or
losses resulting from changes in the values of those derivatives are accounted
for depending on the use of the derivatives and whether they qualify for hedge
accounting as either a fair value hedge or a cash flow hedge. The key criterion
for hedge accounting is that the hedging relationship must be highly effective
in achieving offsetting changes in fair value or cash flows of the hedging
instruments and the hedged items. On adoption, existing hedge positions were
measured at fair value. As the Company's then existing gold price protection
program was a cash flow hedge, the fair market value of $315,100 was recognized
as a cumulative effect adjustment in other comprehensive income. In addition,
$2,769,200 of deferred income arising from the deferral in gains realized in
1999 on the monetization of a gold loan and of certain gold forward contracts
that were liquidated, and reported as liabilities in the consolidated balance
sheet, were reclassified as a cumulative effect adjustment in other
comprehensive income.

54

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. RESTRICTED CASH:

Restricted cash consisted of the following at December 31:

(a) In connection with the issuance of certain bonds for the
performance of reclamation obligations and other contingent
events at the Briggs Mine, a bank Letter of Credit was
provided in favor of the Surety as partial collateral for such
bond obligations. The Letter of Credit is fully collateralized
with cash and will expire no earlier than December 31, 2003,
and at the bank's option, may be renewed or successive
one-year periods.

(b) Held directly by the Surety as partial collateral for
reclamation and other contingent events at the Briggs Mine.

(c) Held directly by Montana Department of Environmental Quality
(DEQ) in an interest bearing account for use in continuing
reclamation at the Kendall Mine.

(d) The Briggs Mine loan facility requires all proceeds from gold
sales to be held in trust and disbursed from the collected
credit balance in certain orders of priority.

(e) In connection with the auction of certain properties, cash has
been sequestered by court order pending a trial scheduled in
October 2003 ((See Note 11 (f)).

(f) Earnest money received in connection with contracted property
sales which had not closed by December 31, 2002 are being held
by the Company's escrow agent.

Metal inventories consisted of the following at December 31:

As a result of restatement adjustments to capitalize depreciation,
depletion and amortization in inventory (see Note 19), the Company wrote down
its metal inventory at the Briggs Mine to net realizable value by $253,800,
$1,561,800, and $3,288,900 in 2002, 2001 and 2000, respectively.

55

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. UNDEVELOPED MINERAL CLAIMS AND LEASES:

The carrying value of the Company's undeveloped mineral claims and
leases consists of the following components at December 31:

These properties are being amortized over eight years with no residual
value. See Note 11(e) for a discussion of the legal status of the properties.

9. IMPAIRMENTS TO PROPERTY AND EQUIPMENT:

During the fourth quarter of 2000, the Company recorded an impairment
loss of $7,463,100 (restated) in connection with a reduction in the carrying
value of long-lived assets at the Briggs Mine to fair market value of
approximately $17 million. Fair market value was determined by discounted cash
flow analysis utilizing an assumed future gold price of $275 per ounce and a
risk adjusted discount rate of approximately 9%. The impairment was principally
due to (i) the Company's forecast for a lower gold price than was estimated in
prior periods; and (ii) the Company's minimal hedge position relative to
remaining reserves.

10. NOTES PAYABLE:

Notes payable consisted of the following at December 31:

(a) On December 6, 1995, the Company's wholly-owned subsidiary, CR
Briggs Corporation, obtained a $34.0 million loan facility to
finance the capital requirements of mine construction and
working capital for its Briggs Mine in California. The Company
is guaranteeing the loan obligations of CR Briggs Corporation,
and the loan facility is collateralized by a first mortgage
lien on the property, non-leased assets of CR Briggs
Corporation, and a pledge of the Company's stock in CR Briggs
Corporation.

The following table summarizes principal payments and weighted
average interest rates on the loan facility during the last
three years:

56

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. NOTES PAYABLE, (CONTINUED):

(1) In January 2003, the Company exercised a lease purchase
option to buy the mining fleet at the Briggs Mine for
approximately $1.6 million and has arranged to finance the
purchase price for one year at an interest rate of 6.75%.

The Company has also entered into various mining lease
arrangements for purposes of exploring, and if warranted,
developing and producing minerals from the underlying
leasehold interests. The lease arrangements typically require
advance royalty payments during the pre-production phase and a
production royalty upon commencement of production, with
previously advanced payments credited against the production
royalties otherwise payable. Advance royalty commitments will
vary each year as the Company adds or deletes properties.
Currently, minimum advance royalty payments expensed total
approximately $130,300 annually.

