Consolidated Interim Financial Statements
Six Months Ended June 30, 2006

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators the Company discloses that its external auditors have not reviewed the unaudited financial statements for the period ended June 30, 2006 in accordance with Section 7050 of the CICA Handbook.

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NEW GUINEA GOLD CORPORATION
Consolidated Balance Sheets
As at June 30, 2006 and December 31, 2005

Approved by the Board of Directors:

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

NEW GUINEA GOLD CORPORATION
Consolidated Statements of Operations and Deficit
For the Three and Six Months Ended June 30,

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

NEW GUINEA GOLD CORPORATION
Consolidated Statements of Cash Flows
For the Three and Six Months Ended June 30,

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

During 2006, the Company issued 315,438 units consisting of one common share and one warrant, valued at $63,088 and 3,300,000 agent's warrants valued at $532,950 for financing fees.

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

NEW GUINEA GOLD CORPORATION
Consolidated Schedule of Deferred Mineral Property Costs

NEW GUINEA GOLD CORPORATION
Notes to Consolidated Financial Statements
Six Months Ended June 30, 2006

1. NATURE OF OPERATIONS AND CONTINUANCE OF BUSINESS

The Company is incorporated in the Province of British Columbia, Canada, and is involved in the acquisition, exploration and development of mineral properties in Papua New Guinea ("PNG"). At the date of these consolidated interim financial statements the Company has not yet determined whether any of its mineral properties contain economically recoverable mineral reserves. Accordingly, the carrying amount of deferred mineral exploration costs represents expenditures made to date and does not necessarily reflect present or future values. The recovery of these costs is dependent upon the discovery of economically recoverable mineral reserves and the ability of the Company to obtain the necessary financing to complete exploration and development work and to resolve any environmental, regulatory, or other constraints, which may hinder the successful exploitation of its mineral properties or dispose of its interests on an advantageous basis.

The Company has taken steps to verify title to the mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of these properties. However, these procedures do not guarantee the Company's title. Title to these rights may be subject to unregistered prior agreements or transfers and may be affected by undetected defects.

The Company does not generate cash flow from operations. In order to pay for future work performed on its mineral properties and administrative costs, the Company will need to raise additional funds through future issuances of securities. Although the Company has been successful in raising funds in the past, there can be no assurance the Company will be able to raise sufficient funds in the future, in which case the Company may be unable to meet its obligations as they come due in the normal course of business. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts disclosed on the balance sheet.

The accompanying unaudited consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles (GAAP). These interim financial statements should be read in conjunction with the Company's annual audited financial statements as at the year-end December 31, 2005, which are available at www.sedar.com. All material adjustments, which, in the opinion of management are necessary for a fair presentation of the results, have been reflected. The results for the three months and six months ended June 30, 2006 are stated utilizing the same accounting policies and methods of application as the most recent annual financial statements, but are not necessarily indicative of the results to be expected for a full year.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, New Guinea Gold Ltd ("NGG PNG"), and its proportionate 50% interest in the accounts of Kanon Resources Ltd. ("Kanon"). References to the Company included herein are inclusive of the Canadian parent company, NGG PNG and Kanon.

b) Financial Instruments
The Company's financial instruments consist of current assets and current liabilities whose fair values approximate their carrying values due to their short-term nature. Financial risk is the risk arising from fluctuations in foreign currency exchange rates. The Company does not use any derivative or hedging instruments to reduce its exposure to fluctuations in currency exchange rates.

c) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities as at the date of the financial statements as well as the reported amounts of expenses incurred during the period. Significant areas requiring the use of management estimates include the determination of potential impairments of asset values, and rates for amortization of equipment, as well as the assumptions used in determining the fair-value of non-cash stock-based compensation. Actual results could differ from those estimates.

d) Deferred Mineral Property Costs
Costs incurred to acquire a mineral property and costs of exploration, development and direct field support are deferred until the property to which they relate are placed into production, sold or abandoned. These deferred costs will be amortized over the estimated useful life of the property following commencement of production, or written-off if properties are sold, allowed to lapse or abandoned. Administration costs and other exploration costs that do not relate to a specific property are expensed as incurred.

