Interim Results

4th Sep 2007 14:30

Thistle Mining Inc.04 September 2007 THISTLE ANNOUNCES RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2007 Toronto September 4, 2007 - Thistle Mining Inc. (AIM: TMG) Overview Thistle Mining Inc. ("Thistle" or the "Company") (AIM:TMG) wishes to announcethat the Company's unaudited Consolidated Financial Statements and ManagementsDiscussion and Analysis ("MD&A") for the six month period ended June 30, 2007will be filed on SEDAR today. All dollar references in this announcement are inUS $. A full copy of the Company's 2007 second quarter report can be obtainedfrom the Company's website: www.thistlemining.com. The board of directors of the Company had decided to embark on a process toconsider the future of its President Steyn Gold Mine ("PSGM"). On September 3,2007 the Company announced that it had received an indicative non-binding offerfrom Pamodzi Gold Limited ("Pamodzi") (JSE:PZG) for the purchase of all of thedirect and/or indirect interests in PSGM. On September 3, 2007 (the "AcceptanceDate"), Thistle notified Pamodzi of its acceptance of the terms of theindicative non-binding offer. Under the terms of the indicative non-bindingoffer the purchase consideration for all the direct and/or indirect interests inPSGM payable to Thistle (on its behalf and on behalf of all other holders ofsuch interests) will be ZAR300 million (approximately U.S.$ 41.0 million at anexchange rate of ZAR 7.25 to the U.S.$) (the "Purchase Consideration"). The Purchase Consideration is to be satisfied through the payment on completionof ZAR 150.0 million in cash and ZAR 150.0 million to be paid in convertibleinterest bearing debt securities (the "Pamodzi SPV Securities") issued by aspecial purpose vehicle wholly owned by Pamodzi Resources (Pty) Limited, a SouthAfrican black owned resources company ("Pamodzi Resources") which will acquire aspecified number of ordinary shares in Pamodzi (the "Pamodzi Gold Shares") foran amount of ZAR 150.0 million. Pamodzi and Thistle have agreed to negotiate anddeal exclusively with each other in good faith until November 30, 2007, subjectto early termination of such exclusivity in certain limited circumstances. In return for this grant of exclusivity, Pamodzi has agreed to pay to Thistle anexclusivity fee of ZAR3.5 million. Pamodzi has also agreed to pay a break fee ofZAR3.5 million to Thistle in certain limited circumstances. Both the exclusivityfee and any break fee will be settled by the issuance to Thistle of Pamodzi GoldShares. The indicative non-binding offer is subject to various conditionsprecedent including, amongst others, the entering into of final binding legalagreements, approvals from the boards of directors and shareholders of Pamodziand Thistle, respectively, and regulatory and stock exchange approvals. AlthoughPamodzi and Thistle are confident that they will be able to conclude requiredtransaction agreements and secure regulatory approval within a three monthperiod there can however be no assurance that these discussions will result in atransaction. Should negotiations proceed as planned, it is envisaged that ameeting of the Company's shareholders to consider the proposed sale of PresidentSteyn will take place during late October or November 2007 in Toronto. On June 27, 2007, MC and Casten agreed to provide a credit line to the Companyof up to $666,600 per month for the three month period to September 2007. Thecredit line was available for the purpose of funding corporate costs includingthe cost of strategic initiatives relating to PSGM and to provide a contingencyin the event of below forecast performance by PSGM. The credit line wascontingent on, amongst others, improved performance at PSGM for each of themonths of July and August 2007 of not less than 396 kilograms of gold.Unfortunately this level has not been reached and as a result MC and Casten haveno obligation to extend any further credit. In addition, MC and Casten may, attheir option, declare all amounts owing by Thistle (including the amountsdeferred in terms of the debt standstill agreement) to them to be forthwith dueand payable. At present Thistle has not received any notice in this regard. MC and Casten have, however, funded certain costs of the Company for August 2007amounting to $374,000. That funding was subject to the appointment of Mr. JohnBredenhann as Chief Executive Officer. MC and Casten have not made any furthercommitments nor have they provided any further assurances with respect to thefunding of future operating requirements although they have stated at theirdiscretion they will consider future requests from the Company for additionalfunding on a case by case basis. Cash flow forecasts indicate that although PSGM will be able to meet itsobligations if the revised production targets are met until the completion ofthe proposed transaction with Pamodzi, it will not be able to support Thistle'scorporate costs including the costs related to strategic initiatives for PSGM.Absent additional funding by MC and Casten on a case by case basis, there is amaterial uncertainty which would cast doubt on the ability of the Company andits subsidiaries to continue as going concerns and, therefore, that they may beunable to realise their assets and discharge their liabilities in the normalcourse of business. However given MC and Casten have funded corporate costs of the Company forAugust 2007 and have stated that at their discretion they will consider futureadditional funding requests on a case by case basis although no furthercommitments or assurances have been made and given the proposed sale of PSGM, itis management's belief that existing cash resources, net cash to be generatedfrom operations and the sale of assets and cash provided by MC and Casten shouldthey elect to meet future additional funding requests on a case by case basisregarding the Company's corporate costs, will be sufficient to meet theCompany's anticipated requirements. Accordingly the financial statements havebeen prepared on the basis of accounting policies applicable to a going concern. Should MC and Casten decline to advance funds in respect of future additionalfunding requests on a case by case basis to meet the corporate costs of theCompany and/or the proposed sale of PSGM not be successful and/or PSGM not besuccessful in achieving sufficient levels of profitable operations, and / orthere be a material award adverse to PSGM under the M Hall and Associates claim,there is a material uncertainty which would cast doubt on the ability of theCompany and its subsidiaries to continue as going concerns and, therefore, thatthey may be unable to realise their assets and discharge their liabilities inthe normal course of business. This news release contains forward-looking statements with the meaning ofapplicable securities laws including amongst others, statements made or impliedunder the headings "Overview", and "Highlights for the quarter ending June 30,2007 and subsequent events" above relating to the Company's objectives,strategies to achieve these objectives, future cash flow and financingrequirements, and similar statements concerning anticipated future events,results, circumstances, performance or expectations that are not historicalfacts. Such forward-looking statements reflect the Company's current beliefsand are based on information currently available to management. Thesestatements are not guarantees of future performance and are based on theCompany's estimates and assumptions that are subject to risk and uncertaintiesinherent in the business of the Company including those discussed in theCompany's materials filed with the Canadian securities regulatory authoritiesfrom time to time, which could cause the actual results and performance of theCompany to differ materially from the forward-looking statements contained inthis news release. Those risks and uncertainties include, among other things,risks related to: the mining industry (including operational risks inexploration development and production; delays or changes in plans with respectto exploration or development projects or capital expenditures; theuncertainties involved in the discovery and delineation of mineral deposits,resources or reserves; the uncertainty of mineral resource and mineral reserveestimates and the ability to economically exploit mineral resources and mineralreserves; the uncertainty of estimates and projections in relation toproduction, costs and expenses; the uncertainty surrounding the ability of theCompany to obtain all permits, consents and authorizations required for itsoperations and activities; competition for the acquisition, exploration anddevelopment of mineral interests; and health and safety and environmentalrisks), the risk of gold and other commodity price and foreign exchange ratefluctuations; the ability of the Company to fund the capital and operatingexpenses necessary to achieve the business objectives of the Company; theuncertainty associated with commercial negotiations and negotiating with foreigngovernments; the risks associated with international business activities; thedependence on key personnel; the ability to access capital markets; theindebtedness of the Company; and labour relations matters. Material factors orassumptions that were applied in drawing a conclusion or making an estimate setout in the forward-looking statements include that the general economy remainsstable, the demand and price of gold continues to increase and the Rand remainsstrong against the US$. It is also assumed that there will be no majordisruptions in production including failure of infrastructure, seismic activity,underground fires and labour unrest. The Company cautions that this list offactors is not exhaustive. Although the forward-looking statements contained inthis news release are based upon what the Company believes are reasonableassumptions, there can be no assurance that actual results will be consistentwith these forward-looking statements. All forward-looking statements in thisnews release are qualified by these cautionary statements. These forward-lookingstatements are made as of the date hereof and the Company, except as required byapplicable law, assumes no obligation to update or revise them to reflect newinformation or the occurrence of future events or circumstances. For further information, contact: Anton Kakavelakis, Chief Financial Officer + 27 57 391 9026 or email [email protected] Gerry Beaney, Maureen Tai or Troy MacDonald, Grant Thornton Corporate Finance at+44 (0) 207 383 5100 Management's Discussion and Analysis September 4, 2007 For the six months ended June 30, 2007 The following management's discussion and analysis ("MD&A") of the financialcondition and operating results of Thistle Mining Inc. ("Thistle" or the"Company") should be read in conjunction with the Company's unauditedConsolidated Financial Statements for the quarters ended June 30, 2007 and June30, 2006 including the notes thereto. Historical results, including trends whichmight appear, should not be taken as indicative of future operations or results. Further details regarding the Company and its business and operations may beobtained from the Company's continuous disclosure documents filed from time totime with the Canadian securities regulatory authorities. These continuousdisclosure documents are available through the SEDAR website maintained by theCanadian securities regulators, which may be accessed at www.sedar.com or on theCompany's website, which may be accessed at www.thistlemining.com. All financialdata herein has been prepared in accordance with Canadian generally acceptedaccounting principles ("GAAP") and all dollar references are in thousands of USdollars unless otherwise indicated. Certain information in this MD&A contains forward-looking statements within themeaning of applicable securities laws including, among others, statements madeor implied under the headings "Overall Performance", "Results of Operations" , "Summary of 2007 Second Quarter Financial Results" and "Liquidity and CapitalResources" relating to the Company's objectives, strategies to achieve thoseobjectives, the Company's beliefs, plans, estimates, and intentions, and similarstatements concerning anticipated future events, results, circumstances,performance or expectations that are not historical facts. Forward-lookingstatements generally can be identified by words such as "outlook", "objective","may", "will", "expect", "intend", "estimate", "anticipate", "believe","should", "plans" or "continue" or similar expressions suggesting futureoutcomes or events. Such forward-looking statements reflect the Company'scurrent beliefs and are based on information currently available to management. These statements are not guarantees of future performance and are based on theCompany's estimates and assumptions that are subject to risk and uncertaintiesinherent in the business of the Company and the risk factors discussed inmaterials filed with the Canadian securities regulatory authorities from time totime, which could cause the actual results and performance of the Company todiffer materially from the forward-looking statements contained in this MD&A. Those risks and uncertainties include, among other things, risks related to: themining industry (including operational risks in exploration development andproduction; delays or changes in plans with respect to exploration ordevelopment projects or capital expenditures; the uncertainties involved in thediscovery and delineation of mineral deposits, resources or reserves; theuncertainty of mineral resource and mineral reserve estimates and the ability toeconomically exploit mineral resources and mineral reserves; the uncertainty ofestimates and projections in relation to production, costs and expenses; theuncertainty surrounding the ability of the Company to obtain all permits,consents and authorizations required for its operations and activities;competition for the acquisition, exploration and development of mineralinterests; and health and safety and environmental risks), the risk of gold andother commodity price and foreign exchange rate fluctuations; the ability of theCompany to fund the capital and operating expenses necessary to achieve itsbusiness objectives of the Company; the uncertainty associated with commercialnegotiations and negotiating with foreign governments; the risks associated withinternational business activities; the dependence on key personnel; the abilityto access capital markets; the indebtedness of the Company; and labour relationsmatters; and the risk of litigation or other claims against the Company. Material factors or assumptions that were applied in drawing a conclusion ormaking an estimate set out in the forward-looking statements include that thegeneral South African economy remains stable, the demand and price of gold inUS$ continues to increase and the Rand remains strong against the US$. It isalso assumed that there will be no major disruptions in production includingfailure of infrastructure, seismic activity, underground fires and labourunrest. The Company cautions that this list of factors is not exhaustive. Although the forward-looking statements contained in this MD&A are based uponwhat the Company believes are reasonable assumptions, there can be no assurancethat actual results will be consistent with these forward-looking statements. Statements in relation to "resources" and "reserves" are deemed to beforward-looking statements, as they involve the implied assessment, based oncertain estimates and assumptions, that the reserves described can be profitablyextracted in the future. All forward-looking statements in this MD&A are qualified by these cautionarystatements. These forward-looking statements are made as of the date hereof andthe Company, except as required by applicable law, assumes no obligation toupdate or revise them to reflect new information or the occurrence of futureevents or circumstances. Due to the realignment in equity interest and capital structure of ThistleMining Inc. under the restructuring plan that followed the Company filingprotection under the Companies' Creditors Arrangement Act ("CCAA") on January 7,2005, the Company was required to perform as at July 1, 2005, a comprehensiverevaluation of its balance sheet referred to as "fresh start accounting,'' whichincluded a number of adjustments. Accordingly, transactions before and after theapplication of "fresh start accounting" from 30 June 2005 are separatelydisclosed in the unaudited Consolidated Financial Statements and this MD&A. Allnumbers contained in this MD&A unless otherwise stated are on a historicalbasis. Description of the Business Thistle's subsidiaries operate a gold mine in South Africa and, prior to thedisposal of Philippine Gold Limited, a wholly-owned subsidiary, were exploringthe feasibility of developing the Masbate Gold Project ("Masbate Project") inthe Philippines. Thistle's principal operating company in South Africa,President Steyn Gold Mines (Free State) (Pty) Limited ("PSGM"), owns andoperates the President Steyn Gold Mine, including five shafts and a processingfacility in the Free State province of South Africa. On July 10, 2002, PSGM wasissued two mining licenses 8/2002 and 9/2002 in terms of s. 9(1) of the SouthAfrican Minerals Act, 1991. PSGM sold 165,277, 175,490 and 146,302 ounces ofgold in 2004, 2005 and 2006 respectively. Overall Performance Highlights • The Board had decided to embark on a process to consider the future ofPSGM. On September 3, 2007 the Company announced that it had received anindicative non-binding offer from Pamodzi Gold Limited ("Pamodzi") (JSE:PZG) forthe purchase of all of the direct and/or indirect interests in PSGM. OnSeptember 3, 2007 (the "Acceptance Date"), Thistle notified Pamodzi of itsacceptance of the terms of the indicative non-binding offer. Under the terms ofthe indicative non-binding offer the purchase consideration for all the directand/or indirect interests in PSGM payable to Thistle (on its behalf and onbehalf of all other holders of such interests) will be ZAR300 million(approximately U.S.$ 41.0 million at an exchange rate of ZAR 7.25 to the U.S.