The Company is also required to pay an annual rental fee to
the federal government for any unpatented mining claims, mill
or tunnel site claim on federally owned lands at the rate of
$100 per mining claim. The Company's present inventory of
claims would require approximately $37,400 in annual rental
fees, however, this amount will vary as claims are added or
dropped. The Company has submitted patent applications for its
Briggs claims, however, no assurances can be made that patents
will be issued. The Company is also subject to rental fees to
various other owners or lessors of mining claims. Currently,
rental payments to these parties total approximately $19,700
annually.

Lease costs included in cost of goods sold for the years ended
December 31, 2002, 2001, and 2000 were $840,200, $1,120,100,
and $1,651,400, respectively.

Rent expense included in selling, general and administrative
expense of the Company for the years ended December 31, 2002,
2001, and 2000, was $53,200, $44,700, and $86,100,
respectively. Property and equipment includes equipment with a
cost and accumulated amortization of $1,521,000 and
$1,257,800, respectively, at December 31, 2002 and cost and
accumulated amortization of $2,641,200 and $1,966,000,
respectively, at December 31, 2001, for leases that have been
capitalized. Future minimum lease obligations under capital
leases are as follows:

2003 $ 178,400
2004 11,200
2005 10,400
2006 10,700
---------
Total 210,700
Less amounts representing interest 14,900
---------
Present value of minimum lease payments 195,800
Less current obligations 167,400
---------
Long-term obligations under capital lease $ 28,400
=========

58

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. COMMITMENTS AND CONTINGENCIES, CONTINUED:

(c) Surety Bonds:

In 2000, in response to a demand for an increase in collateral
by the Surety who issued certain bonds aggregating
approximately $4.0 million for the performance of reclamation
obligations and other contingent matters at the Briggs Mine,
the Company granted a security interest in 28,000 acres of
mineral interests in Montana. In addition, the Company agreed
to make cash deposits with the Surety totaling $1.5 million
over a three year period at the rate of $0.5 million per year,
commencing June 30, 2001. The Company has not made the $0.5
million deposit due on June 30, 2001 nor the $0.5 million
deposit due on June 30, 2002, and is in discussions with the
Surety to reschedule the deposit requirements. If an
acceptable rescheduling of the deposit requirements cannot be
agreed to, the Surety could seek to terminate the bonds which
could result in the Company becoming liable for the principal
amounts under its collateral agreement with the Surety.

(d) Contingent Liability:

On September 25, 1997, the Company, together with its
wholly-owned subsidiary, CR Montana Corporation (CR Montana),
purchased a 72.25% participating interest and underlying
assets in the Seven-Up Pete Venture (SPV) from CR Montana's
partner in the SPV, Phelps Dodge Corporation (Phelps Dodge).
The Company and its wholly-owned subsidiary now own 100% of
the SPV. The SPV includes the McDonald Gold Project near
Lincoln, Montana.

The Company made an initial payment of $5 million and is
required to make a final payment of $10.0 million upon
issuance of all permits required for construction of the
McDonald Gold Project, or alternatively, one-third of any
proceeds received from a takings lawsuit. Due to the
contingent nature of the transaction, the Company recorded
only the initial payment of $5 million as additions to mining
claims and leases.

The purchase payments are collateralized only by the 72.25%
participating interest and underlying assets in the SPV
transferred from Phelps Dodge to the Company and CR Montana in
this transaction, and the 50% co-tenancy interest in certain
real property also transferred to the Company and CR Montana.

(e) Anti-Mining Initiative (I-137)

In November 1998, the Montana electorate passed an anti-mining
initiative (I-137) by a vote of 52% to 48%. I-137, as modified
by the State Legislature in April 1999, bans development of
new gold and silver mines, which use open-pit mining methods
and cyanide in the treatment and recovery process. In April
2000, the SPV filed lawsuits in Montana State District Court
and in the United States District Court, seeking to have I-137
declared unconstitutional, or, alternatively, to obtain a
"takings" or damage award for the lost value of the McDonald,
Seven- Up Pete and Keep Cool mineral properties. These
lawsuits are based on, amongst others, (i) the right not to be
deprived of property without due process of law; (ii) the
right to equal protection under the laws; and (iii) the right
to be protected against laws which impair the obligations of
existing contracts. The United States District Court issued a
ruling August 30, 2001 in which the Court dismissed the SPV's
substantive due process claim but, as requested by the SPV,
ruled that the remainder of the SPV's claims could be pursued
at such time as the State lawsuit was concluded. The Montana
State District Court issued a ruling November 1, 2001 in
response