Cost includes the cash consideration and the fair value of shares issued on the acquisition of mineral properties. Properties acquired under option agreements or joint ventures, whereby payments are made at the sole discretion of the Company, are recorded in the accounts when the payments are made. Proceeds from options granted by the Company are to be netted against the accumulated deferred cost of the related mineral property with any excess being included in earnings.

Management reviews the carrying amounts of mineral properties on a periodic basis and will recognize impairment in value based upon current exploration results and upon management's assessment of the probability of profitable exploitation of each property or realizable value from disposal of each property. Management's assessment of each property's estimated fair value is also based upon a review of other mineral property transactions that have occurred in the same geographic area as that of the properties under review.

e) Translation of Foreign Currencies

The Company translates the results of foreign operations as follows: monetary items are translated at the rate of exchange in effect at the balance sheet date, non-monetary items at average exchange rates in effect during the period in which they are incurred and expenses are translated at average exchange rates in effect during the period, except for amortization, which is translated using historical rates. Gains and losses resulting from the fluctuations in foreign exchange rates are included in the determination of income.

f) Equipment

Equipment is carried at cost less accumulated amortization. Amortization is provided over the estimated useful life of each type of equipment using the declining balance method at annual rates varying from 20% to 30%.

g) Share Capital
Common shares issued for non-monetary consideration are recorded at their fair market value based upon the trading price of the shares on the TSX Venture Exchange on the date of the agreement to issue the shares. Costs incurred to issue shares are deducted from share capital.

h) Income Taxes
Income tax liabilities and assets are recognized for their tax consequences attributable to differences between the amounts reported on the financial statements and their respective tax bases, using enacted income tax rates. The effect of a change in income tax rates on future income tax liabilities and assets is recognized in income in the period in which the change occurs. Future income tax assets are recognized to the extent that they are considered more likely than not to be realized.

i) Marketable securities
Marketable securities are carried at the lower of cost and market value.

j) Stock-based Compensation

The Company records compensation associated with stock options granted using a fair value measurement basis and records the expense when the options vest with the recipients. The adoption of this accounting policy for stock-based compensation has been applied prospectively to all stock options granted subsequent to January 1, 2003.

k) Loss Per Share
Basic earnings per share are computed by dividing the net loss during the period by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive effect of outstanding options and warrants is reflected in earnings per share by application of the treasury stock method. Basic and fully diluted losses per share are the same in the current financial statements.

l) Asset Retirement Obligations
The fair value of a liability for an asset retirement obligation is recognized when a reasonable estimate of its fair value can be made. The asset retirement obligation is recorded as a liability with a corresponding increase to the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost is allocated to expenses using a systematic and rational method and is adjusted to reflect period-to-period changes in the liability resulting from the passage of time and revisions to either timing or the amount of the original estimate of the undiscounted cash flow. As at June 30, 2006 the Company does not have any asset retirement obligations.

m) Impairment of Long-Lived Assets
Long-lived assets are assessed for impairment when events and circumstances warrant. The carrying value of a long-lived asset is impaired when the carrying amount exceeds the estimated undiscounted net cash flow from use and fair value. In that event, the amount by which the carrying value of an impaired long-lived asset exceeds its fair value is charged to earnings.

3. MARKETABLE SECURITIES

The Company's marketable securities at June 30, 2006 consist of 540,000 shares of Vangold Resources Ltd. (trading symbol TSX-V: VAN) with a fair market value of $226,800 and a book value of $214,200.

4. MINING DEPOSITS RECEIVABLE

These amounts are comprised of refundable deposits pledged with the Papua New Guinea Mining Department for the Company's mineral tenements.