$)("Purchase Consideration"). The Purchase Consideration is to be satisfiedthrough the payment on completion of ZAR 150.0 million in cash and ZAR 150.0million to be paid in convertible interest bearing debt securities (the "PamodziSPV Securities") issued by a special purpose vehicle wholly owned by PamodziResources (Pty) Limited, a South African black owned resources company ("PamodziResources") which will acquire a specified number of ordinary shares in Pamodzi(the "Pamodzi Gold Shares") for an amount of ZAR 150.0 million. Pamodzi andThistle have agreed to negotiate and deal exclusively with each other in goodfaith until November 30, 2007, subject to early termination of such exclusivityin certain limited circumstances. In return for this grant of exclusivity,Pamodzi has agreed to pay to Thistle an exclusivity fee of ZAR3.5 million.Pamodzi has also agreed to pay a break fee of ZAR3.5 million to Thistle incertain limited circumstances. Both the exclusivity fee and any break fee willbe settled by the issuance of Pamodzi Gold Shares. The indicative non-bindingoffer is subject to various conditions precedent including, amongst others, theentering into of final binding legal agreements, approvals from the boards ofdirectors and shareholders of Pamodzi and Thistle, respectively, and regulatoryand stock exchange approvals. Although Pamodzi and Thistle are confident thatthey will be able to conclude required transaction agreements and secureregulatory approval within a three month period there can however be noassurance that these discussions will result in a transaction. Shouldnegotiations proceed as planned, it is envisaged that a meeting of the Company'sshareholders to consider the proposed sale of President Steyn will take placeduring late October or November 2007 in Toronto. • On January 31, 2007, the Company and CGA Mining Limited ("CGA") (ASX: CGXand TSX: CGA) entered into a Sale and Purchase Agreement ("SPA") for the sale toa wholly-owned subsidiary of CGA (the "Purchaser") of 100% of Thistle'sshareholding in PGO, a wholly-owned subsidiary of the Company, and its otherinterests in the Masbate Project. The transaction closed on March 19, 2007.Accordingly the Masbate Project has been classified as a discontinued operationand its financial results are separately disclosed with comparatives restated asappropriate. The gain on the sale of the Company's interest in the MasbateProject amounted to $23.5 million or $0.51 per share. Following thistransaction, the Company's total assets exceeded its total liabilities by $1.6million. • The consideration payable for the sale and purchase of the Shares andPurchase Consideration") of which $30 million represented a cash considerationand US$21 million was paid in ordinary shares of CGA. At the agreed issue priceof the CGA Shares of A$0.65 per CGA Share and exchange rate of A$:US$ 1.2686,Thistle received 40,985,538 CGA Shares an approximate 25.4% interest in CGA. Interms of Canadian GAAP this is considered an investment subject to significantinfluence and is accounted for using the equity method. Under the equitymethod, the original cost of the shares is adjusted for the Company's share ofpost-acquisition earnings or losses less dividends. Highlights (continued) However this information was not available as CGA will only release their annualaudited results 30 days after the Company is obligated to release its secondquarter results, Accordingly the investment in CGA has not been accounted forunder the equity method and the investment is reflected at cost. • On March 20, 2007, the Company paid $26.7 million of the PurchaseConsideration to MC and Casten as part payment of short term debt owing.Following this payment, the amount of principal, interest and withholding taxesoutstanding on April 1, 2007 amounted to $54.3 million. • Pursuant to the SPA, Thistle has provided a number of warranties to thePurchaser and CGA and will remain subject to possible Purchaser Claims (asdefined therein) for a minimum period of 12 months. Although no formal claimsor actions related to the sale of the interest in the Masbate Project have beenreceived, CGA and the Purchaser have reserved their rights in connection withthe SPA and the events leading up to the completion of the sale. The Companybelieves that it has a good defence against possible claims that might be madein this regard. Should proceedings be instituted against the Company and thisinterpretation prove not to be the case, the matter would have a materialadverse effect on the Company. • Cash flow used in continuing operations was $3.1 million in the secondquarter of 2007 compared to $2.4 million generated in the second quarter of2006. Despite the increase in the gold price realized for the second quarter of2007 compared to the second quarter 2006, the decrease in ounces sold and theincrease in costs relative to the same period in 2006 resulted in an increase incash used in continuing operations. • Investment in property, plant and equipment of continuing operations,decreased in the second quarter of 2007 relative to the second quarter of 2006.Total funds invested in continuing operations amounted to $1.6 million in thesecond quarter of 2007 and $1.7 million in the second quarter of 2006. Thetotal invested in property, plant and equipment of continuing operations for thefirst six months of 2007 increased to $3.0 million compared to $2.3 million inthe corresponding period for 2006. • No additional financing was raised in the second quarter of 2007. CastenHoldings Limited ("Casten") and MC Resources Limited ("MC") advanced $3.75million for the first six months of 2007 compared to $0.68 million in the firstsix months of 2006. For the first six months of 2007 $0.7 million was applied tofunding a cash deficit at PSGM, with the balance applied to funding thePhilippine operations and corporate overheads. • The net loss and net loss before discontinued operations for the secondquarter of 2007 was $6.4 million, or $0.14 per share and $6.0 million, or $0.13per share, respectively, compared to $0.3 million, or $0.01 per share, and $0.2million, or $0.01 per share, in the second quarter of 2006. Net earnings and netloss before discontinued operations for the first six months of 2007 was $13.1million, or $0.28 per share and $10.4 million, or $0.23 per share, respectively,compared with the net loss and net loss before discontinued operations for thefirst six months of 2006 of $4.9 million, or $0.11 per share and $4.8 million,or $0.10 per share. • Gold sold in the second quarter of 2007 was 30,873 oz, a decrease of15.5% compared to the same period in 2006. Production was adversely affected bya number of issues including seismic events affecting the 32 level haulage atNumber 1 shaft; problems at Number 2 shaft relating to a fall of ground in thefire chimney, installed in the first quarter of 2007, which necessitated theinstallation of additional sixteen fire seals in order to establish a newchimney, this in turn affected mining operations in the south western corner ofthe shaft. In addition production at Number 2 shaft was adversely effected bythe unplanned replacement of rock winder ropes and main surface fan failures.Production at Number 3 shaft was adversely effected by the delay in the start upof bulk air coolers and infrastructure difficulties relating to the B-reefs. • The gold yield from underground sources for the second quarter of 2007averaged 4.96 g/tonne compared to an average of 6.26 g/tonne in the secondquarter of 2006 and 5.70 g/tonne and 5.43 g/tonne for calendar years 2006 and2005 respectively. The drop off in yield reflects the lack of flexibility thatPSGM has to absorb the production shocks experienced in the first and secondquarters of 2007. Highlights (continued) • Compared to the second quarter of 2006, PSGM's unit cash costs (Cash costper ounce sold is not a recognized measure under Canadian GAAP and areconciliation to the cost of sales per ounce is included under South AfricanOperations) increased by 29% to $670 per ounce and total costs increased by 31%to $727 per ounce of gold, respectively. The increase in unit cash cost occurredmainly due to reduction in gold sales by 15.5%, expenditure on upgradingelectrical infrastructure at Number 3 shaft and increases in the cost of labourof 12.7% which took effect at the June 2006 month end. These cost increases werepartly offset by a weaker US $. Relative to the prior years quarter the US $exchange rate has weakened from ZAR 6.43 to ZAR 7.06 to the US$. • The Company realized an average price of $667 per ounce of gold in thesecond quarter of 2007, the same as the market average spot price of $667 forquarter. The price realized is $41 per ounce higher than that realized in thesecond quarter of 2006. • Gold production at PSGM continues to be challenging due to a lack ofoperational flexibility compounded by infrastructure problems. Sales of gold forthe last six months of 2007 remain forecast at approximately 72,601 oz's at acash cost of approximately $600 per oz assuming an exchange rate of 7.18 ZAR:US$. Traditionally the second half of the year is more productive than the firsthalf. Although PSGM is currently forecast to meet its obligations there can beno assurance that the recent production problems experienced by PSGM will notpersist. Gold production from PSGM in 2007 is anticipated to be approximately132,600 oz, at a cash cost and total cost of approximately $615 to $625 and $655to $665 per oz respectively assuming an average exchange rate of 7.16 ZAR:US $for 2007. • Mindserv Limited, a wholly-owned South African subsidiary of the Companythat owns PSGM, concluded a shareholders agreement with Iningi Investments 167(Pty) Ltd ("Iningi") (to be renamed Lefa La Gauta Pty Ltd) a broad-based blackeconomic empowerment consortium pursuant to which Iningi acquired an initial 15%equity stake in PSGM effective on March 30, 2007. The transaction is a necessarystep for PSGM to qualify for the grant of new order mining rights in SouthAfrica and as such, its strategic significance is critical. • On March 29, 2007 following an unwillingness of MC and Casten to defershort term debt and interest due and payable in terms of the Memorandum ofAgreements entered into on March 28, 2006 and the realization that PSGM wouldnot be able to generate sufficient free cash flows to allow Thistle to meet itsfinancial obligations, Thistle announced that it was in financial hardship andsuspended trading on the AIM market of the London Stock Exchange Plc pendingsatisfactory resolution of this matter. • On April 11, 2007, Thistle entered into a non-binding memorandum ofagreement with its major creditors, MC and Casten, on the restructuring of debtowing to them (the "Plan"). The Plan was conditional on the transfer ofThistle's ownership interest in the CGA Shares to MC and Casten. • On May 11, 2007, Thistle entered into a debt standstill agreement with MCand Casten (the "Standstill Agreement") pursuant to which MC and Casten agreed(amongst other matters) that should CGA's consent to the transfer of Thistle'sownership interest in the CGA Shares to MC and Casten not be obtained by August11, 2007, the Plan will lapse and MC and Casten will continue to defer repaymentof interest and principal on the loans they have advanced to Thistle until May31, 2008. In certain circumstances the agreement by MC and Casten to deferrepayment of interest and principal will be of no force and effect. By August11, 2007 CGA's consent to the transfer was not obtained and accordingly the Planhas lapsed. However MC and Casten continue to pursue the matter with CGA. Shouldthe matter not be resolved it would have a material adverse effect on theCompany. • Following the execution of the Standstill Agreement the suspension of theCompany's shares to trading on AIM was restored on May 22, 2007. • On June 27, 2007, MC and Casten agreed to provide a credit line to theCompany of up to $666,600 per month for the three month period to September2007. The credit line was available for the purpose of funding corporate costsincluding the cost of strategic initiatives relating to PSGM and to provide acontingency in the event of below forecast performance by PSGM. The credit linewas contingent on, amongst others, improved performance at PSGM for each of themonths of July and August 2007 of not less than 396 kilograms of gold.Unfortunately this level has not been reached and as a result MC and Casten haveno obligation to extend any further credit. Highlights (continued) In addition, MC and Casten may, at their option, declare all amounts owing byThistle (including the amounts deferred in terms of the debt standstillagreement) to them to be forthwith due and payable. At present Thistle has notreceived any notice in this regard. MC and Casten have, however, funded certaincosts of the Company for August 2007 amounting to $374,000 subject to theappointment of Mr. John Bredenhann as Chief Executive Officer. MC and Castenhave not made any further commitments nor have they provided any furtherassurances with respect to the funding of future operating requirements althoughthey have stated at their discretion they will consider future requests from theCompany for additional funding on a case by case basis. Cash flow forecastsindicate that although PSGM will be able to meet its obligations if the revisedproduction targets are met until the completion of the proposed transaction withPamodzi, it will not be able to support Thistle's corporate costs including thecosts related to strategic initiatives for PSGM. Absent additional funding by MCand Casten, there is a material uncertainty which would cast doubt on theability of the Company and its subsidiaries to continue as going concerns and,therefore, that they may be unable to realise their assets and discharge theirliabilities in the normal course of business. • However given MC and Casten have funded corporate costs of the Companyfor August 2007 and have stated that at their discretion they will considerfuture additional funding requests on a case by case basis although no furthercommitments or assurances have been made and given the proposed sale of PSGM, itis management's belief that existing cash resources, net cash to be generatedfrom operations and the sale of assets and cash provided by MC and Casten shouldthey elect to meet future additional funding requests regarding the Company'scorporate costs, will be sufficient to meet the Company's anticipatedrequirements. Accordingly the financial statements have been prepared on thebasis of accounting policies applicable to a going concern. • Should MC and Casten decline to advance funds in respect of futureadditional funding requests to meet the corporate costs of the Company and/orthe proposed sale of PSGM not be successful and/or PSGM not be successful inachieving sufficient levels of profitable operations, and / or there be amaterial award adverse to PSGM under the M Hall and Associates claim, there is amaterial uncertainty which would cast doubt on the ability of the Company andits subsidiaries to continue as going concerns and, therefore, that they may beunable to realise their assets and discharge their liabilities in the normalcourse of business.. • On August 22, 2007 the Company announced that the term of Mr. GerritKennedy's contract as Chief Executive Officer of Thistle was completed and theappointment of Mr. John Bredenhann as Chief Executive Officer, for an initialperiod of six months with effect from August 26, 2007. Q2 2007 Q2 2006 H1 2007 H1 2006 Fresh Start Fresh Start Fresh Fresh Start StartSales ($ millions) 21.0 23.3 40.0 43.2Net loss before discontinued operations ($ millions) (6.0) (0.2) (10.4) (4.8)Net loss per share before discontinued operations ($) (0.13) (0.01) (0.23) (0.10)Net earnings / (loss) ($ millions) (6.4) (0.3) 13.1 (4.9)Earnings / (loss) per share ($) (0.14) (0.01) 0.28 (0.11)Cash generated by (used in) continuing operations($ millions) (3.1) 2.4 (8.6) 1.4Gold sold (000's oz) 31 37 60 71Cash costs ($/oz) 670 519 658 537Total costs ($/oz) 727 556 704 581 (Cash cost per ounce sold is not a recognized measure under Canadian GAAP and areconciliation to the cost of sales per ounce is included under South AfricanOperations) Outlook Thistle's gold production from PSGM in 2007 is anticipated to be approximately132,600 oz, at a cash cost and total cost of approximately $615 to $625 per ozand $655 to $665 per oz respectively assuming an exchange rate of 7.16 ZAR:US $.Sales of gold for the last six months of 2007 are forecast at approximately72,601 oz's at a cash cost of approximately $600 per oz assuming an exchangerate of 7.18 ZAR:US$. Traditionally the second half of the year is moreproductive than the first half. The forecast is, however, subject touncertainty which could cause actual production to differ materially. Majorrisks include failure of infrastructure, market prices, seismic activity, firesand labour unrest. Despite higher forecast production during the last six months, PSGM is notexpected to generate any appreciable free cash flow assuming current goldprices. The July cost of labour increase of approximately 13.2 %, higher winterelectricity tariffs will squeeze cash margins. The gross cost position willrelax somewhat when the lower electrical tariffs take effect during the fourthquarter and as capital commitments reduce. Eskom, the electrical utility provider in South Africa, predicted in its annualreport that electricity prices would increase by 18% in 2008 and 17% in 2009. Ifapproved, the first increase will take effect from April 1, 2008. PSGM'sbusiness plan has provided for an increase in electricity of 6% in line with thecost of inflation. Should the 18% tariff hike be implemented unit costs can beexpected to increase by an additional $6 per oz. Capital expenditures at PSGM is forecast for the remaining part of 2007 to beapproximately $6.0 million assuming an exchange rate of 7.16 South African randper US $. At forecast gold prices it is anticipated that cash from operationswill be sufficient to fund this capital expenditure. Financial Restructuring in 2005 A financial restructuring was implemented with the Company filing for protectionin Canada under the CCAA in the Ontario Superior Court of Justice (the "Court")on January 7, 2005. Pursuant to the CCAA, Thistle undertook a restructuring ofits debt effective on June 30, 2005. This resulted in the conversion to equity of certain convertible loans togetherwith another long term loan and a portion of its outstanding demand loans. PostCCAA Debt was advanced to Thistle by Casten and MC to advance the development ofthe Masbate Project and to provide working capital to the PSGM Mine. Pursuant tothe terms of a memorandum of agreement between Thistle and Casten and MC,respectively, dated March 28, 2006, Casten and MC agreed to a deferral on thepayment of principal and interest on all loans until April 1, 2007. The total indebtedness of the Company including interest and withholding tax toMC and Casten as at December 31, 2006 amounted to $74.6 million of which $43.1million was classified as short term debt. On March 20, 2007, the Company paid$26.7 million