59

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. COMMITMENTS AND CONTINGENCIES, CONTINUED:

to a Motion to Dismiss and a Motion For Summary Judgment by
the State of Montana. In this ruling, the Court dismissed four
of the SPV's fourteen counts, including its substantive due
process and equal protection challenges to I-137's validity.
The decision maintained for adjudication the contract
impairment validity challenge, contract damage claims, and all
of the takings claims. Following the November 2001 ruling by
the State District Court, the State filed a new Motion for
Summary Judgment as to all claims. In an Order dated December
9, 2002, the Court granted the State Summary Judgment on all
of the remaining legal claims of the Company's lawsuit. On
January 14, 2003, the Company filed an appeal with the Montana
State Supreme Court.

(f) Kendall Mine Lawsuit

In October 2001, a Plaintiff group filed suit in Montana
District Court against the Company and its wholly-owned
subsidiary, CR Kendall Corporation, alleging violation of
water rights another torts in connection with the operation of
the Kendall Mine. The Complaint seeks unspecified damages and
punitive damages. The Company believes the allegations are
completely without merit and that the Company will prevail in
this matter.

In August 2002, a Preliminary Injunction was issued in Montana
District Court on behalf of the Plaintiff group in connection
with the Company's auction of certain mineral rights and fee
lands in western Montana. In October 2002, the Court issued a
Supplemental Order which will sequester up to $528,000 of any
proceeds realized from the auction until such time as the
lawsuit is concluded. As of December 31, 2002, $182,000 had
been remitted to the Court as required by the Order. The
Company has filed an appeal to this Order with the Montana
State Supreme Court.

12. CERTAIN CONCENTRATIONS AND CONCENTRATIONS OF CREDIT RISK:

The Company is subject to concentrations of credit risk in connection
with maintaining its cash primarily in two financial institutions for the
amounts in excess of levels insured by the Federal Deposit Insurance
Corporation. The Company considers the institutions to be financially strong and
does not consider the underlying risk to be significant. To date, these
concentrations of credit risk have not had a significant effect on the Company's
financial position or results of operations.

The Company sold its gold and silver production predominantly to three
customers during 2002, and to two customers during 2001 and 2000. Given the
nature of the commodities being sold and because many other potential purchasers
of gold and silver exist, it is not believed that loss of such customers would
adversely affect the Company.

The Company is subject to credit risk in connection with its hedging
activities as outlined in Note 13 in the event of non-performance by its
counterparties. The Company uses only highly-rated creditworthy counterparties,
however, and does not anticipate non-performance. The Company, however, could be
subject to margin calls by its counterparties if the market price of gold
significantly exceeds the contract price of its forward contracts.

60

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. DERIVATIVE INSTRUMENTS AND PRICE PROTECTION ARRANGEMENTS:

The Company, as required by its Briggs Mine loan facility, utilizes
forward gold sales contracts to limit or reduce market exposure from the sale of
gold from its Briggs Mine. At December 31, 2002, the Company had outstanding
contracts on 6,300 ounces of gold at an average price of approximately $270 per
ounce with a fair market value that was $487,600 less than contractual amounts.
At December 31, 2001, the fair market value of the Company's forward contracts
(51,600 ounces at an average price of approximately $268 per ounce) was $597,600
less than contractual amounts. For the years ended December 31, 2002 and 2001,
the changes in the mark-to-market calculations of the contracts of $110,000 and
($597,600), respectively, are shown as a separate line item in the other income
(expense) section in the Statement of Operations. There was no comparable
activity for the year ended December 31, 2000.

During the first quarter of 2001, the Company closed out all forward
contracts that existed at December 31, 2000 at scheduled delivery dates with its
counterparties. The net gain of $315,100 associated with these contracts is
included in revenues in the Statement of Operations for the year ended December
31, 2001. In addition, the Company entered into a forward position on 20,000
ounces and financially settled the contract with its counterparty, which
resulted in a gain of $164,600. This amount is included in other income in the
Statement of Operations for the year ended December 31, 2001.