5. EQUIPMENT

6. SHARE CAPITAL AND RELATED INFORMATION

a) Authorized: Unlimited

b) Issued and outstanding:

*Net of issue costs of $678,345, of which $82,334 was paid in cash, and $63,088 was paid by the issue of 315,438 Units at $0.20 per Unit, each Unit consisting of one common share and one share purchase warrant, exercisable into an additional share for a period of two years from February 20, 2006 at an exercise price of $0.30 and $532,950 represents the fair value of 3,300,000 Agent's Warrants which have the same terms as the warrants included in the Units above.

c) Stock options

Stock option activity for the three months ended June 30, 2006 and 2005:

The fair value of stock options and warrants granted during 2006 and 2005 are estimated on the date of their grant using the Black-Scholes option pricing model using the following assumptions:

Option pricing models require the use of estimates and assumptions including the expected volatility. Changes in the underlying assumptions can materially affect the fair value estimates and, therefore, existing models do not necessarily provide a reliable measure of the fair value of the grant of the Company's stock options.

Amounts expensed as stock-based compensation are credited to contributed surplus. On exercise, the amounts originally credited to contributed surplus are credited to share capital.

d) Warrants
Warrants outstanding at June 30, 2006:

7. MINERAL PROPERTIES

The Company's mineral properties are all located in Papua New Guinea.

The Company has various interests in twelve exploration projects in Papua New Guinea through its wholly-owned subsidiary New Guinea Gold Ltd (formerly Macmin PNG) and its 50% owned subsidiary Kanon Resources Ltd. The Company has a 100% interest in five of the projects, a 90% interest in two, a 60% interest in one, and 50% interest in 4 of the projects.

The Company is conducting operations on the Sinivit, Normanby, Sehulea, Simuku, and Mt. Penck Projects.

Sinivit
The Sinivit Property is held under three titles in which New Guinea Gold has a direct 90% equity interest and a further 2.5% indirect equity interest.

Normanby
The Normanby Licence covers approximately 68 square kilometres on Normanby Island, Milne Bay Province.

Sehulea
The Sehulea Project covers approximately 30 square kilometres in the eastern part of Normanby Island, in Milne Bay Province, adjacent to the Normanby Project.

Simuku
The West New Britain Porphyry Copper/Gold Project covers four exploration licenses totaling 3,093 square kilometers.

Mt. Penck
The Mt. Penck exploration licence covers 102.6 square kilometres in area and is 55 kilometres west of Kimbe in the West New Britain Province. The Company elected to earn a direct 20% interest in the Mt. Penck property from Kanon Resources Ltd by funding the first CDN$300,000 worth of exploration. The Company has completed its earn in and has an effective 60% interest in the property.

The Company has optioned out the following projects:

Crater Mountain

• Optioned by agreement dated January 6, 2004 to Celtic Minerals Ltd., a TSX Venture-listed company, which acquired a 51% interest by expending $2,000,000 on exploration prior to March 1, 2006, and can acquire a further 25% interest upon completion of a further $2,000,000 exploration program prior to March 1, 2009.

Feni

• Vangold Resources Ltd. (Vangold), a TSX Venture company has earned a 50% interest and been granted the right to earn an additional 25% interest by performing $2,500,000 in exploration over three years, of which $500,000 must be spent by September 26, 2004, (completed) and by issuing to the Company 200,000 shares upon receipt of regulatory consent to the agreement (issued) and a further 600,000 shares in stages prior to June 30, 2006 (400,000 shares received at December, 31, 2005). The Company must pay a finder's fee of 10% on all share consideration received (60,000 Vangold shares paid).
  
  Refer to Note 9, "Subsequent Events" regarding the extension of time for Vangold to complete.
  

Mt. Nakru

• Optioned to Kanon, whereby Kanon acquired a 50% interest by spending $250,000 on exploration and issued 5% of its issued share capital to the Company. The Company and Kanon now contribute funding for exploration equally.

NSR and production bonus in respect of certain Mineral Properties

Seven of the twelve projects, Sinivit, Normanby, Sehulea, Simuku, Mt Nakru, Feni, and Crater Mountain are each subject to a 1% Net Smelter Royalty (NSR) payable to Macmin Silver Ltd in accordance with the agreement for acquisition of New Guinea Gold Ltd (formerly Macmin (PNG) Limited) dated June 12, 2002. In addition, under that agreement, if any mine is developed on these properties and production is achieved in excess of 50,000 ounces of gold or equivalent in any year then a once-only issue of 9% of the Company's issued share capital to Macmin Silver Ltd is to be made. 