of the CGA Purchase Consideration as part payment of short termdebt owing. Following this payment, the amount of principle, interest andwithholding tax outstanding on April 1, 2007 amounted to approximately $54.3million. Financial Restructuring in 2007 On March 29, 2007 following notification by MC and Casten of their unwillingnessto defer short term debt and interest due and payable in terms of the Memorandumof Agreements entered into on March 28, 2006 and the realization that PSGM wouldnot be able to generate sufficient free cash flows to allow Thistle to meet itsfinancial obligations, Thistle announced that it was in financial hardship andsuspended trading on the AIM market of the London Stock Exchange Plc pendingsatisfactory resolution of this matter. On April 11, 2007, Thistle entered a non-binding memorandum of agreement withits major creditors MC and Casten on the restructuring of the debt owing to them(the "Plan"). The execution of the Plan contemplates two private placements tobe underwritten by MC and Casten and is conditional on the transfer of Thistle'sownership interest in CGA to MC and Casten. Financial Restructuring in 2007 (continued) On May 11, 2007, Thistle entered into a debt standstill agreement with MC andCasten (the "Standstill Agreement") pursuant to which MC and Casten agreed(amongst other matters) that should CGA's consent to the transfer of Thistle'sownership interest in the CGA Shares to MC and Casten not be obtained by August11, 2007, the Plan will lapse and MC and Casten will continue to defer repaymentof interest and principal on the loans they have advanced to Thistle until May31, 2008. In certain circumstances the agreement by MC and Casten to deferrepayment of interest and principal will be of no force and effect. Following the execution of the Standstill Agreement the suspension of theCompany's shares to trading on AIM was restored on May 22, 2007. By August 11, 2007 CGA's consent to the transfer was not obtained andaccordingly the Plan has lapsed. However MC and Casten continue to pursue thematter with CGA. Should the matter not be resolved it would have a materialadverse effect on the Company. On June 27, 2007, MC and Casten agreed to provide a credit line to the Companyof up to $666,600 per month for the three month period to September 2007. Thecredit line was available for the purpose of funding corporate costs includingthe cost of strategic initiatives relating to PSGM and to provide a contingencyin the event of below forecast performance by PSGM. The credit line was contingent on, amongst others, improved performance at PSGMfor each of the months of July and August 2007 of not less than 396 kilograms ofgold. Unfortunately this level has not been reached and as a result MC andCasten have no obligation to extend any further credit. In addition, MC andCasten may, at their option, declare all amounts owing by Thistle to them,including the amounts deferred in terms of the Standstill Agreement, to beforthwith due and payable. At present Thistle has not received any notice inthis regard. MC and Casten have, however, funded certain costs of the Company for August 2007amounting to $374,000 subject to the appointment of Mr. John Bredenhann as ChiefExecutive Officer. MC and Casten have not made any further commitments nor havethey provided any further assurances with respect to the funding of futureoperating requirements although they have stated at their discretion they willconsider future requests from the Company for additional funding on a case bycase basis. Cash flow forecasts indicate that although PSGM will be able to meet itsobligations if the revised production targets are met until the completion ofthe proposed transaction with Pamodzi, it will not be able to support Thistle'scorporate costs including the costs related to strategic initiatives for PSGM.Absent additional funding by MC and Casten, there is a material uncertaintywhich would cast doubt on the ability of the Company and its subsidiaries tocontinue as going concerns and, therefore, that they may be unable to realisetheir assets and discharge their liabilities in the normal course of business. Going Concern Having reviewed the cash flow forecasts of the Company and its subsidiarieswhich indicate that PSGM will be able to meet its obligations if revisedproduction targets are met until the completion of the proposed transaction withPamodzi, but will not be able to support Thistle's corporate costs, it ismanagement's belief that absent additional funding by MC and Casten, theprincipal creditors and shareholders of the Company collectively owning 70% ofthe equity, there is a material uncertainty which would cast doubt on theability of the Company and its subsidiaries to realise their assets anddischarge their liabilities in the normal course of business. However given MC and Casten have funded corporate costs of the Company forAugust 2007 and have stated that at their discretion they will consider futureadditional funding requests on a case by case basis although no furthercommitments or assurances have been made and given the proposed sale of PSGM, itis management's belief that existing cash resources, net cash to be generatedfrom operations and the sale of assets and cash provided by MC and Casten shouldthey elect to meet future additional funding requests regarding the Company'scorporate costs, will be sufficient to meet the Company's anticipatedrequirements. Accordingly the financial statements have been prepared on thebasis of accounting policies applicable to a going concern. Going Concern (continued) Should MC and Casten decline to advance funds in respect of future additionalfunding requests to meet the corporate costs of the Company and/or the proposedsale of PSGM not be successful and/or PSGM not be successful in achievingsufficient levels of profitable operations, and / or there be a material awardadverse to PSGM under the M Hall and Associates claim, there is a materialuncertainty which would cast doubt on the ability of the Company and itssubsidiaries to continue as going concerns and, therefore, that they may beunable to realise their assets and discharge their liabilities in the normalcourse of business. South Africa Over the last two years management has taken steps to restore the profitabilityof PSGM. These initiatives include: (i) the placing of Number 7 and 9 Shafts on care and maintenance; (ii) the closure of Number 1 A Ventilation Shaft and other loss making working places; (iii)the implementation of a Section 189 Restructuring at PSGM on October 19, 2005 which led to the voluntary and involuntary retrenchments of 52 and 1,347 employees respectively, or 27% of the then workforce thereby reducing costs at the time by 20%; and (iv) the sale of non core business assets. Despite the aforementioned initiatives, the lack of sufficient pre-developedmining areas and lack of historical investment in infrastructure are constraintsthat have held back PSGM's production capacity. The electrical distributionproblems, compressor and pump failures at Number 3 shaft in the first half of2007 indicate that there is an urgent need to upgrade infrastructure to reducethe risk of production disruptions. During the first quarter of 2007 the risk ofdisruptions to production has been reduced through the commissioning of a secondshaft feeder cable and the upgrading of pumps and compressors. The developmentof the high grade "B" reef channel at Number 3 shaft in close proximity to theshaft should help secure PSGM's production forecast for 2007. Fresh Start Accounting Due to the realignment in equity interest and capital structure of Thistle underthe restructuring plan, the Company was required to perform as at July 1, 2005,a comprehensive revaluation of its balance sheet referred to as "fresh startaccounting,'' which included the following significant adjustments. The Companyhas adjusted the historical carrying value of its assets and liabilities to fairvalue, reflecting the allocation of the Company's reorganization equity value of$6.6 million. In addition, under fresh start accounting, the Company translatedits reclamation provision using June 30, 2005, rates and fair valued otheraccruals. Consequently, transactions before and after the application of "freshstart accounting" from June 30, 2005, are separately disclosed in the Company'sunaudited Consolidated Financial Statements for the three months ended June 30,2007. Selected Information - Financial Highlights For the period ended June 30 (in thousands of dollars, except per share amounts) 3 months 3 months 6 months 6 months 2007 2006 2007 2006 Fresh start Fresh start Fresh start Fresh startSales 21,025 23,329 39,965 43,166Gross profit / (loss) (1,673) 3,051 (2,794) 1,611Net loss before discontinued operations (6,023) (246) (10,391) (4,797)Net loss per share before discontinued (0.13) (0.01) (0.23) (0.10)operations - basic and dilutedNet earnings / (loss) (6,365) (291) 13,092 (4,930)Net earnings/(loss) per share - basic and (0.14) (0.01) 0.28 (0.11)dilutedCash generated by (used in) operating (3,133) 2,357 (8,579) 1,394activitiesTotal assets 76,048 78,497 76,048 78,497Total Long Term Financial Liabilities 36,390 37,863 36,390 37,863Cash dividends declared per share Nil Nil Nil Nil The profitability of the Company is subject to a number of factors, includingthe Rand price of gold and the costs associated with various aspects of miningoperations including acquisition, exploration and development of mininginterests, mining and processing of gold and compliance with various regulatoryrequirements. Not all of the factors are within the control of management. Sales reflect (i) gold sold which was 30,873 oz and 36,521 oz in the secondquarter of 2007 and 2006 respectively and (ii) the price realized of $667 and$626 per oz in the second quarter of 2007 and 2006 respectively. The increase inthe gold price received has partly offset the decline in gold sold over theperiod analysed. The total cost of sales was $22.7 million and $20.3 million inthe second quarter of 2007 and 2006 respectively. The total cost of sales was$42.8 million and $41.6 million in the first six months of 2007 and 2006respectively. Despite increases in the cost of labour of 12.7 % which took effect at the endof June 2006 and the added costs of upgrading infrastructure at Number 3 shaft,costs in US $ were contained relative to the prior year's quarter following theweakening of the US$ by 10% from ZAR 6.43 to R7.06 to the US$. The sale of the Company's interest in the Masbate Project resulted in anextraordinary gain of $23.5 million. Other contributing items include: (i) General and administrative expenses which were $0.4 million and $0.7 million in the second quarter of 2007 and 2006 respectively; (ii) Cost of interest which amounted to $1.71 million and $2.1 million in the second quarter of 2007 and 2006 respectively; and (iii)Foreign exchange losses which amounted to $2.4 million and $0.8 million in the second quarter of 2007 and 2006 respectively. Results of Operations SOUTH AFRICA The principal operating company in South Africa is President Steyn Gold Mine(Free State) (Pty) Ltd ("PSGM"). Thistle's total interest in TM TrainingInitiative (Pty) Limited, which operates a training college attached to the minesite, was sold on November 9, 2006. Due to the insignificant amounts involvedthis subsidiary has not been disclosed as a discontinued operation. Health and Safety The safety of our staff is a core value and is paramount to our success. We areworking to provide employees with a safe workplace and are pleased to reportthat, as at the date of this report, no fatal incidents have occurred sinceNovember 16, 2006. The Company remains focused on achieving its safety target, namely a Lost TimeInjury ("LTI") Rate of 18 per 1 million hours worked a reportable rate of 5 per1 million hours and, most importantly, zero fatalities. For the three month period ended June 30, 2007, the LTI and Reportable rateamounted to 19.9 and 7.4 per one million man hours respectively. This comparesto rates achieved in the twelve month period ended December 31, 2006 of 18.6 and10.9 respectively and the first quarter of 2007 of 14.9 and 7.0 respectively.Although these metrics compare to safety statistics realized in the neighbouringgold mines, PSGM management considers the rates to be high. Material handlingand handling of tools and equipment incidents are the main cause of reportableaccidents at PSGM. Gold Market The market price of gold averaged $667 per ounce in the second quarter of 2007representing an increase of $39 per ounce or 6% against the average market pricefor the second quarter of 2006. The highest closing London PM fix for gold forthe second quarter of 2007 was $691 per ounce. In rand terms, the gold priceincreased on average by 17% in the second quarter of 2007 compared to the secondquarter of 2006. World newly mined gold supply is diminishing. Gold production in South Africa,North America and Australia is falling with this trend being partly offset byincreases in production in Indonesia, Russia and China. As reserves are depletedand without major new discoveries, the supply shortfall will not be arrested inthe near term. Gold prices could also be exacerbated by reduced Central Bank sales as they seekto diversify away from the US dollar. According to Goldfields Mineral Services,the primary gold supply deficit is worsening; investors have rediscovered themerits of gold as a vehicle for portfolio diversification and its role as a US$currency hedge. Although exploration expenditure has increased, given the longlead times between exploration success and mine development strong prices appearreasonably well assured for the next five years. Management believes the South African Rand gold price will continue to be strongand is predicted to be range bound between R135, 000 to R155,000 per kg during2007. South African Operations - Summary of quarterly results 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 2006 2006 2006 2007 2007 Tonnes milled total 199,823 248,997 220,604 202,238 226,396Tonnes milled from underground sources 183,785 218,975 187,569 162,835 188,038Tonnes milled from surface sources 16,038 30,022 33,035 39,403 38,358Average recovered grade g/tonne 5.85 5.06 4.49 4.64 4.29Average recovered grade underground g/tonne 6.26 5.57 5.10 5.44 4.96Average recovered grade surface g/tonne 1.15 1.35 1.05 1.37 1.01Plant recovery % 95.6 95.1 95.0 94.4 95.0Ounces sold 36,521 40,912 34,001 29,126 30,873 Realised US$/oz 626 618 612 648 667Cash costs US$/oz 519 518 580 644 670Cash costs R/tonne milled 598 602 597 671 648 Avg. exch. Rate ZAR/US$ ZAR6.43 ZAR7.14 ZAR7.25 ZAR7.22 ZAR7.06Avg. gold price ZAR/oz 4,025 4,413 4,437 4,678 4,710 Average employees at work 3,806 3,959 4,052 3,987 3,903Productivity: Annual tonnes per man 210 252 218 203 232 Cost of sales US$/oz 556 542 611 681 727Adjusted for:Depreciation, depletion, impairment (41) (20) (52) (45) (52)Derivative fair value adjustments 1 (4) (2) - -Movement in provisions 3 - 24 8 (5)Other non operating costs - - (1) - -Cash costs US$/oz 519 518 580 644 670 Total cash cost per ounce, which is not a recognised measure under CanadianGAAP, is calculated by dividing total cash costs by the ounces sold for theperiod. Total cash costs include mine operating costs such as mining,processing, administration, royalties and production taxes, but excludeamortization, reclamation costs, financing costs and capital development andexploration. Second quarter 2007 sales of gold were 30,873 oz compared with 36,521 oz in thesame quarter of 2006 and 29,126 oz in the first quarter of 2007. Production wasadversely affected by a number of issues including seismic events affecting the32 level haulage at Number 1 shaft; problems at Number 2 shaft relating to afall of ground in the fire chimney, installed in the first quarter of 2007,which necessitated the installation of additional sixteen fire seals in order toestablish a new chimney, this in turn affected mining operations in the southwestern corner of the shaft. In addition production at Number 2 shaft wasadversely effected by the unplanned replacement of rock winder ropes and mainsurface fan failures. Production at Number 3 shaft was adversely effected by thedelay in the start up of bulk air coolers and infrastructure difficultiesrelating to the B-reefs. The first and second quarter are traditionallychallenging for South African gold miners owing to the preponderance of publicholidays. The lack of sufficient pre-developed mining areas to absorb the productionshocks has resulted in a reduction in underground production and drop off ingold yield. The average yield from underground sources has declined from 6.26,5.57 and 5.10 grams per tonne experienced in the second, third and fourthquarters of 2006 to 5.44 and 4.96 grams per tonne in the first and secondquarter of 2007 respectively. The underground grade is expected to stabilise atapproximately 5.00 grams per tonne for the remainder of 2007. Since the secondquarter of 2006, underground production has been augmented by surface materialrecovered from the Number 9 shaft plant cleanup and the Number 2, 3 and 9 Shaftrock dumps. South African Operations - Summary of quarterly results (continued) During the second quarter of 2007, the South African operations realised aneffective gold price of US$667 per ounce which is the same as the average marketprice of US$667 over the same period and is US$41 per ounce more than the pricerealised in the same period in 2006. Cash operating costs for the second quarter of 2007 were $670 per ounce ofproduction, compared with $519 and $644 per oz for the second quarter of 2006and the first quarter of 2007, respectively. Major factors affecting these unitcosts are: • gold production; • the average US $ exchange rate which has weakened from ZAR 6.43 in the second quarter of 2006 to ZAR7.22 and ZAR7.06 for the first and second quarters of 2007 respectively; • the costs of refurbishing infrastructure at Number 3 shaft; and • the total cost of labour Which in South African gold mines represents some 50% to 60% of gross cash costs. Following the conclusion of a three year wage agreement between PSGM and labourunions in December 2005, the total cost of employment has increased by 12.7%effective June 20, 2006. Following restructuring in late 2005 the labourcomplement has remained stable at approximately 3,800 to 4,100 employees. South African Operations - Summary of quarterly results (continued) A summary of production per shaft, comparing the second quarter of 2007 with thecorresponding period in 2006, is as follows: Quarter 2 2007 Quarter 2 2006 6 months 