The Company liquidated certain gold forward contracts in 1998 and 1999.
The gains on the liquidations were deferred and have been recognized in
operations based on the original expected settlement dates of the forward
contracts. For the years ended December 31, 2001 and 2000, deferred income of
$0.3 million and $8.4 million, respectively, is included in revenues in the
Statement of Operations in connection with the transactions.

On June 30, 1999, the Company converted its Briggs Mine gold loan to a
cash loan. In connection with the conversion, the Company reduced the monetized
amount of the debt to fair value, resulting in a gain of $2,528,000, which was
deferred and reported as a liability in the consolidated balance sheet. On
January 1, 2001, the Company adopted SFAS No. 133 and reclassified this amount
as a cumulative effect adjustment in other comprehensive income. For the years
ended December 31, 2002 and 2001, $1,264,000 of the gain was recognized in each
period and is included in revenues in the Statement of Operations.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company does not acquire, hold or issue financial instruments for
trading purposes. The estimated fair values of the Company's financial
instruments approximate carrying values at December 31, 2002, and December 31,
2001. The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH: Carrying amounts approximate fair
value based on the short-term maturity of those instruments.

LONG-TERM DEBT: Carrying values approximate fair values based on discounted cash
flows using the Company's current rate of borrowing for a similar liability.

61

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. INCOME TAXES:

There was no current or deferred provision for income taxes for the
years ended December 31, 2002, 2001, and 2000. The provision for income taxes
differs from the amounts computed by applying the U.S. federal statutory rate as
follows:

Deferred tax assets comprised the following at December 31:

Although the Company has significant deferred tax assets in the form of
operating loss carryforwards, its ability to generate future taxable income to
realize the benefit of these assets will depend primarily on bringing new mines
into production. As commodity prices, capital, legal, and environmental
uncertainties associated with that growth requirement are considerable, the
Company applies a full valuation allowance to its deferred tax assets. During
2002, the valuation allowance increased $2,408,300. During 2001, the valuation
allowance increased $3,642,000. During 2000, the valuation allowance increased
$5,337,200. Changes in the valuation allowance are primarily due to changes in
operating loss carryforwards and other temporary differences.

At December 31, 2002, the Company had net operating loss carryforwards
for regular tax purposes of approximately $68,611,800 and approximately
$60,154,300 of net loss carryforwards available for the alternative minimum tax.
The net loss carryforwards will expire from 2004 through 2022.

16. STOCK OPTIONS:

The Company adopted an Incentive Stock Option Plan on April 12, 1982,
as amended (the Plan), whereby options to purchase shares of the Company's
common stock may be granted to employees of the Company, including those who are
also directors of the Company, or subsidiary corporations in which the Company
owns greater than a 50% interest. Exercise price for the options is at least
equal to 100% of the market price of the Company's common stock at the date of
grant for employees who own 10% or less of the total voting stock of the
Company; and 110% of the market price of the Company's common stock at the date
of grant for employees who own more than 10% of the Company's voting stock.
Options granted can have a term no longer than 10 years and are first
exercisable at dates determined at the discretion of the Company's Board of
Directors.

62

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. STOCK OPTIONS CONTINUED:

Incentive stock option activity during 2002, 2001, and 2000 was as
follows:

A summary of the outstanding incentive stock options as of December 31,
2002, follows:

At December 31, 2002, there were 184,378 shares reserved for future
issuance under the Plan.

On March 20, 1989, the Company's Board of Directors approved the
adoption of a Non-Qualified Stock Option Plan (the Non-Qualified Plan). Under
the Non-Qualified Plan, the Board of Directors may award stock options to
consultants, directors and key employees of the Company, and its subsidiaries
and affiliates, who are responsible for the Company's growth and profitability.
The Non-Qualified Plan does not provide criteria for determining the number of
options an individual shall be awarded, or the term of such options, but confers
broad discretion on the Board of Directors to make these decisions. Total
options granted under the Non-Qualified Plan may not have a term longer than 10
years or an exercise price less than 50 percent of the fair market value of the
Company's common stock at the time the option is granted.

Non-qualified stock option activity during 2002, 2001, and 2000 was as
follows:

63

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. STOCK OPTIONS CONTINUED:

A summary of the outstanding non-qualified stock options as of December
31, 2002, follows:

At December 31, 2002, there were 217,089 shares reserved for future
issuance under the Non-Qualified Plan.

