Gabriel Resources Ltd.
TSX : GBU

Gabriel Resources Ltd.

August 07, 2008 06:00 ET

Gabriel Resources Ltd.: 2008 Second Quarter Report

TORONTO, ONTARIO--(Marketwire - Aug. 7, 2008) - Gabriel Resources Ltd. (TSX:GBU) -

Highlights

"We now have in place the strongest team we have ever had, both in Toronto and in Romania," said Alan R. Hill President and CEO. "All of our energy is focused on getting the Rosia Montana Project back on track - laying the groundwork now so that when the project review begins again, we can move forward quickly."

Financial performance

- Second quarter loss was $16.2 million, or $0.06 per share basic and diluted. Year-to-date loss was $5.3 million, or $0.02 per share basic and diluted.

- The second quarter loss includes a provision for income taxes of $10.7 million related to a reassessment of the fiscal years 2003 and 2004.

- The year-to-date results also include foreign exchange gains, amounting to $9.7 million on EURO cash balances held to finance planned future EURO-denominated development activities.

- A total of $10.5 million was spent on our development projects during the quarter increasing the year-to-date amount to $24.3 million.

Liquidity and capital resources

- Cash, cash equivalents and restricted cash at June 30, 2008 totaled $116.5 million.

- Project related expenditures are expected to total $65 million in 2008, below 2007 levels as the Company placed most activities on hold until environmental impact assessment (the "EIA") approval.

- The Company is forecasting a cash, cash equivalents and restricted cash position at December 31, 2008 of approximately $65 million.

- Project financing discussions with the Company's advisors are expected to restart during the third quarter.

Rosia Montana Project Development

Overview

- As discussed in previous annual and quarterly reports, the Project has long faced opposition from a group of foreign-funded non-governmental organizations ("NGOs"), certain Romanian organizations and some members of the Hungarian Government.

- In September 2007, the Minister of Environment announced it was impossible to continue the EIA review process for the Project. He suspended the Technical Assessment Committee (the "TAC") EIA review meetings, asserting a linkage between a minor procedural certificate and the EIA review process that, we believe, lacks any basis in law.

- As a result of the Minister's arbitrary action, the Company is focused on doing everything within its power to restart the permitting process. To that end, the Company stepped up its advocacy efforts in Romania and abroad.

- Those efforts have been focused on creating an open and transparent review of the Project. Management's goal is that these stakeholder outreach efforts will create a non-partisan environment for the Project's evaluation.

- In addition to stakeholder outreach, the Company continues to ensure that all licenses and approvals are maintained in good standing in order to preserve the value of our investment.

Political Situation

- Romania became a full member of the EU on January 1, 2007. Since accession, however, the country's ruling coalition has disintegrated, with the departure of two of the parties in government, the first in January and the second in April 2007.

- A minority government comprised of the Liberal party and ethnic Hungarian UDMR party, representing approximately 23 percent of the Parliament, was formed in April 2007 under the sitting Prime Minister.

- Efforts on the part of the minority government to blunt or evade efforts to prosecute cases of high-level corruption were criticized by the European Commission in its January and July 2008 Post Accession Monitoring Reports on Romania.

- In its July 2008 Report, the EU notes that: "Politicization of corruption cases by the Romanian Parliament and the failure of the judicial system to deliver sentences in high-level corruption cases has weakened the public perception of respect for the rule of law."

- While management is making every effort - legal and political - to restart the EIA review process, it is becoming increasingly likely that a change in government will be required to restart the permitting process.

- Local elections took place in June and the proposed date for national elections is November 23 or November 30, 2008. The election date is expected to be finalized in late August.

- With the expected change in government the Company expects that the obstruction by various government ministries we have seen will be replaced by a fair and open review process.

Environmental/Permitting

- In addition to initiating court challenges designed to frustrate our ability to permit the Project in a timely manner, the opposition has orchestrated the tabling of a "private members bill" in the Romanian Parliament to ban the use of cyanide in mining operations in Romania.

- The industry commission, the third and final commission responsible for reviewing the proposed cyanide ban in mining, amended the bill to ban cyanide in excess of EU limits. The amended bill was placed on the agenda of the Chamber of Deputies on April 15, 2008, whereupon the Chamber decided to have the amended bill sent back to the industry commission for further review.