2007 6 months 2006Steyn 1 ShaftTonnes milled Tonnes 41,295 32,929 79,269 79,723Recovered grade g/t 3.76 5.08 4.31 4.76Gold recovered Ounces 4,991 5,376 10,572 12,204Steyn 2 ShaftTonnes milled Tonnes 41,452 65,599 88,893 134,522Recovered grade g/t 6.38 7.09 5.89 7.12Gold recovered Ounces 8,506 14,943 16,841 30,801Steyn 3 ShaftTonnes milled Tonnes 105,291 85,257 185,711 159,348Recovered grade g/t 4.87 6.08 5.20 5.87Gold recovered Ounces 16,491 16,654 31,034 30,094Surface OperationsTonnes milled Tonnes 38,358 16,038 77,761 16,038Recovered grade g/t 1.01 1.15 1.19 1.15Gold recovered Ounces 1,243 594 2,974 594 Quarter 2 2007 Quarter 2 2006 6 months 2007 6 months 2006TOTAL SHAFTSTonnes milled Tonnes 226,396 199,823 428,634 389,631Recovered grade g/t 4.29 5.85 4.46 5.88Gold recovered Ounces 31,231 37,568 61,421 73,694DevelopmentDevelopment on reef M 471 563 861 1,101Development off reef M 1,624 803 2,620 1,891 It is the Company's policy to recognize sales when gold is delivered to theprecious metal refinery. Refinery delivery cut-off arising at the end of thequarter has resulted in lower ounces being recorded in the financial resultsthan were actually produced in the period. Gold sales for the quarter amountedto 30,873 oz relative to production of 31,231 oz. There are two growth projects at PSGM, namely the Eldorado Reef Project and theGolden Triangle Project. These projects are expected to help sustain productionat PSGM beyond 2012. Eldorado Reef Project The Eldorado Formation (Ellsberg's) contains significant economic gold reefsalong the western margin of the northern section of the Free State Goldfield.The reefs have been successfully mined in localized areas in the past at Number3 Shaft. During September 2006 the Board of directors agreed that work should commence onan extensive drilling programme to explore the economic potential of the unminedEldorado reefs along the strike length of 6 km accessible from Number 3 Shaftworkings. This will be undertaken via the existing underground infrastructurecovering some forty crosscut lines. An estimated 11 500 meters of drilling willbe carried out from 46 and 54 Levels over a period of 3 to 4 years. The aim isto delineate some 11.8 million tonnes containing an estimated 2.4 million ouncesof gold. Should the exploration programme prove successful this will have the effect ofincreasing the resources at Number 3 shaft by up to 40% to 7.6 million ounces.The cost of the programme is estimated to be $6.9 million or $3.00 per estimatedresource oz and is to be funded from available PSGM generated cash flows. Golden Triangle Project A feasibility study for the Golden Triangle No. 9 shaft to access ground below 9shafts was completed on January 31, 2007. The Golden Triangle Project providesaccess to a measured and indicated mineral resource quantified at 2.77 milliontonnes containing an estimated 1.04 million ounces of gold. Thistle believesthat the Golden Triangle Project holds promise for consolidating PSGM's miningactivities and producing more predictable results. The Golden Triangle Projectis considered to be viable at current gold prices and exchange rates. At a gold price of $550 per oz the inflation adjusted internal rate of return ofthe project is calculated to be 13%. The maximum cash draw down is anticipatedto be $37.8 million in current value terms. The Golden Triangle Project isanticipated to have an average cash and total cost of $361 and $477 per ozrespectively. For additional information relating to the Golden Triangle Project refer to thetechnical report titled "43-101 Document for President Steyn Gold Mine 9 ShaftProject situated in the Witwatersrand Basin, Free State Goldfield, South Africa"dated January 28, 2007, which is filed on SEDAR at www.sedar.com. Mineral and Petroleum Resources Development Act, 2002, the Mining Charter andRoyalty Bill The Mineral and Petroleum Resources Development Act, 2002 ("MPRDA") contains thetransitional arrangements from the old mining law system which was contained inthe Minerals Act, 1991, to the new mining law system contained in the MPRDA.Security of tenure in respect of active mining operations is protected for aperiod not exceeding five years from May 1, 2004, during which period the holderof the old order mining right must apply for conversion to a new form of miningright, failing which the old order mining right ceases to exist. In order to beable to convert old order mining rights to new order mining rights, a holdermust submit a prescribed social and labour plan and undertake to "give effect to" the Black Economic Empowerment ("BEE") and socio-economic objectives of theMPRDA Act (the "Objectives"). The Objectives are embodied in the broad-based socioeconomic empowerment charterwhich was signed by the Department of Minerals and Energy of South Africa, theSouth African Chamber of Mines and others on October 11, 2002 (the "Charter"),and its appendix known as the Scorecard which followed on February 18, 2003.The Charter is based on seven key principles, two of which are focused onownership targets for historically disadvantaged South Africans ("HDSA's") andbeneficiation, and five of which are operationally oriented and cover areasfocused on improving conditions for HDSA's. Mineral and Petroleum Resources Development Act, 2002, the Mining Charter andRoyalty Bill (cont.) Regarding ownership targets, the Charter (as read with the Scorecard) requireseach mining company to achieve the following HDSA ownership targets for thepurpose of qualifying for the grant of new order rights: (i) 15% ownership by HDSAs in that company by May 1, 2009, and(ii) 26% ownership by HDSA's in that company by May 1, 2014. The Charter states that such transfers must take place in a transparent mannerand for fair market value. On December 12, 2006, Mindserv Limited, a wholly owned South African subsidiaryof Thistle that owns PSGM, concluded a shareholders agreement with IningiInvestments 167 (Pty) Ltd. (to be renamed Lefa La Gauta Pty Ltd), a majorityshareholder in a broad based Black Economic Empowerment consortium comprised ofprofessional mining engineers, to acquire an initial 15% equity stake in PSGM.Although the transaction is not expected to have a material impact on thefinancial condition of PSGM, it is a necessary step for PSGM to qualify for thegrant of new order mining rights in South Africa. The agreement is subject to asignificant suspensive condition which closed on 30 March 2007. The South African government has introduced for enactment a Mineral andPetroleum Royalty Bill ("Royalty Bill") which will lead to the implementation ofa royalty on gross sales value with effect from May 1, 2009. It is now proposedthat the South African gold mining industry will pay 1.5% of its revenues to theSouth African National Treasury some 1.5% lower than in the first draft of thelegislation. Marginal mining companies, defined as producers whose cash operating costsexceeded cash income would receive up to a 75% reduction in the royalty rates.The South African government now proposes to table the bill in Parliament in2007. Proposed sale of PSGM The Board has decided to embark on a process to consider the future of PSGM. Thehigh risk nature of operating a single gold mine on a stand-alone basis andinability at present of PSGM to self-fund all the capital expenditure needed toupgrade infrastructure, create more operational flexibility, develop the GoldenTriangle and explore the Eldorado reefs indicates that it could be appropriateto integrate PSGM into a diversified South African gold mining company. OnSeptember 3, 2007 the Company announced that it had received an indicativenon-binding offer from Pamodzi Gold Limited ("Pamodzi") (JSE:PZG) for thepurchase of all of the direct and/or indirect interests in PSGM. On September 3,2007 (the "Acceptance Date"), Thistle notified Pamodzi of its acceptance of theterms of the indicative non-binding offer. Pamodzi is a South African gold mining company that is controlled by PamodziResources (Pty) Limited, a South African black owned resources company ("PamodziResources"). Pamodzi owns established mining operations in both the western andeastern parts of the Witwatersrand. In the west, Pamodzi owns the Middelvleimine, an open cast operation currently in ramp-up stage. In the east, theinterest consists of a group of operating mines namely Grootvlei, Cons Modderand Nigel. Pamodzi is also in discussions to acquire Harmony's Orkney mines. Thestated objective of the company is to be a 1,000,000 oz per annum producer inthe short to medium term. The acquisition of PSGM will secure for Pamodzi afoothold in the Free State goldfields of South Africa and contribute towards therealization of its stated objective. Pamodzi is in a good position to secure thecapital needed to develop PSGM's Golden Triangle project and explore itsEldorado reefs thus securing a sound future for the employees of PSGM. Under the terms of the indicative non-binding offer the purchase considerationfor all the direct and/or indirect interests in PSGM payable to Thistle (on itsbehalf and on behalf of all other holders of such interests) will be ZAR300million (approximately U.S.$ 41.0 million at an exchange rate of ZAR 7.25 to theU.S.$) which will be allocated as to ZAR100 in respect of the entire issuedshare capital of PSGM, or Thistle's South African holding companies, DisselHoldings SA (Proprietary) Limited or Mindserv (Proprietary) Limited, asapplicable and the remainder to all claims on loan account held against suchcompany and all of its subsidiaries by Thistle and all of its other subsidiaries(the "Purchase Consideration"). Proposed sale of PSGM (continued) The Purchase Consideration is to be satisfied through the payment on completionof ZAR 150.0 million in cash and ZAR 150.0 million to be paid in convertibleinterest bearing debt securities (the "Pamodzi SPV Securities") issued by aspecial purpose vehicle wholly owned by Pamodzi Resources which will acquire aspecified number of ordinary shares in Pamodzi (the "Pamodzi Gold Shares") foran amount of ZAR 150.0 million. On or after May 31, 2009 (or in limitedcircumstances, prior thereto), Thistle will be entitled to repayment of theoutstanding debt including interest together with an agreed percentage of anyincrease in the value of the Pamodzi Gold Shares which will be settled by way ofa transfer of Pamodzi Gold Shares to Thistle or out of the proceeds of sale ofthe Pamodzi Gold Shares. Pamodzi and Thistle have agreed to negotiate and deal exclusively with eachother in good faith until November 30, 2007, subject to early termination ofsuch exclusivity in certain limited circumstances. In return for this grant ofexclusivity, Pamodzi has agreed to pay to Thistle an exclusivity fee of ZAR3.5million. Pamodzi has also agreed to pay a break fee of ZAR3.5 million to Thistlein certain limited circumstances. Both the exclusivity fee and any break feewill be settled by the issuance to Thistle of Pamodzi Gold Shares. Theindicative non-binding offer from Pamodzi is subject to various conditionsprecedent including, amongst others, the entering into of final binding legalagreements, approvals from the boards of directors and shareholders of Pamodziand Thistle, respectively, and regulatory and stock exchange approvals. AlthoughPamodzi and Thistle are confident that they will be able to conclude requiredtransaction agreements and secure regulatory approval within a three monthperiod there can however be no assurance that these discussions will result in atransaction. Should negotiations proceed as planned, it is envisaged that a meeting of theCompany's shareholders to consider the proposed sale of President Steyn willtake place during late October or November 2007 in Toronto. A meeting of Pamodzishareholders, as required, will be held in Johannesburg at or about the time ofthe meeting of the Company's shareholders to consider the proposed sale of PSGM. PHILIPPINES (Discontinued operation) Sale of interest in the Masbate Project Following a decision by the Board in 2006 to explore strategic alternatives forthe Company's Masbate gold project located on the island of Masbate in thePhilippines with a view to enhancing shareholder value, the Company agreed tosell its interest in that project to Central Asia Gold Limited (the "Purchaser")a wholly owned subsidiary of CGA Mining Limited ("CGA"). The final terms of the CGA Transaction were approved by Thistle's Board onJanuary 31, 2007 and the Share Purchase Agreement ("Original SPA") and relateddocumentation were executed on this date. Pursuant to the Original SPA, theconsideration payable for Thistles interest in Philippine Gold Ltd ("PGO") andthe assignment of debt owing by PGO to Thistle to the Purchaser was, inaggregate, US$51 million of which US$21 million was payable in ordinary sharesof CGA (the "CGA Shares"). The issue price of the CGA Shares was to be based onthe lesser of A$0.65 per share and the volume weighted average price at whichthe CGA Shares were traded on the Australian Stock Exchange (the "ASX") in the10 consecutive trading days immediately prior to the completion date of the CGATransaction ("Completion Date"). As a result of the market volatility in earlyApril, Thistle and CGA agreed to amend the Original SPA to provide that theissue price of the CGA Shares would be fixed at A$0.65 per CGA Share (the "Revised Formula"). All other terms and conditions of the Original SPA remainedunchanged. At special meetings held on March 16, 2007 the shareholders of Thistle and CGAapproved the acquisition of 100% of the shares of PGO and Thistle's otherinterests in the Masbate gold project by CGA subject to the terms and conditionsset out in the original agreement dated January 31, 2007 and as amended on March15, 2007. Sale of interest in the Masbate Project (continued) The transaction closed on March 19, 2007 at which time all the conditionsprecedent were met. The Purchase Consideration has been and will be satisfiedby: • the issue by CGA to Toowong Mining BV, a new wholly-owned subsidiary of Thistle ("Toowong") registered in the Netherlands, of 40,985,538 fully paidordinary shares representing an approximate 25.4% of CGA's paid up capital; • the payment by the Purchaser to Thistle on March 19, 2007, of US$25 million in cash, less the deposit of US$500,000 that has already been paid by the Purchaser to Thistle; and • the payment by the Purchaser into escrow (the "Escrow") within six months of US$5 million required to meet any substantiated warranty and indemnity claims that may have been made by the Purchaser, on a date not later than twelve months from the date of Completion. In addition to the above, on March 19, 2007 Thistle was reimbursed US$4.4million in working capital and capital expenditures in respect of the MasbateProject. A gain of $23.5 million was realised on the sale of the Company'sinterest in the Masbate Project in the first six months of 2007 determined asoutlined below: $ 000'sCash proceeds on sale (including reimbursements and deposit received in 2006) 29,387Proceeds receivable on September 19, 2007 and March 19, 2008 5,000Shares received in CGA 21,000Total proceeds on sale of Masbate Project 55,387Less: Thistle's net investment in PGO (29,738)Less: Transaction costs for the first six months of 2007 (1,761)Less: Fair value adjustment on shares received in CGA (359)Gain on sale of interest in Masbate Project 23,529 On completion of the CGA Transaction, Thistle contributed the CGA Shares toToowong. Under Section 85.1(3) of the Canadian Tax Act, the sale of the PGOshares (being shares of one foreign affiliate (PGO)) for the CGA Shares (beingshares of another foreign affiliate) will not trigger a tax event. For additional information relating to the sale of the Company's interest in theMasbate Project refer to the shareholder circular dated February 14, 2007 titled"To Approve the sale of Shares of Philippine Gold Limited and Related Assets toCGA Mining Limited. Notice of Meeting and Management Information Circularrespecting the Special Meeting of Shareholders to be held on March 16, 2007". Summary of 2007 Second Quarter Financial Results South African Operations The South African sub-group cash EBITDA in the first six months ended June 30,2007 was an inflow of $0.1 million. After depreciation and amortization of $2.9million and foreign exchange loss on translation of $0.1 million, an operatingloss of $2.9 million was recorded for the first six months compared to a profitof $1.9 million in the same period in 2006. EBITDA is derived based on earnings before interest, taxes, depreciation andamortization and foreign exchange losses on translation. EBITDA is not arecognized measure under Canadian GAAP. Management believes that, in additionto net income (loss), EBITDA is a useful supplemental measure as it providesinvestors with an indication of cash available for distribution prior to debtservice, capital expenditures and income taxes. Investors should be cautioned,however, that EBITDA should not be construed as an alternative to net income(loss) determined in accordance with GAAP as an indicator of the Company'sperformance or to cash flows from operating, investing and financing activitiesas a measure of liquidity and cash flows. The Company's method of calculatingEBITDA may differ from other companies and, accordingly, EBITDA may not becomparable to measures used by other companies. Corporation Sales Sales for the first six months ended June 30, 2007 decreased to $40.0 millionfrom $43.2 million in the corresponding period in 2006 due to a decline inounces sold of 15.5%. Although the Company realized an average price of $667 perounce of gold in the second quarter of 2007, which is approximately $41 perounce higher than that realized in the second quarter of 2006, the priceincrease was not large enough to offset the decline in ounces sold. Total ounces sold for the South African operations in the first six months of2006 amounted to 59,999 oz compared to 71,389 oz sold in the correspondingperiod in 2005. Total ounces sold for the South African operations in the secondquarter of 2007 amounted to 30,873 oz compared to 36,521 oz sold in thecorresponding period in 2006. Gross Profit / (Loss) For the six months ended June 30, 2007, the Company reported a gross loss of$2.8 million compared to a gross profit of $1.6 million over the same period in2006. A gross loss of $1.7 million was reported for the second quarter of 2007compared to a gross profit of $3.1 million in the same period in 2006. Thelosses incurred are attributable to poor operating performance at PSGM. Costs were contained in US$ terms following the weakening of the US$ by 10% fromZAR 6.43 to R7.06 