17. EARNINGS PER SHARE (EPS):

The Company computes EPS by applying the provisions of Financial
Accounting Standards No. 128, Earnings per Share. As the Company reported net
losses for all years presented, inclusion of common stock equivalents would have
an antidilutive effect on per share amounts. Accordingly, the Company's basic
and diluted EPS computations are the same for all years presented. Common stock
equivalents in 2002, 2001, and 2000 that were not included in the computation of
diluted EPS because the effect would be antidilutive were 1,974,900, 757,900,
and 626,100, respectively.

18. ASSIGNMENT OF ROYALTY PROCEEDS:

In October 2001, the Company issued 1,050,000 shares of common stock
with a fair market value of $1,207,500 to Franco-Nevada Mining Corporation in
connection with the assignment of a 2% net smelter returns royalty on the first
175,000 ounces of gold production from the Company's Briggs Mine, commencing
April 1, 2001.

19. RESTATEMENT OF PRIOR FINANCIAL INFORMATION

The Company determined that certain previously capitalized costs for
the McDonald Gold Project should be expensed. In November 1998, the Montana
electorate passed an anti-mining initiative (I-137), which bans development of
new gold and silver mines which use open-pit mining methods and cyanide in the
treatment and recovery process. As a result of the legal impediment, the Company
cannot presently proceed with the development of the McDonald Gold Project.
Accordingly, the Company has restated its Consolidated Financial Statements to
remove all costs capitalized since I-137 took effect. These adjustments are
reflected in the Consolidated Financial Statements with effect as of January 1,
2000 and increased the Company's net loss by $392,600, or $0.03 per share in
2001 and $889,400, or $0.08 per share in 2000. The adjustments also increased
net losses of years prior to 2000 by $347,900 and therefore increased Retained
Deficit by $347,900 at January 1, 2000. The Company also reclassified the
carrying values of the mineral property interests of $21,375,200 at December 31,
2001 to a separate intangible asset caption.

The Company restated its Consolidated Financial Statements to include
depreciation, depletion and amortization (DD&A) as a cost in inventories at the
Briggs Mine. Previously, the Company recorded DD&A as a period expense. In
addition, the Company changed from recognizing units-of-production (UOP) DD&A
based on the volume of gold ounces sold to recognizing UOP DD&A based on
estimated recoverable ounces mined or produced from proven and provable reserves
to accommodate the capitalization of DD&A in inventory. These adjustments are
reflected in the Consolidated Financial Statements with effect as of January 1,
2000 and increased the Company's net loss by $1,313,500, or $0.09 per share in
2001 and $460,600, or $0.04 per share in 2000. The

64

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. RESTATEMENT OF PRIOR FINANCIAL INFORMATION, CONTINUED:

adjustments also decreased net losses of years prior to 2000 by $192,300 and,
therefore decreased Retained Deficit by $192,300 at January 1, 2000. As a result
of the adjustments to capitalize DD&A to inventory, write downs to net
realizable value were also required in 2001 and 2000. The Company reports these
write downs in cost of sales in the Consolidated Statement of Operations.

The following sets forth the effects of the aforementioned restatements
to the Company's Consolidated Balance Sheet at December 31, 2001, and its
Consolidated Statements of Operations and Consolidated Statements of Cash Flows
for the years ended December 31, 2001 and 2000.

65

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. RESTATEMENT OF PRIOR FINANCIAL INFORMATION, CONTINUED:

CONDENSED CONSOLIDATED BALANCE SHEET

66

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. RESTATEMENT OF PRIOR FINANCIAL INFORMATION, CONTINUED:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

67

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. RESTATEMENT OF PRIOR FINANCIAL INFORMATION, CONTINUED:

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

68

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS:

In July 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143). SFAS No. 143 establishes accounting and reporting
standards for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 contains disclosure
requirements that provide descriptions of asset retirement obligations and
reconciliations of changes in the components of those obligations. SFAS No. 143
is effective for fiscal years beginning after June 15, 2002 (January 1, 2003 for
the Company). The adoption of SFAS No. 143 will not have a material impact on
the Company's results of operations or financial position.

In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS No. 145) which is generally effective for transactions
occurring after May 15, 2002. Through the rescission of FASB Statements 4 and
64, SFAS No. 145 eliminates the requirement that gains and losses from
extinguishment of debt be aggregated and, if material, be classified as an
extraordinary item net of any income tax effect. SFAS No. 145 made several other
technical corrections to existing pronouncements that may change accounting
practice. The Company does not believe SFAS No. 145 will have a material impact
on its results of operations or financial position.