- It is unclear when or if this bill will re-emerge from the industry commission for vote by Parliament, as the commission awaits clarification from the constitutional commission to determine how to proceed.

- The Company has designed the Project to be compliant with the EU Mine Waste Directive from day one of operations.

- Management continues to believe the proposed ban on cyanide is unlikely to have enough support in Parliament to become law.

- Parliament has begun its summer recess until September. The fall session is expected to be abbreviated because of the national elections, providing only a small window to pass legislation this year.

- In addition to the bill to ban cyanide, one of its Senate co-authors has put forward two new initiatives which would declare Rosia Montana an archaeological and natural reserve, as well as declare Rosia Montana along with certain other areas archeological sites of national importance.

- Similar to the procedures applied to the proposed bill to ban cyanide, specific committees have been assigned to deliberate on these proposed bills. The Reporting deadlines for the lead committees deliberating on the two bills passed during the second quarter 2008 and extensions have been requested.

- The timing of these final reports is uncertain, as are the implications of these bills on our Project given the current legal framework.

Tax Audits

- During the first quarter of 2008, the Company received a tax assessment in the amount of $4.8 million related to a Romanian tax audit, completed during the first quarter of 2008, for the period January 1, 2005 to June 30, 2007.

- On June 24, 2008, the Company received another tax assessment in the amount of $9.7 million for the fiscal years 2003 and 2004 related to a tax audit initiated and completed during the second quarter of 2008.

- While the Company has fully provided for these assessments in the financial statements and paid all of the tax related to the assessments, based on the advice of its professional tax advisors, the Company believes that the tax authorities have misapplied the legislation. As a result, the Company plans to vigorously contest the State's position in court.

- It is expected to take approximately 18 months to resolve the court cases.

Environmental/Permitting

- The Company filed a lawsuit against the Ministry of Environment and Sustainable Development (MESD), for suspending the permitting TAC review process, in November 2007, with the first hearing taking place on February 20, 2008. The lawsuit is ongoing, and the Company expects the court to rule during 2008.

- The MESD's suspension of the TAC review process was the most prominent of its efforts to stall the Project. MESD has also withheld final signature on our dam safety permits, which were approved in the spring of 2007 along with a number of other dam safety permits for unrelated projects by a committee of experts. As a result, we may ultimately have to file a second lawsuit against the MESD.

- In the absence of any other extraordinary events, legal or otherwise, we expect these permitting processes to be completed within six months of EIA approval; however at present, most of these other permits and approvals have been stopped by virtue of the suspension of the EIA review process.

Litigation

- Since summer 2007, the Company has lost a number of court cases, causing greater concern for the rule of law in Romania, as well as concern for potential setbacks to the Project.

- Alburnus Maior has commenced legal action in the Alba Court of Appeal seeking an order compelling the National Agency for Mineral Resources (NAMR) to annul the Rosia Montana exploitation concession license, on the basis of a minor administrative fine imposed on state-run mining company Minvest in 2004.

- A similar claim seeking the cancellation of the Rosia Montana mineral license was recently heard by the High Court of Cassation and Justice (the "Supreme Court") and was rejected on its merits.

Surface Rights

- As a result of the suspension of the EIA review process, on February 1, 2008, the surface acquisition program was suspended indefinitely.

- Construction of the Alba Iulia resettlement site began in summer 2007. Infrastructure was largely completed during the second quarter 2008 and of the 123 homes to be built, 78 homes are under construction of which 60 are expected to be completed by year end with the balance of all homes completed by June 30, 2009.

- It is expected to take another 12 months to complete all 128 homes at the Alba Iulia resettlement site.

- Construction of the resettlement site at Piatra Alba is suspended until EIA approval.

- As of February 2008, when the purchase program was suspended, the Company owns or has options on 77 percent of the homes in the industrial zone, protected area and the buffer zone.

- Once we complete the agreements for institutional properties, our ownership will rise to approximately 85 percent of the three zones of the Project, further demonstrating strong local support for the Project.

Archaeology

- An NGO commenced legal action in the Alba Court of Appeal in 2004 and obtained an annulment with respect to archaeological discharge Certificate No. 4. After a successful appeal to the Supreme Court and a retrial of the matter on its merits in the Brasov Court of Appeal, a second annulment of archaeological discharge Certificate No. 4 was ordered by the Brashov Court of Appeal.