to the US$. Costs in ZAR terms reflect the 12.7% increase inthe cost of labour effective from the end of June 2006 and costs associated withthe refurbishment of infrastructure at Number 3 shaft. General and Administrative Expenses and Restructuring Charges The general and administration expenses of $1.2 million for the first six monthsended June 30, 2007, of which $0.4 million was incurred in the second quarter,represents mainly salaries and expenses relating to senior management anddirectors and professional and consultancy fees. The amount expensed in thefirst six months of 2006 was $1.4 million, of which $0.7 million was incurred inthe second quarter. Interest Interest of $4.2 million for the six months ended June 30, 2007, of which $1.7million was incurred in the second quarter, represents mainly the interest onthe servicing of debt from Casten and MC (Refer to the Liquidity and CapitalResources section). The interest for the first six months of 2006 was $4.5million. Foreign Currency Gain/Loss The foreign currency loss for the first six months ended June 30, 2007 of $2.6million, of which $2.4 million was realised in the second quarter, representsthe net translation gain on the conversion of monetary assets and liabilities ofthe South African operations as well as a loss on the revaluation of theCanadian dollar denominated debt and other non US $ creditors' balances. In thesame period in 2006, the foreign currency loss was $1.0 million. Earnings / (loss) per share The earnings per share for the first six months of 2007 of $0.28 per share iscalculated on the basis of the net earnings of $13.1 million and the dilutedweighted average number of common shares in issue during the period of 46.2million. The loss per share of $0.11 for the first six months of 2006 iscalculated on the basis of the net loss of $4.9 million and the weighted averagenumber of common shares in issue during the period of 46.2 million. The loss per share for the second quarter of 2007 of $0.14 per share iscalculated on the basis of the net loss of $6.4 million and the diluted weightedaverage number of common shares in issue during the period of 46.2 million. Theloss per share of $0.01 for the second quarter of 2006 is calculated on thebasis of the net loss of $0.3 million and the weighted average number of commonshares in issue during the period of 46.2 million. The production performance of PSGM remains the driver of the Company'sprofitability. Share options to purchase 876,666 common shares at GBP0.17 per share wereoutstanding and exercisable at June 30, 2007 but were not included in thecomputation of diluted earnings per share because they would be anti-dilutive. Total Assets The Company's total assets at June 30, 2007 decreased by $6.7 million fromDecember 31, 2006 due to the disposal of the Philippine mining properties, aspart of the sale of PGO, offset by the acquisition of a 25.4% interest in CGAMining Limited, accounted for as an investment subject to significant influence.During the six months ended June 30, 2007 $3.1 million was capitalizedprincipally on underground development in South Africa. Cash Flows Cash used in operating activities in the first six months of 2007 (cashoperating loss, adjusted for movements in current assets and liabilities)amounted to $8.6 million against a cash inflow of $1.4 million for the sameperiod in 2006. Despite the increase in the gold price realized for the secondquarter of 2007 compared to the second quarter 2006, the decrease in ounces soldand the increase in costs relative to the same period in 2006 resulted in anincrease in cash used in continuing operations. Plant Property and Equipment (in thousands of dollars) Philippine South African assets assets Total Net book value at December 31, 2006 3,169 19,091 22,260Additions 3 3,065 3,068Disposals -- (31) (31)Disposal of discontinued operation (3,164) -- (3,164)Depreciation (8) (2,161) (2,169)Net book value at June 30, 2007 -- 19,964 19,964 Additions for PSGM relates mainly to underground development needed to sustainproduction. The South African operations have elected not to obtain insurance inrespect of business interruption and machinery breakdown including loss ofprofits and damage to property, plant and equipment. The operations, however,carry general liability and transport of bullion insurance. Mining Properties (in thousands of dollars) Philippines South African resource resource Properties properties Total Balance at December 31, 2006 28,199 22,812 51,011Additions 921 -- 921Change in estimate -- 129 129Disposal of discontinued operation (29,120) -- (29,120)Depletion -- (994) (994)Balance at June 30, 2007 -- 21,947 21,947 Reclamation Provision At June 30, 2007 the Company has a provision of approximately $6.6 millionrecorded for environmental liabilities in South Africa. The Company makes annualcontributions to the rehabilitation trust fund created in accordance withstatutory requirements, to provide for the estimated cost of pollution controland rehabilitation during and at the end of the life of the mine. The funds heldin trust are invested in a mixed portfolio of cash, bonds, property and equityinstruments. The Company intends to fund the ultimate rehabilitation costs fromthe money invested with the trust fund. As at June 30, 2007 the balance of therehabilitation trust fund was $2.2 million. The total liability will be fundedover the life of the mine currently estimated to be 14 years. The calculation ofthe liability is based on the future projected cost of the rehabilitationamounting to $9.8 million discounted at a real rate of 4.398%. Income Tax Payable Income tax payable of $0.7 million recorded at June 30, 2007 represents thetaxes payable in respect of the South African subsidiaries on the foreignexchange gains in the shareholders loans. Contractual Obligations The Company rents premises and leases equipment under operating leases thatexpire over the next two years. Operating lease expenses in the first six monthsof 2007 were $65,000 (for the same period in 2006, $97,000). The following is a schedule of future minimum rental and lease paymentsrequired: Year 2007 2008 Total$ 000's 20 21 41 Off balance sheet arrangements The Company does not enter into off-balance sheet arrangements with specialpurpose entities in the normal course of its business nor does it have anyunconsolidated affiliates. Summary of Quarterly Results Fresh Fresh Fresh Fresh Fresh Fresh Fresh Pre fresh Start Start Start Start Start Start Start Start Q2/2007 Q1/2007 Q4/2006 Q3/2006 Q2/2006 Q1/2006 Q4/2005 Q3/2005Total revenue $ 21,025 18,940 20,972 25,742 23,329 19,837 20,315 22,274Earnings (loss) beforediscontinued operations $ (6,023) (4,370) (3,674) 657 (291) (4,639) (6,697) (9,954)Earnings (loss) beforediscontinued operations pershare (basic and diluted) $ (0.13) (0.10) (0.08) 0.02 (0.01) (0.10) (0.14) (0.21)Gain on the sale of the -- 23,871 -- -- -- -- -- --Company's interest in theMasbate ProjectNet earnings (loss) US$ (6,365) 19,457 (3,674) 657 (291) (4,639) (6,697) (9,954)Earnings (loss) per share(basic and diluted) $ (0.14) 0.42 (0.08) 0.01 (0.01) (0.10) (0.15) (0.22) Tonnes Milled from Underground 188,038 162,835 187,569 218,975 183,785 189,808 218,301 268,237sourcesRecovered grade - underground 4.96 5.44 5.10 5.57 6.26 5.92 5.56 5.86sourcesTonnes Milled - Surface sources 38,358 39,403 33,035 30,022 16,038 - - -Recovered grade - Surface 1.01 1.37 1.05 1.35 1.15 - - -sourcesTonnes milled 226,396 202,238 187,569 218,975 183,785 189,808 218,301 268,237Recovered grade g/t 4.29 4.64 4.49 5.06 5.85 5.92 5.56 5.86Total Development Meters 2,095 1,386 1,602 2,086 1,366 1,615 1,896 2,475Gold sold oz 30,873 29,126 34,001 40,912 36,521 34,868 40,945 49,260CAD$/ US$ exchange rate 1.06 1.15 1.17 1.12 1.12 1.17 1.17 1.19ZAR / US$ exchange rate 7.06 7.22 7.25 7.14 6.43 6.12 6.51 6.43Average gold price realized US$ 667 648 555 482 439per ounce 612 618 626Cash cost R/tonne milled 648 671 597 602 598 629 613 569 The net earnings / (loss) per share - basic and diluted (both before and afterdiscontinued operations) for periods prior to 30 June 2005 has been adjusted inrespect of the consolidation of 200 shares for 1 on 30 June 2005. Total revenuesare generally affected by the average price of gold and the performance of theSouth African operations. The prevailing trend over the recent 24-month periodis an increase in the US $ gold price combined with a weakening of the US $.This has resulted in record high ZAR gold prices. During the first six months of 2007, the lack of sufficient pre-developed miningareas to absorb production shocks has resulted in a reduction in undergroundproduction and drop off in yield. The impact of the section 189 restructuringwhich resulted in a reduction of 27% in the workforce in November 2005 onproduction is also apparent. Since the second quarter of 2006 production fromunderground has been augmented by the treatment of surface material sourcedmainly from the reclamation of the Number 9 shaft plant and rock dump. In total156,856 surface tons at an average grade of 1.20 g/t was milled over the period.The decline in grade from underground sources in the fourth quarter of 2006 andthe first and second quarters of 2007 reflects the decline in grade at the "A"reef operations at Number 2 shaft and the impact of an underground fire in the71C45 stope at Number 2 shaft on January 5, 2007. This area has been sealed offto contain the fire and affected production crews relocated to open otherworking places. Summary of Quarterly Results (continued) Since August 10, 2004 the Company remains un-hedged from a cash flow point ofview. On October 24, 2005, PSGM purchased put options on USD gold for theperiod January 2006 to December 2007 on 2,000 ozs per month at a flat forwardprice of $490 per ounce. The put options are valued at fair value on balancesheet date with the movement in fair value for the period disclosed separatelyunder cost of sales. The costs associated with the South African operation are greatly affected bythe South African Rand: US $ exchange rate. Following the conclusion of the sale of the Company's interest in the MasbateProject on March 19, 2007, the company realised an extraordinary gain of $23.5million. Other notable factors affecting earnings over the second half of 2005include corporate and mine restructuring costs of $2.9 million and $0.2 millionaccretion in the reclamation provision at PSGM. Adjustments applied in thefourth quarter of 2005 include impairments to assets at TMTI amounting to $0.6million, impairment of South African mining properties of $1 million, arevaluation adjustment of put options bought by PSGM in October 2005 at $1million and restructuring costs relating to the implementation of the Section189 Restructuring at PSGM of $2.8 million. Adjustments applied in the fourthquarter of 2006 include a credit adjustment of $1 million relating to a decreasein the reclamation provision in South Africa, a revaluation adjustment of putoptions bought by PSGM in October 2005 of $0.6 million and $0.5 millionaccretion in the reclamation provision in South Africa. Transactions with Related Parties Casten and MC are the principal creditors and shareholders of the Company andown collectively 70% of the equity. (See "Liquidity and Capital Resources".) Liquidity and Capital Resources As of June 30, 2007, Thistle had cash and short-term investments of $0.7million, an increase of $0.4 million from the start of the year. Consolidatedshort and long-term debt balances, including interest, fees and withholding tax,at June 30, 2007, were $58.5 million compared with $74.8 million at the end of2006. At June 30, 2007, Thistle was in compliance with all debt covenants anddefault provisions. As at June 30, 2005, the Company's consolidated debt was $105.1 million. Uponimplementation of the CCAA restructuring plan, certain debt was restructuredwith approximately $60.0 million being converted into new consolidated commonshares of Thistle, leaving a net debt of approximately $45.1 million as at June30, 2005. This debt is analyzed as follows: Restructured debt outstanding as at June 30, 2005 Currency Interest Principal rate debt MC Cdn $ 10% 1,965,000Casten Cdn $ 10% 1,965,000Total Cdn $ 10% 3,930,000 MC Cdn $ 12% 13,500,000Casten Cdn $ 12% 13,500,000Total Cdn $ 12% 27,000,000 MC US$ 10% 10,000,000Casten US$ 10% 10,000,000Total US$ 10% 20,000,000 Liquidity and Capital Resources (continued) Subsequent to the end of the CCAA process to March 19, 2007, additional debt of$19.6 million was advanced from MC and Casten analysed as follows: Debt incurred subsequent to CCAA as at March 19, 2007 Currency Interest Principal rate debtMC US$ 12% 9,795,000Casten US$ 12% 9,795,080Total US$ 12% 19,590,080 For the period January 1, 2007 to March 19, 2007 an additional amount of $3.75million in aggregate was advanced to the Company by Casten and MC in order tomeet corporate costs and fund the Philippine operations. $0.7 million wasapplied to funding a cash deficit at PSGM. No further funds were advanced forthe first six months of 2007. On March 1, 2007, the Company signed Memorandum of Agreements with Casten and MCwith the effect that interest will only be paid after all the principal debt hasbeen repaid. On March 20 2007, the Company applied $26.7 million of the CGA PurchaseConsideration in full payment of the debt incurred subsequent to the end of theCCAA process and part payment of the restructured debt on June 30, 2005 leavingan amount of $54.3 million in respect of principal, interest and withholdingtax, payable on April 1, 2007 in terms Memorandum of Agreements. The principal debt outstanding at June 30, 2007 is analyzed as follows: Restructured debt outstanding as at June 30, 2007 Currency Interest Current Long term rate portion portion MC Cdn $ 10% 1,473,750 491,250Casten Cdn $ 10% 1,473,750 491,250Total Cdn $ 10% 2,947,500 982,500 MC Cdn $ 12% 5,947,164 3,375,000Casten Cdn $ 12% 5,947,164 3,375,000Total Cdn $ 12% 11,894,328 6,750,000 MC US$ 10% 7,500,000 2,500,000Casten US$ 10% 7,500,000 2,500,000Total US$ 10% 15,000,000 5,000,000 Payment of debt restructured in terms of the Standstill Agreement. However sincea condition of the June 27, 2007 credit line was not met subsequent to June 30,2007, the deferment in terms of the Standstill Agreement is no longerenforceable. Refer to note 7 of the financial statements. At June 30, 2007, the Company's payment obligations are analyzed as follows: Payments Due by PeriodError! Bookmark not defined. Total Less than 1 1 - 2 years yearDebt outstanding 41,472 29,065 12,407Interest and loan advance fee payable 17,002 -- 17,002Operating leases 41 20 21Purchase obligations -- -- --Total contractual obligations 58,515 29,085 29,430 Liquidity and Capital Resources (continued) The Company incurred losses of $10.4 million from continuing operations duringthe first six months ended June 30, 2007 and continues to incur losses. At June30, 2007 the Company's current liabilities exceeded its current assets by $33.1million and the Company's total liabilities exceeded its total assets by $4.8million. On May 11, 2007 a Standstill Agreement was entered into with MC andCasten, outlined under "Financial Restructuring in 2007" included in this MD &A, in terms of which MC and Casten will defer repayment of interest andprincipal on the loans they have advanced to Thistle until May 31, 2008. On June 27, 2007, MC and Casten agreed to provide a credit line to the Companyof up to $666,600 per month for the three month period to September 2007. Thecredit line was contingent on, amongst others, improved performance at PSGM foreach of the months of July and August 2007 of not less than 396 kilograms ofgold. Unfortunately this level has not been reached and as a result MC andCasten have no obligation to extend any further credit. In addition, MC andCasten may, at their option, declare all amounts owing by Thistle to them,including the amounts deferred in terms of the Standstill Agreement, to beforthwith due and payable. At present Thistle has not received any notice inthis regard. MC and Casten have, however, funded certain costs of the Company for August 2007amounting to $374,000 subject to the appointment of Mr. John Bredenhann as ChiefExecutive Officer. MC and Casten have not made any further commitments nor havethey provided any further assurances with respect to the funding of futureoperating requirements although they have stated at their discretion they willconsider future requests from the Company for additional funding on a case bycase basis. Cash flow forecasts indicate that although PSGM will be able to meet itsobligations if the revised production targets are met until the completion ofthe proposed transaction with Pamodzi, it will not be able to support Thistle'scorporate costs including the costs related to the strategic initiatives forPSGM. Absent additional funding by MC and Casten, there is a materialuncertainty which would cast doubt on the ability of the Company and itssubsidiaries to continue as going concerns and, therefore, that they may beunable to realise their assets and discharge their liabilities in the normalcourse of business. However given MC and Casten have funded corporate costs of the Company forAugust 2007 and have stated that at their discretion they will consider futureadditional funding requests on a case by case basis although no furthercommitments or assurances have been made and given the proposed sale of PSGM, itis management's belief that existing cash resources, net cash to be generatedfrom operations and the sale of assets and cash provided by MC and Casten shouldthey elect to meet future additional funding requests regarding the Company'scorporate costs, will be sufficient to meet the Company's anticipatedrequirements. Accordingly the financial statements have been prepared on thebasis of accounting policies applicable to a going concern. Should MC and Casten decline to advance funds in respect of future additionalfunding requests to meet the corporate costs of the Company and/or the proposedsale of PSGM not be successful and/or PSGM not be successful in achievingsufficient levels of profitable operations, and / or there be a material awardadverse to PSGM under the M Hall and Associates claim, there is a materialuncertainty which would cast doubt on the ability of the Company and itssubsidiaries to continue as going concerns and, therefore, that they may beunable to realise their assets and discharge their liabilities in the normalcourse of business. Contingent Liabilities M Hall and Associates On June 4, 2004, PSGM cancelled a mining contract with M Hall and Associates ("MH & A"). Shortly