In June 2002, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 146, Accounting for Costs Associated with Exit or
Disposal Activities (SFAS No. 146). SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. This Statement
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." The Company does not believe that SFAS No. 146 will have a
material impact on its results of operations or financial position.

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN No.
45). FIN No. 45 elaborates on the disclosures to be made by the guarantor about
its obligations under certain guarantees. FIN No. 45 also clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. As
required by FIN No. 45, the Company has adopted the disclosure requirements
effective December 31, 2002. The Company believes that the initial recognition
and measurement provisions of FIN No. 45 on a prospective basis for guarantees
issued or modified after December 31, 2002, will not have a material impact on
its results of operations or financial position.

In December 2002, the Financial Accounting Standards Board issued
Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation
- - Transition and Disclosure (SFAS No. 148). SFAS No. 148, amends SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123), to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The amendments to SFAS No. 123 are effective for
financial statements for fiscal years ending after December 15, 2002. As the
Company accounts for stock-based employee compensation using the intrinsic value
method in accordance with APB No. 25, Accounting for Stock Issued to Employees,
the Company has adopted the disclosure requirements of SFAS No. 148, effective
December 31, 2002.

69

CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21. SUBSEQUENT EVENT:

In March 2003, the Company completed a private placement financing of
6%, two year convertible debentures, raising approximately $3.3 million.
Approximately $1.2 million of the proceeds were used to pay off the existing
Briggs Mine debt, with the remaining amount retained for general corporate
purposes. The debentures require quarterly interest payments, and the holders
have the right to convert principal to common stock of the Company, subject to
certain adjustments, at any time at a conversion rate of $1.38 per share of
common stock.

70

SELECTED QUARTERLY FINANCIAL DATA
(RESTATED)*

Selected quarterly financial information (unaudited) for the years
ended December 2002 and 2001 as restated is summarized as follows:

* Operating income (loss), net income (loss) and per share amounts have been
restated as a result of certain financial statement adjustments more fully
described in Notes 5 and 19 to the Consolidated Financial Statements. The
impact of these adjustments on the Company's quarterly financial results
are as follows:

71

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There has been no change in the Company's certified public accountants
during the past two years.There has been no report on Form 8-K of a disagreement
between the Company and its accountants on any matter of accounting principles
or practices or financial statement disclosure.

72

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item appears under the captions "Officers
and Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
included in the Company's Proxy Statement for the 2003 Annual Meeting to be
filed within 120 days after the end of the fiscal year and is incorporated by
reference in this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item appears under the captions
"Compensation Committee Interlocks and Insider Participation", "Report of the
Compensation Committee on Executive Compensation", "Compensation of Officers",
"Shareholder Return Performance Graph", "Compensation of Directors", and "Change
in Control Arrangement" included in the Company's Proxy Statement for the 2003
Annual Meeting to be filed within 120 days after the end of the fiscal year and
is incorporated by reference in this Annual Report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS

The information required by this item appears under the caption "Security
Ownership of Certain Beneficial Owners and Management" included in the Company's
Proxy Statement for the 2003 Annual Meeting to be filed within 120 days after
the end of the fiscal year and is incorporated by reference in this Annual
Report on Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is not currently applicable to the
Company.

ITEM 14. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures. The
term "disclosure controls and procedures," as defined by regulations of the
Securities and Exchange Commission ("SEC"), means controls and other procedures
that are designed to ensure that information required to be disclosed in the
reports that the Company files or submits to the SEC under the Securities
Exchange Act of 1934, as amended (the "Act"), is recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits to the SEC under the Act is
accumulated and communicated to the Company's management, including its
principal executive officer and its principal financial officer, as appropriate
to allow timely decisions to be made regarding required disclosure. The
Company's Chief Executive Officer and Chief Financial Officer have evaluated the
Company's disclosure controls and procedures as of a date within 90 days of the
filing date of this Annual Report on Form 10-K and have concluded that the
Company's disclosure controls and procedures are effective as of the date of
such evaluation.

Changes in Internal Controls

The Company also maintains a system of internal controls. The term
"internal controls," as defined by the American Institute of Certified Public
Accountants' Codification of Statement on Auditing Standards, AU Section 319,
means controls and other procedures designed to provide reasonable assurance
regarding the achievement of objectives in the reliability of the Company's
financial reporting, the effectiveness and efficiency of the Company's
operations and the Company's compliance with applicable laws and regulations.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect such controls subsequent to the
date the Company carried out its evaluation.