- Gabriel has appealed this second annulment to the Supreme Court. The Company expects the Supreme Court to rule on the case by the end of 2008.

- The opposition has also challenged the issuance of archaeological discharge Certificate No. 5 ("Certificate No. 5") on grounds similar to their challenge of Certificate No. 4, and this matter is also currently before the Romanian courts.

Financing

- The budgeted expenditures for the Rosia Montana Project for 2008 are approximately $65 million, as the Company placed most activities on hold until the EIA permit is approved. This is the minimum level of expenditures required to maintain the value of our investment.

- The control estimate scheduled for completion during the fourth quarter 2007 has been placed on hold until the EIA permit is approved.

- No further long-lead-time equipment orders will be placed and installment payments under equipment previously ordered will be deferred to the extent possible under the terms of the agreements.

Expected Financing Plan

- Based on a definitive feasibility study completed in early 2006, the cost to construct the Project was estimated at US$638 million.

- The Company has placed the updated cost estimate, referred to as the control estimate, on hold until EIA approval.

- While the estimate is not complete, costs are higher in line with industry-wide factors. Once the EIA is approved, we will update the control estimate and revise our Financing Plan.

- As a result, the updated Financing Plan will look very different from the original Financing Plan announced in the spring of 2006.

Board of Directors / Management Additions

- At the Company's Annual General Meeting on June 19, 2008, in addition to the eight incumbent Directors who were re-elected, 5 new nominees were elected to the Board of Directors.

- Three of the new members were nominated by Electrum Strategic Holdings LLC, and two were nominated by Newmont Mining Corporation.

- The Company further strengthened its management team - both in Toronto and Romania - during the second quarter of 2008. In Toronto, Jonathan Weisstub joined the Company as Vice President, Corporate Affairs.

- In Romania, Dragos Tanase, who joined in the first quarter 2008 as Vice-President Finance of RMGC, was promoted to Managing Director. Mr. Tanase further strengthened the Romanian team by hiring some of Romania's top communications, government affairs, legal and financial professionals to join RMGC during the quarter.

- Yani Roditis, Gabriel's COO, who had been country manager for the past three years, has returned to North America to focus on project engineering and the cost control estimate.

Rosia Montana Project Timeline

- The Company is using all means at its disposal to get the TAC process back on track, even as it continues to evaluate the implications associated with a prolonged delay. Once the TAC process recommences, and in the absence of any other extraordinary events, legal or otherwise, Gabriel anticipates that it would take at least 6 months to:

- complete the EIA approval process;

- complete the purchase of the outstanding properties;

- receive all other permits and approvals, including initial construction permits; and

- update the control estimate and complete the financing plan.

- Construction of the mine would then take approximately 24 months. Ultimately, the Romanian Government determines the timing of issuance of the EIA approval and all other permits and approvals required for the Rosia Montana Project, subject to the Romanian courts dealing with litigation from NGO's in a timely manner.

About Gabriel

Gabriel is a Canadian based resource company committed to responsible mining and sustainable development in the communities in which it operates. Gabriel is currently engaged in the exploration and development of mineral properties in Romania and is presently engaged in the development of its 80% owned Rosia Montana gold project. For more information please visit the Company's website at www.gabrielresources.com.

The Company will be hosting its Second Quarter 2008 Conference Call and Webcast Thursday, August 7, 2008 at 9:00 am EST. North American callers dial 1-888-713-4216; International callers dial 617-213-4868 - Participant Passcode: 82502887.

Management's Discussion and Analysis

This Management's Discussion and Analysis ("MD&A") provides a discussion and analysis of the financial condition and results of operations to enable a reader to assess material changes in the financial condition and results of operations as at and for the three-and-six-months ended June 30, 2008 and 2007. The MD&A should be read in conjunction with the unaudited consolidated financial statements and notes thereto ("Statements") of Gabriel Resources Ltd. ("Gabriel" or the "Company") as at and for the three-and-six-months ended June 30, 2008 and 2007, as well as the audited Consolidated Financial Statements of the Company as at and for the year ended December 31, 2007 including notes thereto. The Company's Consolidated Financial Statements have been prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP").