thereafter MH & A disputed whether PSGM was lawfully entitledto cancel the contract and presented a claim amounting to ZAR33 million whichPSGM denied. Under the terms of the contract, any dispute is to be decidedthrough arbitration. MH & A did not pursue this course of action but instead onJune 28, 2004 applied for an urgent application to prevent PSGM from using andremoving certain equipment. This application was dismissed with costs. Leave toappeal was granted but the appeal was also dismissed with costs on October 21,2004. M Hall and Associates (continued) On May 22, 2006 and October 9, 2006 the liquidator of MH & A subpoenaedemployees of PSGM to attend enquiries in terms of the South African CompaniesAct. On May 25, 2007 the Company's was served with a summons from theliquidators of MH & A for an amount of ZAR40.5 million ($5.8 million at anexchange rate of ZAR 7.00 to US $). An amount of ZAR 33.0 million relates to the repudiation of the contract and ZAR7.5 million relates to equipment used by the mine. These amounts excludeinterest at 15.5% per annum as set by the rules of the South African Courts. The Company appointed a technical expert who, together with the Company's legalcounsel, prepared a legal opinion reflecting a good chance of success. TheCompany, on advice from the Company's legal counsel, took exception to theparticulars in the summons which requires the liquidators to make the necessaryamendments before the matter can proceed. The Company has launched anapplication for security for costs to guarantee that some costs will berecovered in the event that the Company is successful. Should the liquidatorsnot be in a position to provide the security, the Company will launch anapplication to have the claim dismissed. The Company currently believes that ithas a good defence against the claim. Should this interpretation prove not tobe the case, the matter could have a material adverse effect on the Company. Matjhabeng Municipality PSGM received a summons for ZAR1.756 million ($0.249 million) from theMatjhabeng Municipality in Welkom, South Africa, on March 9, 2007. Although itis not yet clear, Management believe that this is in respect of seweragecharges, for periods prior to the acquisition of PSGM by Thistle, which PSGM iscontesting. Although the final result of the matter cannot be predicted withcertainty, management does not currently expect the outcome of this matter tohave a material adverse effect on the Company. CGA Mining Limited Pursuant to the Sale and Purchase Agreement, Thistle has provided a number ofwarranties to Purchaser and CGA and will remain subject to possible PurchaserClaims (as defined therein) for a minimum period of 12 months. Although noformal claims or actions related to the sale of the interest in the MasbateProject have been received, CGA and the Purchaser have reserved their rights inconnection with the Sale and Purchase Agreement and the events leading up to thecompletion of the sale. The Company believes that it has a good defense againstpossible claims that might be made in this regard. Should proceedings beinstituted against the Company and this interpretation prove not to be the case,the matter would have a material adverse effect on the Company. Outstanding Share Data On June 30, 2005 and before the consolidation described below, the Company had461,520,685 common shares issued and outstanding. In addition, the 31,880,000directors and employees stock options outstanding as at December 31, 2004, werecancelled effective February 16, 2005. The share purchase warrants outstandingas at December 31, 2004, totaling 87,452,913 were also cancelled effectiveFebruary 16, 2005. As part of the restructuring under the CCAA, which was completed on the close ofbusiness on June 30, 2005, the issued and outstanding shares at March 15, 2005,were consolidated on a one new consolidated share for 200 existing shares basis.This resulted in 2,307,603 consolidated common shares. In addition, themajority of the convertible loans, together with another long-term loan, wereconverted into 11,538,015 new shares. A portion of the demand loans were alsoconverted under the restructuring process into 32,306,442 new shares. As aresult of the aforementioned, there were a total of 46,152,060 common sharesoutstanding upon completion of the restructuring, which continues to be thenumber of outstanding common shares as of June 30, 2006. Share options topurchase 876,666 common shares at GBP0.17 per share were outstanding andexercisable at June 30, 2007. Critical Accounting Estimates Thistle's significant accounting policies are described in note 2 to the 2006Audited Consolidated Financial Statements and the Company's MD & A for the yearended December 31, 2006. The preparation of the Company's consolidated financialstatements requires the use of estimates and assumptions that affect thereported amounts of assets and liabilities as well as revenue and expenses.Estimates are based on historical and anticipated results and trends and otherassumptions made by management about matters that are uncertain, at the time theaccounting estimate is made, and where different estimates that could reasonablyhave been used in the current period - or changes in the accounting estimatethat are reasonably likely to occur from period to period - would have amaterial impact on Thistle's financial statements. By their nature, estimatesare subject to an inherent degree of uncertainty. Actual results could differfrom those estimates. The following accounting policies have been identified as critical: • carrying value of mining properties, property, plant and equipment evaluated at least annually using management's best estimates of futureproduction, sales prices, operating, capital costs and reclamation costs; • depletion, depreciation and amortization based on proven and probable mineral reserves and the estimated life of assets; • stockpiles, metal in circuit and product inventories at the lower of average cost or net realizable value; • financial instruments, recorded on the balance sheet at the estimated fair market value; • future income tax assets whose recognition is determined based on significant estimates related to expectations of future taxable income; • contingencies, when available information indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated; • stock options, using the fair value method to value the Company's stock based compensation plan based on the Black Scholes model; and • reclamation obligations, resulting from minimum standards for mine reclamation established by various governmental agencies, which affect certainoperations of the Company. Management has discussed the development and selection of the above criticalaccounting policies with the Audit Committee of the Board of Directors. Changes in Accounting Policies including Initial adoption For details regarding changes in accounting policies refer to note 2 of theunaudited consolidated financial statements for the six months ended June 30,2007. Changes in internal controls over financial reporting During the most recent interim period, there have been no changes in theCompany's policies and procedures and other processes that comprise its internalcontrol over financial reporting, that have materially affected, or arereasonably likely to materially affect, the Company's internal control overfinancial reporting. Notice of Disclosure of Non-Auditor Review of Interim Financial Statements For the six month periods ended June 30, 2007 and 2006. Pursuant to National Instrument 51-102 - Continuous Disclosure Obligations,section 4.3(3)(a), if an auditor has not performed a review of the interimfinancial statements; the interim financial statements must be accompanied by anotice indicating that the financial statements have not been reviewed by anauditor. The accompanying unaudited interim consolidated financial statements ofthe Company for the interim periods ended June 30, 2007 and 2006, have beenprepared in accordance with Canadian generally accepted accounting principlesand are the responsibility of the Company's management. The Company'sindependent auditors, KPMG Inc., have not performed a review of these interimconsolidated financial statements in accordance with the standards establishedby the Canadian Institute of Chartered Accountants for a review of interimfinancial statements by an entity's auditor. Corporate Information Head Office Registrar & Transfer Nominated advisor Bankers AgentPresident Steyn Gold Mines CIBC Mellon Trust Grant Thornton Royal Bank of Canada CompanyPrivate Bag X10206 Toronto, Ontario Corporate Finance Toronto, OntarioWelkom, 9459 London, United Kingdom London, United Kingdom Standard Bank LimitedRepublic of South Africa Johannesburg, South AfricaTel: +27 57 391 9114 Auditors Legal CounselFax: +27 57 391 9118 KPMG Inc. Heenan Blaikie LLP Listing Johannesburg, South Toronto, Ontario Alternative Investment Africa Market Werksmans London, Symbol TMG Johannesburg, South AfricaCorporate Structure and Management Directors OfficersChairman of the Board Alekseev Sergey Barry Goldberg Chief Executive OfficerThe Right Honourable Aleksandrovich Toronto, Ontario John BredenhannLord Lang of Monkton Appointed February 7, Johannesburg, South Africa 2006Ayrshire, Scotland London, United Kingdom Alexey Kruzhkov London, United Kingdom Chief Financial OfficerPaul Marchand Askar Alshinbayev Anton KakavelakisLondon, United Kingdom Resigned February 7, Welkom, South Africa 2006 London, United KingdomYuri Shafranik Company SecretaryResigned February 7, 2006 Jeffery Barnes Ryan Middleton,Moscow, Russia Toronto, Ontario Toronto Ontario Financial Information Attached are Thistle Mining Inc.'s unaudited Consolidated Financial Statementsfor the six months ended June 30, 2007 and June 30, 2006. All figures are in US$unless otherwise noted. The statements are presented in accordance with CanadianGAAP. For further information, please contact:Anton Kakavelakis, Chief Financial OfficerPresident Steyn Gold MinesPrivate Bag X 10206, Welkom, 9460, Free State, South AfricaTel: +27 57 391 9026Fax: +27 57 391 [email protected] Consolidated Balance Sheets (in thousands of US dollars, unaudited) 30 June 31 December 2007 2006 Fresh start Fresh start note 3.3 note 3.3AssetsCurrent assetsCash and cash equivalents 679 233Accounts receivable 6,229 2,982Investments 35 98Inventories 4,289 3,431Derivative financial instruments -- 5Prepayments and deposits 107 54Discontinued operation (note 6) -- 676Total current assets 11,339 7,479 Investment subject to significant influence (note 4) 20,641 --Rehabilitation trust fund (Restricted use) 2,157 2,002Property, plant and equipment 19,964 19,091Mining properties 21,947 22,812Discontinued operation (note 6) -- 31,368Total Assets 76,048 82,752 Liabilities and Shareholders' deficitCurrent liabilitiesAccounts payable and accrued liabilities 14,574 14,106Current debt 29,065 43,083Income taxes payable 749 728Future income tax liabilities 46 50Discontinued operation (note 6) -- 1,872Total current liabilities 44,434 59,839 Long-term debt 29,409 31,761Retirement provision -- --Reclamation provision 6,570 6,178Future income tax liabilities 411 453Discontinued operation (note 6) -- 2,395Total liabilities 80,824 100,626 Shareholders' deficitCommon shares (note 5) 6,627 6,627Contributed surplus 103 97Accumulated other comprehensive income -- --Accumulated deficits (11,506) (24,598) Total shareholders' deficit (4,776) (17,874) Total Liabilities and Shareholders' deficit 76,048 82,752 Going concern (note 3.1)Subsequent events (note 3.1 and 7) See accompanying notes. Consolidated Statements of Earnings and Deficit (in thousands of US dollars, except net loss per share) Three months ended Six months ended(unaudited) 30 June 30 June 2007 2006 2007 2006 Fresh start Fresh start Fresh start Fresh start Sales 21,025 23,329 39,965 43,166Net impact of derivative financial instruments (1) 50 (5) (345)Cost of sales (20,835) (18,845) (39,334) (38,196)Profit / (loss) on sale of property, plant and equipment - 220 - 220Accretion relating to reclamation provision (135) (107) (265) (107)Depletion and depreciation, and impairment (1,727) (1,596) (3,155) (3,127)Gross profit / (loss) (1,673) 3,051 (2,794) 1,611 Costs and ExpensesGeneral and administrative expenses (395) (680) (1,203) (1,243)Interest (1,709) (2,134) (4,210) (4,486)Foreign currency gain / (loss) (2,447) (755) (2,608) (986)Other gains and (losses) 250 (29) 423 53Loss before income taxes and discontinued operations (5,974) (547) (10,392) (5,051) Discontinued operations (note 6) (342) (45) 23,485 (133)Income tax (expense) / recovery (49) 301 (1) 254Net earnings / (loss) (6,365) (291) 13,092 (4,930) Deficit, beginning of the period (5,141) (21,290) (24,598) (16,651)Deficit, end of the period (11,506) (21,581) (11,506) (21,581) Loss per share before discontinued operations - basic and diluted (0.13) (0.01) (0.23) (0.10) Earnings/ (loss) per share - basic and diluted (0.14) (0.01) 0.28 (0.11) See accompanying notes. Consolidated Statements of Comprehensive Income (in thousands of US dollars, unaudited) Three months ended Six months ended 30 June 30 June 2007 2006 2007 2006 Fresh start Fresh start Fresh start Fresh startNet earnings/ (loss) (6,365) (291) 13,092 (4,930) Other comprehensive income (loss) - net of income tax -- -- -- -- Comprehensive income (6,365) (291) 13,092 (4,930) See accompanying notes. Consolidated Statements of Cash Flows(in thousands of US dollars, unaudited) Three months ended Six months ended 30 June 30 June 2007 2006 2007 2006 Fresh start Fresh start Fresh start Fresh startOperating activitiesNet loss for the period from continuing operations (6,023) (246) (10,393) (4,797)Add (deduct) items not affecting cash from operatingactivitiesDepletion and depreciation, and impairment 1,727 1,596 3,155 3,127Future income and mining tax provisions 44 (192) (46) (232)Foreign exchange 2,447 755 2,608 986Unrealized (gain) loss on derivative instruments 1 (50) 5 345(Gain) loss on investments (186) 54 (233) (16)Stock based compensation 5 15 6 31Accretion relating to reclamation provision 135 -- 265 --Other movement in the reclamation provision 23 -- (2) --Profit on sale of plant, property and equipment -- (220) -- (220)Other non-cash items -- 107 31 108 (1,827) 1,819 (4,604) (668) Changes in non-cash working capital balancesAccounts receivable (10) 268 (3,217) (56)Inventories (214) (1,148) (726) (659)Other assets (125) 106 (155) 121Accounts payable and accrued liabilities (938) 2,179 120 3,442Income and mining taxes recoverable and payable (19) (867) 3 (786) (1,306) 538 (3,975) 2,062 Cash flows generated by (used in) continuing operations (3,133) 2,357 (8,579) 1,394 Net change in discontinued operations (342) (962) 1,734 (1,550) Investing activitiesAdditions to mining properties -- -- -- --Purchase of property, plant and equipment (1,671) (1,252) (3,065) (2,321)Proceeds of sale of discontinued operation -- -- 28,887 --Proceeds on sale of property, plant and equipment -- 357 -- 357Sale of investments 198 236 296 330Cash flows provided by (used in) investing activities (1,473) (659) 26,118 (1,634) Financing activitiesPrincipal payments under capital lease obligations (14) (30) (43) (55)Interest accrued on debt 1,685 -- 4,166 --Repayment of borrowings -- -- (26,700) --Proceeds from borrowings -- -- 3,750 680Cash flows provided by (used in) financing activities 1,671 (30) (18,827) 625 Net increase / (decreased) in cash and cash equivalents (3,277) 706 446 (1,165)Cash and cash equivalents, beginning of period 3,956 1,761 233 3,632Cash and cash equivalents, end of period 679 2,467 679 2,467 Interest Paid 5 7 14 24Taxes Paid 28 42 28 42 See accompanying notes. Notes (forming part of the financial statements) (tabular amounts in thousands of USdollars unless specified) 1. Significant accounting policies Thistle Mining Inc ("Thistle" or "The Company") prepares its financialstatements in accordance with Canadian generally accepted accounting principles("Canadian GAAP"). With exception to changes in accounting policies institutedsince December 2006 as outlined in note 2 the accounting policies are consistentwith those used in the preparation of the Company's audited consolidatedfinancial Statements for the year ended December 31, 2006. These unaudited interim consolidated financial statements ("the statements")include the financial statements of the Company and its subsidiary undertakings.These statements do not include all disclosures required for annual financialstatements, and accordingly, should be read in conjunction with the Company'saudited consolidated financial Statements for the year ended December 31, 2006. 2. Changes in accounting policies Commencing January 1, 2007, the Company adopted the following Canadian Instituteof Chartered Accountants ("CICA") Handbook Sections: (a) Section 1506 "Accounting Changes",(b) Section 1530 "Comprehensive Income",(c) Section 3051 "Investments",(d) Section 3251 "Equity",(e) Section 3855 "Financial Instruments - Recognition and Measurement",(f) Section 3861 "Financial Instruments - Disclosure and presentation", and(g) Section 3865 "Hedges" No restatement of prior year's financial statements was required. The principalchanges due to the adoption of these sections, performed in terms of theirtransitional provisions where applicable, are summarised below: (a) Accounting Changes Under this section, changes in accounting policy are applied retrospectivelyunless doing so is impracticable or the change in accounting policy is made oninitial application of a primary source of Canadian GAAP in accordance with thespecific transitional provisions, if any. A change in accounting estimate isgenerally recognized prospectively and material prior period errors are amendedthrough restatements. New disclosures are required in respect of such accountingchanges. The adoption of this section did not affect comparatives. (b) Comprehensive Income Comprehensive income is the change in equity (net assets) of the Company fromtransactions and other events and circumstances from non-owner sources. Itincludes all changes in equity during a period except those resulting frominvestments by owners and distributions to owners. Other comprehensive income comprises revenues, expenses, gains and losses that,in accordance with primary sources of Canadian GAAP, are recognized incomprehensive income, but excluded from net income. The implications to the Company include: • A new statement of comprehensive income now forms part of the consolidated financial statements and displays current period net income and other comprehensive income. • As the Company does not have self-sustaining foreign operations, appraisal increase credits or donations from non-owners, comparatives are not restated. 