73

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Financial Statements "(included in Part II of this Report)

Report of Independent Accountants

Consolidated Balance Sheets - December 31, 2002 and 2001

Consolidated Statements of Operations - Years Ended December 31,
2002, 2001, and 2000

Consolidated Statements of Changes in Stockholders' Equity - Years
Ended December 31, 2002, 2001, and 2000

Consolidated Statements of Cash Flows - Years Ended December 31,
2002, 2001, and 2000

Notes to Consolidated Financial Statements

Selected Quarterly Financial Data (Unaudited)

(b) A report on Form 8-K was filed on December 11, 2002 in connection with
an Order dated December 9, 2002 by the Montana First Judicial District
Court, Lewis and Clark County, which granted the State of Montana
Summary Judgment on all of the remaining legal claims of the lawsuit
filed by Canyon Resources, the Seven-Up Pete Venture, and its
co-plaintiffs in their attempts to have the Court overturn the
anti-mining initiative, I-137, or, alternatively, to be awarded damages
for their properties taken from them by imposition of I-137. The Court
also affirmed the conclusion of the Montana Department of Natural
Resources and Conservation hearing examiner in termination of the
Seven-Up Pete Venture's mineral leases with the State.

(c) Exhibits, as required by Item 601 of Regulation S-K, are listed on
PAGEs 75 - 76. The exhibit numbers correspond to the numbers assigned
in Item 601 of Regulation S-K.

74

75

(5) Exhibits 4.2, 4.3, 10.2 and 10.3 are incorporated by reference from
Exhibits 4.9, 4.10, 10.22 and 10.23 of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.

(6) Exhibit 4.4 is incorporated by reference from Exhibit 4 of the
Company's Report on Form 8-K filed with the Securities and Exchange
Commission on March 27, 1997.

(7) Exhibit 10.4 is incorporated by reference from Exhibit 2 of the
Company's Report on Form 8-K filed with the Securities and Exchange
Commission on October 9, 1997.

(8) Exhibit 3.2 is incorporated by reference from Exhibit 3.2 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.

(9) Exhibits 10.2.1 and 10.2.2 are incorporated by reference from
Exhibits 10.2.1 and 10.2.2 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.

(10) Exhibits 10.2.3 and 10.4.1 are incorporated by reference from
Exhibits 10.2.3 and 10.4.1 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.

(11) Exhibit 10.2.4 is incorporated by reference from Exhibit 10.2.4 of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.

(12) Exhibit 10.5 is incorporated by reference from Exhibit 1.1 of the
Company's Report on Form 8-K filed with the Securities and Exchange
Commission on October 9, 2001.

(13) Exhibit 10.2.5 is incorporated by reference from Exhibit 10.2.5 of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.

76

SIGNATURES

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

CANYON RESOURCES CORPORATION

Date: April 15, 2003 /s/ Richard H. De Voto
-----------------------------------------
Richard H. De Voto
Principal Executive Officer

Date: April 15, 2003 /s/ Gary C. Huber
-----------------------------------------
Gary C. Huber
Principal Financial and Accounting 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
Company and in the capacities and on the dates indicated.

Date: April 15, 2003 /s/ Richard H. De Voto
-----------------------------------------
Richard H. De Voto, Director

Date: April 15, 2003 /s/ Gary C. Huber
-----------------------------------------
Gary C. Huber,Director

Date: April 15, 2003 /s/ Leland O. Erdahl
-----------------------------------------
Leland O. Erdahl, Director

Date: April 15, 2003 /s/ Richard F. Mauro
-----------------------------------------
Richard F. Mauro, Director

Date: April 15, 2003 /s/ David K. Fagin
-----------------------------------------
David K. Fagin, Director

Date: April 15, 2003 /s/ Ronald D. Parker
-----------------------------------------
Ronald D. Parker, Director

77

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Richard H. De Voto, certify that:

1. I have reviewed this annual report on Form 10-K of Canyon Resources
Corporation;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the period presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

/s/ Richard H. De Voto Date: April 15, 2003
- -------------------------------------------
Richard H. De Voto, Chief Executive Officer

78

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Gary C. Huber, certify that:

1. I have reviewed this annual report on Form 10-K of Canyon Resources
Corporation;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the period presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designated such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date.

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

/s/ Gary C. Huber Date:April 15, 2003
- --------------------------------------
Gary C. Huber, Chief Financial Officer

79

INDEX TO EXHIBITS