All amounts included in the MD&A are in Canadian dollars, unless otherwise specified. This report is dated as of August 6, 2008. Readers are encouraged to read the Company's Annual Information Form dated March 26, 2008 and the Company's other public filings, which can be reviewed on the SEDAR website (www.sedar.com).

Overview

Gabriel is a Canadian based resource company committed to responsible mining and sustainable development in the communities in which it operates. Gabriel is engaged in the exploration and development of mineral properties in Romania and is presently developing its 80% owned Rosia Montana gold project (the "Project").

Our vision is to create value for all of our stakeholders from responsible mining. Our mission is to build Rosia Montana and, as a result, to be a catalyst for sustainable economic, environmental, cultural and community development. As we develop the world-class Rosia Montana project, we will strive to set high standards through good governance, open and transparent communications, and operations and reclamation based on Best Available Techniques - all in the service of sustainable development. Whether the issue is corporate governance, community development, environmental responsibility or operational practices, we pledge to do it right.

As discussed in previous annual and quarterly reports, the Project has long faced opposition from a group of foreign-funded non-governmental organizations ("NGOs"), certain Romanian organizations and some members of the Hungarian Government. During 2007, however, the nature and magnitude of the opposition changed. A change in Romania's Government, resulting in the appointment of a Minister for the Ministry of Environment and Sustainable Development ("MESD") who is a member of Romania's ethnic-Hungarian political union, positioned anti-project political forces to delay the Project. In September 2007, the Minister of Environment announced it was impossible to continue the environmental impact assessment (the "EIA") review process for the Project. He suspended the Technical Assessment Committee (the "TAC") EIA review meetings, asserting a linkage between a minor procedural certificate and the EIA review process that, we believe, on the advice of local counsel, lacks any basis in law.

As a result of the Minister's arbitrary action, the Company is focused on doing everything within its power to restart the permitting process. To that end, the Company stepped up its advocacy efforts in Romania and abroad. Those efforts have been focused on creating an open and transparent review of the Project. Management's goal is that these stakeholder outreach efforts will create a non-partisan environment for the Project's evaluation. In addition to stakeholder outreach, the Company continues to ensure that all licenses and approvals are maintained in good standing in order to preserve the value of our investment.

Key Issues

Political Situation

Romania became a full member of the EU on January 1, 2007. Since accession, however, the country's ruling coalition has disintegrated, with the departure of two of the parties in government, the first in January and the second in April 2007. Open disputes between the presidential and parliamentary branches of government now dominate the political agenda, causing gridlock and delay.

A minority government comprised of the Liberal party and ethnic Hungarian UDMR party, representing approximately 23 percent of the Parliament, was formed in April 2007 under the sitting Prime Minister. In the resulting reshuffle of ministry portfolios, the UDMR negotiated to obtain the Ministry of Environment and Sustainable Development. The new Minister arbitrarily suspended the Project's EIA review process in September 2007.

The current minority government has seen several resignations, as ministers were charged with corruption, while other officials from the governing party have open files with Romania's anti-fraud investigators. Efforts on the part of the minority government to blunt or evade efforts to prosecute cases of high-level corruption were criticized by the European Commission in its January and July 2008 Post Accession Monitoring Reports on Romania. In its July 2008 Report, the EU notes that: "Politicization of corruption cases by the Romanian Parliament and the failure of the judicial system to deliver sentences in high-level corruption cases has weakened the public perception of respect for the rule of law."

While management is making every effort - legal and political - to restart the EIA review process, it is becoming increasingly likely that a change in government will be required to restart the permitting process. With the expected change in government the Company expects that the obstruction by various government ministries we have seen will be replaced by a fair and open review process. Local elections took place in June and the proposed date for national elections is November 23 or November 30, 2008. The election date is expected to be finalized in late August.

In addition to initiating court challenges designed to frustrate our ability to permit the Project in a timely manner, the opposition has orchestrated the tabling of a "private members bill" in the Romanian Parliament to ban the use of cyanide in mining operations in Romania. This is the second time in recent years that a private members bill has been brought forward to ban cyanide. The previous bill was not supported by the Romanian Government and was rejected. The currently proposed bill was initially opposed by the minority government when introduced in April 2007, which argued the merits of mining conducted to high EU standards. The Romanian Government then changed its position without explanation to support the private members bill in June 2007.