2. Changes in accounting policies (continued) (c) Investments This section establishes standards for accounting for investments subject tosignificant influence and for measuring and disclosing certain othernon-financial instrument investments (such as works of art and other tangibleassets held for investment purposes). As the Company's only investment subjectto significant influence was acquired in the first quarter of 2007, the adoptionof this section did not affect the comparatives. (d) Equity This Section establishes standards for the presentation of equity and changes inequity during the reporting period. The implications to the Company include: • Accumulated other comprehensive income is a separate component of shareholders' deficit on the balance sheet. • A note to the accumulated other comprehensive income is required. • As the Company does not have self-sustaining foreign operations, appraisal increase credits or donations from non-owners, comparatives are not restated. (e) Financial Instruments - Recognition and Measurement • All financial instruments are classified into one of the followingcategories: held for trading, held to maturity investments, loans andreceivables, available for sale financial assets or other financial liabilities. • All financial instruments, including derivatives, are measured at fairvalue, except for loans and receivables, held to maturity investments and otherfinancial liabilities which are measured at amortized cost. • Changes in fair value of held-for-trading financial assets are recognizedin net earnings and changes in fair value of available-for-sale financialinstruments are recorded in other comprehensive income until the investment isderecognized or impaired at which time the amounts would be recorded in netearnings. • The Company has adopted the policy to recognise transaction costs in netincome. Upon adoption of this section, the Company designated its cash and cashequivalents, accounts receivable and other deposits as loans and receivables,which are measured at amortized cost. Derivative financial instruments areclassified as held for trading and measured at fair value. Current and long-termdebt, accounts payable and accrued liabilities are classified as other financialliabilities, which are measured at amortized cost, using the effective interestrate method. The adoption of this section had no material impact on the financial statementsof the Company and does not require the restatement of comparatives. (f) Financial Instruments - Disclosure and presentation This section establishes standards for presentation of financial instruments andnon-financial derivatives, and identifies the information that should bedisclosed about them. The adoption of this section had no material impact on thefinancial statements of the Company and does not require the restatement ofcomparatives. (g) Hedges This section establishes standards for when and how hedge accounting may beapplied. Hedge accounting is optional. The Company does not currently applyhedge accounting and consequently the adoption of this section did not impactthe consolidated financial statements. 2. Changes in accounting policies (continued) Recent pronouncements In February 2007, the CICA issued Section 1535, ''Capital Disclosures'' which iseffective for fiscal years beginning on or after October 1, 2007. This standardrequires disclosure of information that enables users of its financialstatements to evaluate the entity's objectives, policies and processes formanaging capital. In February 2007, the CICA issued Section 3862 ''Financial Instruments-Disclosure'' (''Section 3862'') and Section 3863 ''Financial Instruments -Presentation'' (''Section 3863''), which are effective for fiscal yearsbeginning on or after October 1, 2007. The objective of Section 3862 is toprovide financial statement disclosure to enable users to evaluate thesignificance of financial instruments for the Company's financial position andperformance and the nature and extent of risks arising from financialinstruments that the Company is exposed to during the reporting period and thebalance sheet date and how the Company is managing those risks. The purpose ofSection 3863 is to enhance the financial statement user's understanding of thesignificance of financial instruments to the Company's financial position,performance and cash flows. 3. Financial reorganization, going concern and fresh start accounting 3.1 Going Concern The accompanying unaudited consolidated financial statements have been preparedon a "going concern" basis in accordance with Canadian generally acceptedaccounting principles (''GAAP''). The going concern basis of presentationassumes that Thistle Mining Inc. ("Thistle" or the "Company") will continue inoperation for the foreseeable future and will be able to realize its assets anddischarge its liabilities and commitments in the normal course of business. The Company and its subsidiaries incurred losses of $10.4 million fromcontinuing operations during the six months ended June 30, 2007 and continue toincur losses. At June 30, 2007 the Company's current liabilities exceeded itscurrent assets by $33.1 million and the Company's total liabilities exceeded itstotal assets by $4.8 million. On March 19, 2007 all the conditions related to the sale of 100% of the sharesof Philippine Gold Limited, a wholly-owned subsidiary of Thistle, and Thistle'sother interests in the Masbate gold project to CGA Mining Limited ("CGA") wassatisfied and the transaction has been completed. Pursuant to this transaction(the "CGA Transaction") the consideration that was paid amounted to in aggregateUS$51 million of which US$21 million was payable in ordinary shares of CGA (the"CGA Shares"). Applying the pricing formula Thistle received 40,985,538 CGAShares on March 19, 2007. This represents an approximate 25.4% interest in CGA.In addition on March 19, 2007 Thistle received US $28,887,430. This paymentenabled Thistle to pay down US$26.7 million of the debt owing to MC ResourcesLimited ("MC") and Casten Holdings Limited ("Casten") on March 20, 2007. Pursuant to the Sale and Purchase Agreement ("SPA"), Thistle has provided anumber of warranties to Central Asia Gold Limited (the "Purchaser") and CGA andwill remain subject to possible Purchaser Claims (as defined therein) for aminimum period of 12 months. Although no formal claims or actions related tothe sale of the interest in the Masbate Project have been received, CGA and thePurchaser have reserved their rights in connection with the SPA and the eventsleading up to the completion of the sale. The Company believes that it has agood defense against possible claims that might be made in this regard. Shouldproceedings be instituted against the Company and this interpretation prove notto be the case, the matter would have a material adverse effect on the Company. On April 11, 2007, Thistle entered into a non-binding agreement with each of MCand Casten on the restructuring of debt (the "Plan"). On May 11, 2007, Thistleentered into a debt standstill agreement with MC and Casten (the "StandstillAgreement") pursuant to which MC and Casten agreed (amongst other matters) thatshould CGA's consent to the transfer of Thistle's ownership interest in CGA toMC and Casten not be obtained by August 11, 2007, the Plan will lapse and MC andCasten will, subject to certain conditions, continue to defer repayment ofinterest and principal on the loans they have advanced to Thistle until May 31,2008. On June 27, 2007, MC and Casten agreed to provide a credit line to theCompany of up to $666,600 per month for the three month period to September2007. The credit line was available for the purpose of funding corporate costsincluding the cost of strategic initiatives relating to PSGM and to provide acontingency in the event of below forecast performance by PSGM. 3. Financial reorganization, going concern and fresh start accounting 3.1 Going Concern (continued) The credit line was contingent on, amongst others, improved performance at PSGMfor each of the months of July and August 2007 of not less than 396 kilograms ofgold. Without the credit line there may be a material uncertainty which may castdoubt on the ability of the Company and its subsidiaries to continue as goingconcerns. The following events occurred subsequent to the end of the second quarter of2007: On August 11, 2007, the Plan lapsed as CGA's consent to the transfer ofThistle's ownership interest in CGA was not obtained and, in terms of theStandstill Agreement, MC and Casten will, subject to certain conditions,continue to defer repayment of interest and principal on the loans they haveadvanced to Thistle until May 31, 2008. However, as PSGM failed to improve its performance for each of the months ofJuly and August 2007 to not less than 396 kilograms of gold in terms of the June27, 2007 credit line agreement, MC and Casten have no obligation to extend anyfurther credit and may, at their option, declare all amounts owing by Thistle tothem, including the amounts deferred in terms of the Standstill Agreement, to beforthwith due and payable. At present Thistle has not received any notice inthis regard. MC and Casten have, however, funded certain costs of the Company for August 2007amounting to $374,000 subject to the appointment of Mr. John Bredenhann as ChiefExecutive Officer. MC and Casten have not made any further commitments nor havethey provided any further assurances with respect to the funding of futureoperating requirements although they have stated at their discretion they willconsider future requests from the Company for additional funding on a case bycase basis. The Board had decided to embark on a process to consider the future of PSGM. OnSeptember 3, 2007 the Company announced that it had received an indicativenon-binding offer from Pamodzi Gold Limited ("Pamodzi") (JSE:PZG) for thepurchase of all of the direct and/or indirect interests in PSGM. On September 3,2007 (the "Acceptance Date"), Thistle notified Pamodzi of its acceptance of theterms of the indicative non-binding offer. Under the terms of the indicativenon-binding offer the purchase consideration for all the direct and/or indirectinterests in PSGM payable to Thistle (on its behalf and on behalf of all otherholders of such interests) will be ZAR300 million (approximately U.S.$ 41.0million at an exchange rate of ZAR 7.25 to the U.S.$) (the "PurchaseConsideration"). Pamodzi and Thistle have agreed to negotiate and dealexclusively with each other in good faith until November 30, 2007, subject toearly termination of such exclusivity in certain limited circumstances. Inreturn for this grant of exclusivity, Pamodzi has agreed to pay to Thistle anexclusivity fee of ZAR3.5 million. Pamodzi has also agreed to pay a break fee ofZAR3.5 million to Thistle in certain limited circumstances. Although Pamodzi andThistle are confident that they will be able to conclude required transactionagreements and secure regulatory approval within a three month period there canhowever be no assurance that these discussions will result in a transaction.Should negotiations proceed as planned, a meeting of the Company's shareholdersto consider the proposed sale of PSGM is envisaged to be held in Toronto in lateOctober or November 2007. Having reviewed the cash flow forecasts of the Company and its subsidiarieswhich indicate that PSGM will be able to meet its obligations if revisedproduction targets are met until the completion of the proposed transaction withPamodzi, but will not be able to support Thistle's corporate costs, it ismanagement's belief that absent additional funding by MC and Casten, theprincipal creditors and shareholders of the Company collectively owning 70% ofthe equity, there is a material uncertainty which would cast doubt on theability of the Company and its subsidiaries to realise their assets anddischarge their liabilities in the normal course of business. However given MCand Casten have funded corporate costs of the Company for August 2007 and havestated that at their discretion they will consider future additional fundingrequests on a case by case basis although no further commitments or assuranceshave been made and given the proposed sale of PSGM, it is management's beliefthat existing cash resources, net cash to be generated from operations and thesale of assets and cash provided by MC and Casten should they elect to meetfuture additional funding requests regarding the Company's corporate costs, willbe sufficient to meet the Company's anticipated requirements. 3. Financial reorganization, going concern and fresh start accounting 3.1 Going Concern (continued) The financial statements have been prepared on the basis of accounting policiesapplicable to a going concern. Should MC and Casten decline to advance funds inrespect of future additional funding requests to meet the corporate costs of theCompany and/or the proposed sale of PSGM not be successful and/or PSGM not besuccessful in achieving sufficient levels of profitable operations, and / orthere be a material award adverse to PSGM under the M Hall and Associates claim,there is a material uncertainty which would cast doubt on the ability of theCompany and its subsidiaries to continue as going concerns and, therefore, thatthey may be unable to realise their assets and discharge their liabilities inthe normal course of business. The lack of sufficient pre-developed mining areas and lack of historicalinvestment in infrastructure are constraints that have and are holding backPSGM's production capacity. The compressor and pump failures at Number 3 shaftin the first half of 2007 indicate that there is an urgent need to upgradeinfrastructure to reduce the risk of production disruptions. The forecastincludes expenditure to remedy the historical under spending and is expected tohave positive effect on future production. The unaudited consolidated financial statements do not reflect adjustments thatwould be necessary if the going concern basis was not appropriate. If the goingconcern basis was not appropriate for these unaudited consolidated financialstatements, then significant adjustments would be necessary in the carryingvalue of assets and liabilities, the reported revenues and expenses, and thebalance sheet classifications used. The appropriateness of the going concernbasis is dependent upon, among other things, future profitable operations, theability to generate sufficient cash from operations and financing arrangementsto meet obligations. 3.2 2005 Financial Restructuring On January 7, 2005 (the "Filing Date"), the Company obtained protection underthe Companies' Creditors Arrangement Act from the Ontario Superior Court ofJustice (the "Court"). The Court subsequently granted extensions of theCompanies' Creditors Arrangement Act ("CCAA") protection to June 30, 2005. Thisallowed the Company to continue operating its business while it negotiated arestructuring plan with its creditors. On May 3, 2005 the Company's affectedcreditors approved the Company's Plan ("CCAA Plan") and the CCAA Plan wasapproved by the Court on May 10, 2005. The Company subsequently emerged fromCCAA protection and the CCAA Plan was implemented on June 30, 2005. The CCAAPlan provided, inter alia, for the following: 1) Two classes of creditors: a) Class One, consisting of Meridian Creditors, the holders of claims inrespect of the Company's senior secured indebtedness; and b) Class Two, consisting of the Note-holder Creditors, the holders ofclaims relating to notes issued by the Company 2) The sale by Meridian Creditors to the Company, or its security agent,of a) Debt owing to Meridian Creditors by subsidiaries of the Company,guaranteed by the Company, and secured, totalling approximately $54.2 milliontogether with interest thereon; and b) Debt owing to Meridian Creditors by a subsidiary of the Companytotalling approximately Cdn $3.93 million together with interest thereon; 3) In consideration for such sale, the Meridian Creditors received fromthe Company, in aggregate: a) Secured notes evidencing indebtedness of $20 million b) Secured notes evidencing indebtedness of Cdn $3.93 million; and c) 70% of the post-implementation equity in the Company 4) The release of all claims of Note holder Creditors, totalling principalof $24.85 million plus interest thereon, in consideration for which Note-holderCreditors received 25% of the post-implementation equity in the Company; 5) The consolidation of existing common shares of the Company so thatexisting shareholders retained 5% of the post-implementation equity in theCompany; 6) Payment in full by the Company of all proven claims of the Company'screditors as at the Filing Date (other than claims of Meridian Creditors andNote-holder Creditors); and 7) The delivery by the Company to the Meridian Creditors of secured notesevidencing the amount of the Company's outstanding debtor-in-possessionfinancing owing to them as at the CCAA Plan implementation date. 3. Financial reorganization, going concern and fresh start accounting 3.2 2005 Financial Restructuring (continued) The CCAA process was completed on June 30, 2005 following which Casten and MCbecame the principal creditors of the Company and own collectively 70% of theequity. The balance of the equity is owned as to 25% by former creditors,including the secured loan note holders and as to 5% by former equityshareholders. 