8. RELATED PARTY TRANSACTIONS

The amounts paid to related parties were in the normal course of operations and were valued at fair value as determined by management. Amounts due to or from related parties are unsecured, non-interest bearing and due on demand.


9. SUBSEQUENT EVENTS

On July 25, 2006 the Company announced that it had granted 1,000,000 incentive stock options to officers, employees, contractors and consultants at an exercise price of $0.30 for a period of five years.

On 15 August 2006 the Company executed an amendment to the joint venture agreement with Vangold on the Feni project EL 1021 (refer to Note 7 "Mineral Properties"). The amendment extends the completion date to June 30, 2007 for Vangold to expend the balance of $1,260,000 on exploration and issue a further 200,000 shares to the Company.

Form 52-109F2 Certification of Interim Filings

I , Robert D. McNeil, CEO/President of New Guinea Gold Corporation, certify that:

Form 52-109F2 Certification of Interim Filings

I , Judith O'Quinn, CFO/Corporate Secretary of New Guinea Gold Corporation, certify that:

Management Discussion & Analysis
For the Three and Six Months Periods Ended June 30, 2006

The following Management Discussion and Analysis of the Company's financial position is for the three-month period ended June 30, 2006 compared to June 30, 2005. The information is current to July 31, 2006. This discussion should be read in conjunction with the attached financial statements and related "Notes to the Consolidated Financial Statements" which have been prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP).

BUSINESS & DEVELOPMENT STRATEGY IN PAPUA NEW GUINEA

The Company is involved in Mineral Exploration and Mine Development in Papua New Guinea ("PNG"). New Guinea Gold Corporation ("NGG") has interests in 10 gold properties and 2 porphyry copper-gold-molybdenum properties. In excess of 60,000 metres of drilling has been completed on all properties and this drilling has located extensive mineralisation at 11 of the 12 projects. An additional project contains widespread and extensive alluvial gold.

Three gold properties, Sinivit, Normanby and Mt Penck are currently regarded as key projects. Mine development is underway at Sinivit and on the latter two projects the Company is presently focusing on defining resources by year-end 2006. The remaining gold properties are all well advanced in terms of exploration and the Company plans to add several more projects to key project status in 2007. The two porphyry copper-gold-molybdenum systems are large areas of mineralisation, each in excess of 6 square kilometers in area as defined by surface geochemistry, trenching and drilling. The Company is presently in discussions regarding financing the definition of resources at each of these latter properties.

The Sinivit, Mt Nakru, Simuku, Normanby, Sehulea, Feni and Crater Mountain Projects, are each subject to a 1% Net Smelter Royalty (NSR) payable, and the issue of 9% of the Company's issued share capital to Macmin Silver Ltd. at the time that any mine is developed on these properties and production is achieved in excess of 50,000 ounces of gold or equivalent in any year.

Readers are advised to review the Company's Press Releases and website for complete details of each project.

PAPUA NEW GUINEA MINERAL PROJECTS

Sinivit Mine Development (92.5% NGG): Sinivit mine development is proceeding satisfactorily with most infrastructure, plant and mining equipment now on site, at the local port of Kokopo, or in transit to Kokopo. HBS Machinery of Lae, Papua New Guinea, have been contracted to supply, operate and maintain all mining equipment, and in addition will operate and maintain the mine crushing facility.

HBS Machinery shipped by barge much of their equipment to Kokopo in early July.

The equipment is now on site and the contractor has commenced construction of the maintenance facility. A combined Reverse Circulation/Diamond Core Drill Rig for grade control and blocking out additional resources has been purchased and is expected on site in August. A separate diamond core rig has also been purchased for exploration at Sinivit, in particular to define the extent of the gold-telluride-copper mineralisation at depth and along strike from the initial proposed oxide gold mine. This rig is expected to be shipped from Tasmania to Papua New Guinea in August, and will be in operation by early September.

Mine pre-stripping is expected to commence in September with ore production and loading of vats for gold recovery soon thereafter. In the meantime the HBS Machinery equipment will be used to complete site earthworks, remaining roads and formation of vats.