Before the bill was introduced into Parliament, three commissions from the Chamber of Deputies reviewed it. The legal commission indicated the proposed bill poses no constitutional concerns in August 2007. The environmental commission rejected the proposed bill in September 2007. The industry commission, the third and final commission responsible for reviewing the proposed cyanide ban in mining, amended the bill to ban cyanide in excess of EU limits. The amended bill was placed on the agenda of the Chamber of Deputies on April 15, 2008, whereupon the Chamber decided to have the amended bill sent back to the industry commission for further review. It is unclear when or if this bill will re-emerge from the industry commission for vote by Parliament, as the commission awaits clarification from the constitutional commission to determine how to proceed.

Against the backdrop of a potential Romanian Parliamentary vote on a ban on the use of cyanide in the mining industry, the Romanian Government is also obliged, pursuant to the terms of the EU Directive 2006/21/EC on the management of waste from extractive industries (the "EU Mine Waste Directive"), to transpose the EU Mine Waste Directive into domestic Romanian law on or before May 1, 2008. While the EU Mine Waste Directive is currently in the process of being transposed into Romania law, there is no firm timetable for the new law to be finalized. The EU Mine Waste Directive provides strict guidelines for the regulation of cyanide usage in ponds and specifically does not contemplate a blanket ban on its use. The Company has designed the Project to be compliant with the EU Mine Waste Directive from day one of operations.

As the current Government represents only a parliamentary minority, proposed bills require the support of a large portion of the opposition parties. Management has spent considerable time informing and educating parliamentarians from all parties on modern mining methods governing the safe use of cyanide. Management believes that a majority of legislators support a strong Romanian mining industry, as evidenced by the rejection of the proposed ban on cyanide by the environmental commission and its amendment by the industry commission to permit cyanide use within EU limits (in accordance with the EU Mine Waste Directive). As a result, management continues to believe the proposed ban on cyanide is unlikely to have enough support in Parliament to become law. Parliament has begun its summer recess until September. The fall session is expected to be abbreviated because of the national elections, providing only a small window to pass legislation this year.

If however, a cyanide ban were to pass, the Company would advocate and pursue all legal avenues possible to have the law overturned, as there are no other economic and environmentally safe technologies available to develop the Rosia Montana Project. While the Company's legal and political positions would be strong, passage of the cyanide ban would cause further delays in the timeline to develop the Project. In addition, the passage of a cyanide ban would cause management to undertake an impairment test of the recoverability of capital assets and mineral properties.

In addition to the bill to ban cyanide, one of its Senate co-authors has put forward two new initiatives which would declare Rosia Montana an archaeological and natural reserve, as well as declare Rosia Montana along with certain other areas archeological sites of national importance. Similar to the procedures applied to the proposed bill to ban cyanide, specific committees have been assigned to deliberate on these proposed bills. The reporting deadlines for the lead committees deliberating on the two bills passed during the second quarter 2008 and extensions have been requested. The timing of these final reports is uncertain, as are the implications of these bills on our Project given the current legal framework.

Tax Audits

During the third quarter of 2007, tax authorities in Romania initiated various tax audits to assess the appropriateness the Company's tax filing positions since January 1, 2005. As a consequence of the tax audits being undertaken, during the third quarter 2007, the Company accrued $700 thousand of withholding tax liabilities arising from payments made to non-Romanian resident suppliers of services.

During the first quarter of 2008, the Company received a second tax assessment in the amount of $4.8 million related to a subsequent Romanian tax audit, completed during the first quarter of 2008, for the period January 1, 2005 to June 30, 2007, in respect of the assessment which arose from the disallowance of the application of state tax incentives related to unrealized foreign exchange gains on inter-company debt.

On April 10, 2008, the Company was advised by Romanian tax authorities that they were reopening the fiscal years 2003 and 2004 which had previously been audited.

On June 24, 2008, the Company received another tax assessment in the amount of $9.7 million related to the third tax audit, for the fiscal years 2003 and 2004, initiated and completed during the second quarter of 2008. This assessment also arose from the disallowance of the application of state tax incentives related to unrealized foreign exchange gains on inter-company debt.