3.3 Fresh start accounting Following implementation of the plan implemented under the CCAA, the Company hadto adopt "fresh start" accounting. This accounting has required that assets andliabilities be recorded at their fair values at the date of emergence from theCompany's reorganization proceedings, which was 30 June 2005. As a result, thereported amounts in the consolidated financial statements separate resultsbefore and after fresh start accounting. The Company has adjusted the historicalcarrying value of its assets and liabilities to fair value reflecting theallocation of the Company's reorganization equity value of $6.6 million. Inaddition the Company translated its reclamation provision and future taxliabilities using June 30, 2005 rates. The following table summarizes the impact of adjustments required to implementthe CCAA Plan and to reflect the adoption of fresh start accounting. (in thousands of US dollars) 30 June 2005 Fresh start 30 June 2005 Balance prior to accounting Balance after CCAA Plan CCAA Plan implementation ImplementationAssetsCurrent AssetsCash and cash equivalents 4,183 - 4,183Accounts receivable 1,627 - 1,627Investments 1,011 (52) 959Inventories 3,865 - 3,865Other assets 1,191 11 1,202 11,877 (41) 11,836Property, plant and equipment 17,951 - 17,951Mining properties 44,403 - 44,403 74,231 (41) 74,190 Liabilities and Shareholders' deficitCurrent LiabilitiesAccounts payable and accrued liabilities 16,996 (1,112) 15,884Current debt 67,462 (59,980) 7,482Income taxes payable 1,559 - 1,559Total current liabilities 86,017 (61,092) 24,925Long term debt 37,630 - 37,630Reclamation provision 3,000 1,296 4,296Future income tax liabilities 755 (43) 712 127,402 (59,839) 67,563 Shareholders' deficitCommon shares (note 11) 123,461 (116,834) 6,627Contributed surplus 2,735 (2,735) -Deficit (176,708) 176,708 -Equity adjustment from foreign currency translation (2,659) 2,659 -Total shareholders' deficit (53,171) 59,798 6,627 74,231 (41) 74,190 4. Investment subject to significant influence Thistle is considered to be able to influence the affairs of CGA. Thistle owns a25.4% interest in CGA and is party to an Investor Agreement which regulates therelationship with CGA and certain aspects of CGA's management including theentitlement to a board seat. Investments in significantly influenced companies are accounted for using theequity method. Under the equity method, the original cost of the shares isadjusted for the Company's share of post-acquisition earnings or losses lessdividends. The excess of the cost of the shares of the associated company overthe net book value of its net assets on the date of acquisition, which amountedto $0.464 million, was recognized as goodwill and is not amortized. The excessof the cost of the shares over the net book value of its net assets iscalculated using the published financial results for CGA at March 31, 2007. CGA will only release their annual audited results 30 days after the Company isobligated to release its second quarter results. Accordingly the informationnecessary to account for the investment under the equity method is not yetavailable. Therefore the statements of earnings for the first six months of 2007does not reflect the Company's share of the post acquisition earnings of theassociated company and the investment in CGA is reflected at cost. (in thousands of US dollars) 30 June 31 December 2007 2006 Fresh start Fresh startInvestments in significantly influenced companies:CGA Mining Limited (25.4% interest) 20,641 - 20,641 - 5. Share capital On January 7, 2005 the Company commenced restructuring under CCAA. Under therestructuring and effective June 30, 2005, all of the Company's existing commonshares were consolidated on a one share for 200 existing shares basis andadditional common shares were issued to creditors affected by the CCAA Plan,such that MC and Casten collectively hold approximately 70% of the existingcompany shares, holders of secured and unsecured convertible loan notesapproximately 25% of the outstanding shares with the balance being held byprevious existing shareholders. a) Authorized Unlimited common shares without par value. Unlimited Class "A" preference shares b) Issued Common shares Number Amount of shares $000 January 1, 2005 461,520,685 108,883Cancellation of warrants - 14,578June 30, 2005 461,520,685 123,461Conversion of existing shares on a 200 for one basis as of June 30, 2005 2,307,603 123,461Conversion of various loans per CCAA Plan of arrangement 43,844,457 59,980Other fresh start accounting adjustments (note 3.3) - (176,814)June 30, 2005 Post CCAA, December 31, 2005, December 31, 2006, June 30, 2007 46,152,060 6,627 5. Share capital (continued) On June 30, 2005, the Company had 461,520,685 common shares issued andoutstanding. In addition, the 31,880,000 directors and employees stock optionsoutstanding as at December 31, 2004 were cancelled effective February 16, 2005.The share purchase warrants outstanding as at December 31, 2004 totalling87,452,913 were also cancelled effective February 16, 2005. As part of the restructuring under CCAA, which was completed on the close ofbusiness on June 30 2005, the issued and outstanding shares at March 15, 2005were consolidated on a one consolidated share for 200 existing shares basis.This resulted in 2,307,603 consolidated common shares. As a result of therestructuring, the majority of the convertible loans together with another longterm loan were converted under a new agreement. This resulted in 11,538,015 newshares being issued. A portion of the demand loans were converted under therestructuring agreement for 32,306,442 new shares. As a result of the foregoing,there were a total of 46,152,060 common shares outstanding upon completion ofthe restructuring, which is the same number of shares outstanding as at December31, 2005, December 31, 2006 and June 30, 2007. The net loss per share before discounting operations (basic and diluted) and thenet loss per share (basic and diluted) for periods prior to 1 July 2005 havebeen adjusted for the effect of the consolidation of 200 shares for 1 under theCCAA restructuring process detailed above. 6. Discontinued operation On January 31, 2007, the Company and CGA Mining Limited (previously namedCentral Asia Gold Limited) entered into a Sale and Purchase Agreement ("SPA")for the sale to a wholly-owned subsidiary of CGA ("the Purchaser") of 100% ofThistle's shareholding in Philippine Gold Limited ("PGO") and its otherinterests in the Masbate gold project. The transaction closed on March 19, 2007("Completion date"). Under the terms of the transaction, the considerationpayable for the sale and purchase of the Shares and Assets is, US$51 millionconstituted as follows: • $21 million being payable in ordinary shares of CGA. At the agreed issueprice of the CGA Shares of A$0.65 per CGA Share and exchange rate of A$:US $1.2686 Thistle has received 40,985,538 CGA Shares. This represents anapproximate 25.4% interest in CGA. • the payment by the Purchaser to Thistle of $25 million in cash, less thedeposit of $500,000 that was already been paid by the Purchaser to Thistle inDecember 2006; • the payment by the Purchaser into escrow (the "Escrow") of $4 million and$1 million to Thistle, less any amount(s) which are required to meet anysubstantiated warranty and indemnity claims that may have been made by thePurchaser, on a date not later than six months from the date of Completion (the"Completion Date"); and • the payment to Thistle twelve months after Completion of the amount of $4million paid into Escrow as referred to in sub-paragraph (c) above, less anyamount(s) required to meet any substantiated warranty and indemnity claims thatmay have been made by the Purchaser within twelve months of the Completion Date. In addition to the above consideration the Company received a refund of $4.4million in working capital. Thistle has provided a first priority security to Thistle Holdings (the "FirstRanking Pledge") over all the issued and outstanding shares in Toowong assecurity for the performance by Thistle of all its obligations under theexisting security documents. The First Ranking Pledge will terminate uponrepayment of all amounts owing to MC and Casten under the existing securitydocuments and related credit agreements and loan notes. Under the terms of the SPA, Thistle has also provided a second priority securityto the Purchaser (the "Second Ranking Pledge") over the Toowong (ranking inpriority after the First Ranking Pledge) as security for the amount of anysubstantiated warranty or indemnity claims made by the Purchaser under the SPAand certain related agreements. If the amount of such claim is in excess of the amounts then held in Escrow, thePurchaser may instruct Thistle to: (a) either (at Thistle's sole discretion) cause Toowong to sell suchnumber of CGA Shares on the market or provide loans to Toowong as are requiredto raise a sum (net of any permitted expenses) equal to the remaining amount dueunder all such claims; and 6. Discontinued operation (continued) (b) where CGA Shares are sold, cause the sale proceeds (net of anypermitted expenses) to be paid to the Purchaser in or towards satisfaction ofsuch claims or, where a loan is provided, cause that the loan to be paid to thePurchaser in or towards satisfaction of such claims. The Second Ranking Pledge will terminate 12 months after the Completion Date,unless a valid claim under the SPA or related agreements has been institutedprior to the end of that period in which event that pledge will remain in effectuntil the claim has been substantiated. The Second Ranking Pledge will alsoterminate on the date all amounts due under the existing loan documents havebeen repaid in full or fully converted into equity. At all times during the termof the aforementioned pledge agreements, and subject to no event of defaulthaving occurred there under, Toowong will be entitled to exercise all rightsattaching to the CGA Shares including, among other things, the right to vote andthe right to receive dividends. Thistle and Toowong will be subject to a 12 month "lock-up" from Completionunder which they will agree not to dispose of the CGA Shares during that period,subject to certain limited exceptions set out in an investor agreement enteredinto between Thistle, Toowong and CGA (the "CGA Investor Agreement"). Under the terms of the CGA Investor Agreement, for so long as Toowong and itsaffiliates own more than 10% of the voting shares of CGA, Toowong will beentitled to nominate one person to be appointed as a director to the board ofdirectors of CGA. The first director nominated by Toowong will be Andreas J.Graetz. A summary statement of earnings for Philippine Gold Limited is as follows: (in thousands of US dollars) Three months Three months Six months Six months ended ended ended ended(unaudited) 30 June 30 June 30 June 30 June 2007 2006 2007 2006 Fresh start Fresh start Fresh start Fresh start General and administrative expenses -- (31) (43) (119)Foreign currency loss -- (14) (1) (14)Net loss -- (45) (44) (133)Gain on sale of discontinued operation (342) -- 23,529 -- (342) (45) 23,485 (133) Assets held in discontinued operations: (in thousands of US dollars, unaudited) 30 June 31 December 2007 2006 Fresh start Fresh startAssetsCurrent assetsCash and cash equivalents -- 375Accounts receivable -- 36Investments -- 258Inventories -- 7Total current assets 676 Property, plant and equipment -- 3,169Mining properties -- 28,199 Total Assets -- 32,044 6. Discontinued operation (continued) Liabilities held in discontinued operations: (in thousands of US dollars, unaudited) 30 June 31 December 2007 2006 Fresh start Fresh startLiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities -- 1,872Total current liabilities -- 1,872 Retirement provision -- 94Reclamation provision -- 2,301 Total Liabilities -- 4,267 7. Subsequent events The following significant events occurred after the balance sheet date: • Continuing production problems at PSGM Gold production at PSGM continues to be challenging due to a lack of operationalflexibility compounded by infrastructure problems. Sales of gold for the lastsix months of 2007 are forecast at approximately 72,601 oz's at a cash cost ofapproximately $600 per oz assuming an exchange rate of 7.18 ZAR:US$.Traditionally the second half of the year is more productive than the firsthalf. Although PSGM is currently forecast to meet its obligations there can beno assurance that the recent production problems experienced by PSGM will notpersist. Gold production from PSGM in 2007 is anticipated to be approximately132,600 oz, at a cash cost and total cost of approximately $615 to $625 and $655to $665 per oz respectively assuming an average exchange rate of 7.16 ZAR:US $for 2007. PSGM has also elected not to obtain insurance in respect of businessinterruption and machinery breakdown including loss of profits and damage toproperty, plant and equipment. • PSGM strategic initiatives The Board had decided to embark on a process to consider the future of PSGM. OnSeptember 3, 2007 the Company announced that it had received an indicativenon-binding offer from Pamodzi Gold Limited ("Pamodzi") (JSE:PZG) for thepurchase of all of the direct and/or indirect interests in PSGM. On September 3,2007 (the "Acceptance Date"), Thistle notified Pamodzi of its acceptance of theterms of the indicative non-binding offer. Under the terms of the indicativenon-binding offer the purchase consideration for all the direct and/or indirectinterests in PSGM payable to Thistle (on its behalf and on behalf of all otherholders of such interests) will be ZAR300 million (approximately U.S.$ 41.0million at an exchange rate of ZAR 7.25 to the U.S.$) ("PurchaseConsideration"). Pamodzi and Thistle have agreed to negotiate and deal exclusively with eachother in good faith until November 30, 2007, subject to early termination ofsuch exclusivity in certain limited circumstances. In return for this grant ofexclusivity, Pamodzi has agreed to pay to Thistle an exclusivity fee of ZAR3.5million. Pamodzi has also agreed to pay a break fee of ZAR3.5 million to Thistlein certain limited circumstances. Both the exclusivity fee and any break feewill be settled by the issuance to Thistle of Pamodzi Gold Shares. AlthoughPamodzi and Thistle are confident that they will be able to conclude requiredtransaction agreements and secure regulatory approval within a three monthperiod there can however be no assurance that these discussions will result in atransaction. Should negotiations proceed as planned, it is envisaged that ameeting of the Company's shareholders to consider the proposed sale of PresidentSteyn will take place during late October or November 2007 in Toronto. Refer tothe "Proposed sale of PSGM" section in the MD&A for more information on theoffer. 7. Subsequent events (continued) • Credit line On June 27, 2007, MC and Casten agreed to provide a credit line to the Companyof up to $666,600 per month for the three month period to September 2007. Thecredit line was available for the purpose of funding corporate costs includingthe cost of strategic initiatives relating to PSGM and to provide a contingencyin the event of below forecast performance by PSGM. The credit line wascontingent on, amongst others, improved performance at PSGM for each of themonths of July and August 2007 of not less than 396 kilograms of gold.Unfortunately this level has not been reached and as a result MC and Casten haveno obligation to extend any further credit. In addition, MC and Casten may, attheir option, declare all amounts owing by Thistle (including the amountsdeferred in terms of the debt standstill agreement) to them to be forthwith dueand payable. At present Thistle has not received any notice in this regard. MC and Casten have, however, funded certain costs of the Company for August 2007amounting to $374,000 subject to the appointment of Mr. John Bredenhann as ChiefExecutive Officer. MC and Casten have not made any further commitments nor havethey provided any further assurances with respect to the funding of futureoperating requirements although they have stated at their discretion they willconsider future requests from the Company for additional funding on a case bycase basis. Cash flow forecasts indicate that although PSGM will be able to meet itsobligations if the revised production targets are met until the completion ofthe proposed transaction with Pamodzi, it will not be able to support Thistle'scorporate costs including the costs related to strategic initiatives for PSGM.Absent additional funding by MC and Casten, there is a material uncertaintywhich would cast doubt on the ability of the Company and its subsidiaries tocontinue as going concerns and, therefore, that they may be unable to realisetheir assets and discharge their liabilities in the normal course of business. • Possible CGA Claim Pursuant to the Sale and Purchase Agreement, Thistle has provided a number ofwarranties to Central Asia Gold Limited (the "Purchaser") and CGA and willremain subject to possible Purchaser Claims (as defined therein) for a minimumperiod of 12 months. Although no formal claims or actions related to the saleof the interest in the Masbate Project have been received, CGA and the Purchaserhave reserved their rights in connection with the Sale and Purchase Agreementand the events leading up to the completion of the sale. The Company believesthat it has a good defence against possible claims that might be made in thisregard. Should proceedings be instituted against the Company and thisinterpretation prove not to be the case, the matter would have a materialadverse effect on the Company. • M Hall and Associates ("MH & A") Claim On May 25, 2007 the Company's was served with a summons from the liquidators ofMH & A for an amount of ZAR40.5 million ($5.8 million at an exchange rate of ZAR7.00 to US $). An amount of ZAR 33.0 million relates to the repudiation of thecontract and ZAR 7.5 million relates to equipment used by the mine. Theseamounts exclude interest at 15.5% per annum as set by the rules of the SouthAfrican Courts. The Company appointed a technical expert who, together with the Company's legalcounsel, prepared a legal opinion reflecting a good chance of success. TheCompany, on advice from the Company's legal counsel, took exception to theparticulars in the summons which requires the liquidators to make the necessaryamendments before the matter can proceed. The Company has launched anapplication for security for costs to guarantee that some costs will berecovered in the event that the Company is successful. Should the liquidatorsnot be in a position to provide the security, the Company will launch anapplication to have the claim dismissed. The Company currently believes that ithas a good defence against the claim. Should this interpretation prove not to bethe case, the matter could have a material adverse effect on the Company. 8. Segment reporting Management has determined that the Company operates in one dominant industrysegment which involves the production and sale of gold. All of the Company'soperations, assets and employees engaged in operating activities are located inSouth Africa. The Company's exploration and development project located in thePhilippines was sold in the first quarter of 2007 (Refer note 6). 9. Economic dependence The Company is economically dependant upon its majority shareholders andcreditors, MC and Casten, due to the extent of the debt owed to them and thefunding of future corporate costs not funded by operations. Refer to note 3.1for details on the funding of future corporate costs and to the "Liquidity andCapital Resources" section of the MD&A for loans advanced by MC and Casten. This information is provided by RNS The company news service from the London Stock Exchange

---

Related Shares:

The Mission Group