Normanby Project (100% NGG): Resource definition drilling continues at the Imwauna Prospect on Normanby Island, Papua New Guinea. Drilling towards the southern end of the defined Imwauna structure intersected very high value gold and/or wide intervals of high value gold (reported earlier) as follows:

These results are particularly significant as surface exposures and a near surface drill hole showed only relatively narrow, lower grade gold values in this area. It appears that a high to very high grade and much wider zone of mineralisation is developing about 20m below surface and increasing in width and gold grade with depth. This part of the system appears to be near the top of the gold mineralisation system and occurs at an elevation of 550m above sea level. About a kilometer to the north the system outcrops with high-grade gold at an elevation of about 350m above sea level. The difference of 200m suggests that the high-grade mineralisation in the vicinity of IMH-67 could extend to a depth of at least 250m below surface.

Four additional holes have now been sited in this area to test for a depth extension of the 3m of 106g/t gold and for lateral extensions of the overall higher grade/wider zone of mineralisation. Results will not be available for the first holes before late August.

In addition to the drilling a detailed ground survey has been completed to complement resource estimates and mine planning when appropriate.

An excavator will be moved to site in the near future to commence exploration on the other vein systems in the area in addition to the Imwauna system.

Environmental and land use/land ownership studies have commenced in anticipation of a pre-feasibility or scoping study to be completed in early 2007.

An Independent QP, Ralph Stagg of Project Geoscience visited the site in late July as part of the requirement for completing an NI 43-101 Report, including verifying resources. The report is expected in the final quarter of 2006.

Further check assaying is in progress by way of screen fire assay to determine if the fire assay method used to date has been underestimating the gold content of the drill core. (i.e. the actual gold content may be higher than reported). The laboratory has requested more drill core samples to conduct further testing and these samples have been dispatched from the field to the laboratory. This is an ongoing investigation but the initial results suggest that the original fire assays underestimate the gold content.


Mt. Penck (60% NGG): The Mt. Penck evaluation program, which has been beset by rain delays since it was re-activated earlier this year, is now proceeding at a fast rate. A second drill was recently mobilized to site and it is expected that the two rigs will continue operating for at least a further three months. The delays in this program have been largely weather related with Papua New Guinea experiencing the worst wet season in many years. Although the weather is still un-seasonally wet, drilling is now proceeding satisfactorily.

The initial diamond core drill holes at Mt. Penck, in the present program, were successful in defining gold mineralisation to the east of the previously drilled mineralisation at the Kavola East prospect. Best intersections included 23m of 2.3g/t gold, 4m of 4.0g/t gold and 4m of 2.3g/t gold. All intersections are shown below.

Trenching to the south of Kavola East in an area of high soil gold results (previously untested) showed significant gold in the near surface environment and suggests a possible major extension to the south of the Kavola East mineralisation. The best result was 3m of 27g/t gold within 36m of 4.2g/t gold (of 61 three (3) metre long trench samples 24 were greater than 0.5g/t gold).

The drill assay results from holes MPD-8 through MPD-10 are in the accompanying table (0.5g/t gold cut-off). Of note is that the gold mineralisation commences at surface in hole MPD-8, and the 4m intersections in holes MPD-9 and MPD-10 may represent the same mineralised zone. The intersections would be slightly greater than true width.

Assay Results Summary

The trench results (see Figures 1 and 2 in the release dated August 2, 2006) are also very encouraging with two separate intersections (cut off used was 0.5g/t gold) of 36m of 4.17g/t gold and 27m of 1.25g/t gold, separated along trench by a low grade zone of 57m averaging approximately 0.1g/t gold.

The drill and trench locations, together with contours of gold in soil geochemistry are shown in the August 2, 2006 press release. As can be seen from this plan, only a small part of the Mt. Penck system has been drill tested. The arsenic in soil geochemistry has previously been released.

The soil and arsenic results are regarded as a guide only to gold mineralisation. We note that trenching in some areas where gold geochemistry is low still yielded significant gold in trench samples, thus all the 1.5 square kilometres area within Figure 1 (see release dated August 2, 2006) will require assessment by trenching and drilling.

Drilling is now focused on resource definition within the gold anomalous zone to the south of holes MPD-6 and MPD-8, and within the newly trenched area, with holes being drilled to nominal depths of 100m on 25 to 50m centers. Holes MPD-011 to MPD-17 have been completed with holes MPD-11 through 15 sampled (core sawed in half) and 142 half-core samples dispatched for assay. Results should be available in late August.

The relationship of mineralisation to structure is still uncertain although there appear to be both sub-horizontal and sub-vertical controls. Mineralisation is concentrated in NE trending structural zones within the eroded Mt. Penck stratovolcano.

The trenches were channel sampled over 2 or 3m lengths within a shallow hand dug trench (1m or less in depth).


Mt Nakru Porphyry Copper/Gold/Molybdenum Project (75% NGG): Assessment of data was undertaken and drill targets defined for action in the last quarter of 2006, subject to drill availability.


Fergusson Gold Project (50% NGG): A geochemical program was completed at Igwageta and an assessment of the results is currently underway. A report should be available in the near future.


Yup River Gold Project (50% NGG): A broad soil geochemical program will commence in August to attempt to define drill targets at the Dauri Prospect, referred to in earlier press releases.


Bismarck Gold Project (50% NGG): A geochemical soil program is planned for the last quarter of 2006 to attempt to extend the 300m long gold zone defined earlier this year (see Press Release dated March 1, 2006).


Allemata Gold Project (50% NGG): No work was carried out during the quarter.


Crater Mountain Gold Project (100% NGG): No reports have been received from JV partners, Triple Plate Junction ("TPJ") and Celtic Resources Ltd.


Feni Gold Project (50% NGG): The Feni Project, New Ireland Province, Papua New Guinea (EL 1021) is southeast of, and along trend from the Lihir Gold Mine.
The Feni Islands consists of two islands, Ambitle and Babase, both of which show very similar geology, including widespread known (drilled) gold mineralisation, similar alteration styles and similar alkaline intrusives to the Lihir Islands, and in particular to the Lihir Mine (42 million oz Au in resources).
Numerous drill hole intersections of between 1 and 10g/t - such as 114m of 1.12g/t Au (0.2% Cu), 19.9m of 2.13g/t Au, 15.25m of 2.56g/t Au, 16m of 2.3g/t Au, 52m of 1.65g/t Au, 10m of 5.7g/t Au, 3m of 10g/t Au.

A geological and geochemical reconnaissance program is planned for the third quarter 2006, to locate possible drill targets for testing in 2007.

MARKET OUTREACH

New Guinea Gold has been very active in getting the story of its properties out to the marketplace. In June, Chairman and CEO Bob McNeil completed an extensive marketing trip to Europe (including presentations to fund managers and investors in London, Paris, Stockholm, Geneva and Zurich) and concluded the program with a very successful post AGM presentation in Vancouver.

The Company continues to promote excellent community relations in the locations in which it operates, meeting frequently with landowners and residents to outline its plans, update progress, and deal with questions or concerns.

RESULTS OF OPERATIONS

The Company's net loss for the three-month period ended June 30, 2006 was $183,462 or $0.01 per common share compared to $255,470 in the same period ended 2005 or $0.01 per common share. The Company received $62,979 in interest payments on cash balances and deposits. Interest revenues fluctuate according to the amounts of funds held in deposit and the interest rates attained during the period.

The decrease in net loss for the period ended June 30, 2006 compared to the same period in 2005 was $72,008 and is due primarily to lower wages and benefits and stock-based compensation being realized in the first quarter ended March 31, 2006 (nil in the current quarter). Losses were lessened by a one-time gain from the disposal of equipment. Amortization, repairs and maintenance costs increased due to equipment purchases during the previous fiscal year and in the current fiscal period.

During the three-month period ended June 30, 2006 the Company completed $1,919,365 in exploration and development expenditures on its mineral property interests, primarily the Mt. Sinivit gold project.

Summary of Quarterly Results September 30, 2004 to June 30, 2006

The Company is in the exploration and development stage and has no mining revenue, and therefore variances in its quarterly losses are not affected by sales or production-related factors. Increases in costs are generally attributed to growth in operations related to the success in financing activities, which in turn allows the Company to increase expenditures on its properties.

FINANCIAL CONDITION

At June 30, 2006, the Company had working capital of $4,492,362 (2005 - $5,146,570). The Company has no long-term indebtedness or long-term obligations. The change in working capital is the result of decreased available cash of $1,700,535 compared to the previous period (2005 - $4,980,293).

Current liabilities increased to $679,210 as at June 30, 2006 from $262,028 on June 30, 2005. This was primarily owed to Macmin Silver Ltd., a related party, for expenditures made on behalf of NGG.

The Company is committed to paying approximately $215,000 in amounts owing at July 31, 2006 for expenses billed subsequent to the period end.

CAPITAL RESOURCES AND LIQUIDITY

Capital resources of the Company consist primarily of cash and liquid short-term deposits of approximately $3,970,000 at July 31, 2006.

The Company has adequate cash reserves to continue operations at current levels to late 2006, and has been able to fund its operations by the issue of shares as needed. The Company has warrants and stock options outstanding, which are "in-the-money" and could generate an additional $14,001,381 if exercised. There is no certainty that the Company will be able to continue to obtain funding by share issuances in the future.

The Company does not anticipate the payment of dividends in the foreseeable future.


Financing Operations

During the six month period ended June 30, 2006:

• The Company closed a brokered Private Placement with Bolder Investment Partners Ltd acting as Agent. The total subscriptions represent 32,850,000 units (the "Units") priced at $0.20 per unit, raising gross proceeds of $6,570,000. The units consisted of one share and one non-transferable share purchase warrant. Each warrant is exercisable into an additional share for a period of two years from closing at an exercise price of $0.30. The Agent received a cash commission of $429,662 plus 315,438 Units at a deemed price of $0.20 per Unit in lieu of cash and 3,285,000 Agent's Warrants. In addition, the Agents received a Corporate Finance Fee of 300,000 Units of the Company plus an administration fee of $7,500. The Agent's Warrants have the same terms as the clients' warrants.

• The Company also closed a non-brokered Private Placement of 2,150,000 Units at $0.20 per Unit, raising gross proceeds of $430,000. Finder's fees of $2,500 and 15,000 Agent's Warrants were paid in respect of the non-brokered placement.

• The Company granted 550,000 stock options to employees and consultants exercisable at a price of $0.23 for a five-year period.

• The Company issued 150,000 common shares for proceeds of $34,500 on the exercise of stock options.

CASH FLOWS

The Company has not generated cash flow from mining operations. The Company has funded its operations by issuing its shares either through financings or the exercise of existing share purchase warrants and stock options.

Shares issued from June 30, 2004 to June 30, 2006 and to the date of this report are as follows:

Related Party Transactions

Amounts paid to related parties were in the normal course of operations and were valued at fair market value as determined by management.


Contractual Obligations

The Company has no long-term debt and does not anticipate that it will require debt financing for current planned expenditures.


Off-Balance Sheet Arrangement

The Company has no off-balance sheet arrangements or transactions and none are contemplated.


Financial and Other Instruments

The Company's financial instruments consist of cash, amounts receivable, prepaid expenses, marketable securities, accounts payable and accrued liabilities and amounts due to related parties. The balances in these accounts are in Canadian dollars, Papua New Guinea kina and Australian dollars and are recorded at their fair value.


Legal Proceedings

The Company and its subsidiaries are not parties to any legal proceedings and have no contingent liabilities.


Changes in Accounting Policy

There were no significant changes in accounting policy.


Outstanding Share Data

The Company has one class of shares and there were 100,938,934 shares issued as at July 31, 2006 and 148,888,872 on a fully diluted basis.

The Company has a stock option plan and at July 31, 2006 there were 6,535,000 options outstanding exercisable into one common share between $0.23 and $0.49.

The Company has 45,649,438 warrants outstanding as at July 31, 2006.


Subsequent Financial Events

On July 25, 2006 the Company announced that it had granted 1,000,000 incentive stock options to officers, employees, contractors and consultants at an exercise price of $0.30 for a period of five years.