While the Company has fully provided for the assessment, in the financial statements, and paid all of the tax related to the assessments, based on the advice of its professional tax advisors, the Company believes that the tax authorities have misapplied the legislation. As a result, the Company plans to vigorously contest the State's position in court. It is expected to take approximately 18 months to resolve the court cases.

Environmental/Permitting

On September 12, 2007 the Company received a letter from the MESD indicating that the review process for the EIA had been suspended. The MESD based its action on a court challenge by Alburnus Maior, an NGO opposing the Project, regarding the validity of an urbanism certificate wholly unrelated to the EIA review process.

An urbanism certificate is an information document detailing the legal, economic and technical regime for any project, as well as the list of documents needed to apply for a construction permit. It is not a permit or approval, nor does it authorize the undertaking of any activities. Anyone is entitled to ask for an urbanism certificate and the relevant local council is obligated to provide a copy to anyone who asks. Tens of thousands of these documents are provided each year across Romania as a matter of routine. To the Company's knowledge, only one - the Company's urbanism certificate - has been annulled in a Romanian court.

The Company's position, supported by legal counsel, is that an urbanism certificate is not required for the TAC review process. On September 21, 2007, the Company filed an Administrative Complaint against the MESD regarding its decision to suspend the TAC review process. While the MESD responded to the Administrative Complaint on October 19, 2007, the MESD's fourteen page response failed to address the grounds of the complaint. As a result, the Company filed a lawsuits against the MESD as well as the Minister himself and the State Secretary in November 2007, with the first hearing taking place on February 20, 2008. The lawsuits are ongoing, and the Company expects the court to rule during 2008.

The MESD's suspension of the TAC review process was the most prominent of its efforts to stall the Project. MESD has also withheld final signature on our dam safety permits, which were approved in the spring of 2007 along with a number of other dam safety permits for unrelated projects by a committee of experts. While all other dams approved by the committee promptly received their necessary permits, our permits alone await final signature by the MESD. The Company filed an Administrative Complaint with the MESD regarding the withholding of the dam safety permits, a required precursor to litigation, in February 2008. The MESD reconvened an extraordinary second meeting of the dam safety committee in March 2008, requesting that they reconsider their earlier decision to grant RMGC its permits. The dam safety committee again voted to grant RMGC its permits. Despite this second meeting, the MESD continues to withhold the final signature for our dam safety permits. As a result, we may ultimately have to file a second lawsuit against the MESD.

While the EIA is by far the most important Project permit, there are a number of other permits and approvals required to advance the Project, such as the zonal urbanistic plans for the industrial and protected areas, the forestry and land use change permits, dam safety permits as well as other permits and approvals that follow the EIA approval, to obtain the construction permit. The processes for each of these permits and approvals were underway in parallel with the EIA review process. In the absence of any other extraordinary events, legal or otherwise, we expect these permitting processes to be completed within six months of EIA approval; however at present, most of these other permits and approvals have been stopped by virtue of the suspension of the EIA review process.

Litigation

A number of foreign-funded NGOs, including the Hungarian-registered Alburnus Maior, the Soros Foundation Romania (formerly Open Society Institute/Romania), the Independent Centre for the Development of Environmental Resources (a "new" NGO formed in 2007 by the members of Alburnus Maior), Terra Mileniul III Foundation and the Center for Legal Resources (working on behalf of Alburnus Maior), have initiated a multitude of legal challenges against virtually every local, regional and national Romanian regulatory authority that has the administrative authority to grant permits, authorizations and approvals for any aspect of the exploration and development of the Project. While few of the actions have been successful and most have been frivolous, they include both civil actions and criminal complaints against both the regulatory authorities and individuals within such regulatory authorities; in general, they claim that such regulatory authorities are acting in violation of Romanian laws and ask for cancellation of the license, permit or approval. Gabriel, through RMGC, has intervened in the majority of these cases in order to ensure that the Romanian courts considering these actions are presented with a legally correct, fair and balanced analysis as to why the various Romanian regulatory authorities' actions are in accordance with the relevant and applicable laws. While we have designed the Project to follow all applicable laws to protect against permitting delays of the Project, multiple legal challenges that abuse the privileged access to courts enjoyed by NGOs in Romania and the incorrect application of the law in some court decisions increase the litigation uncertainty and potential setbacks to the Project.

Since summer 2007, the Company has lost a number of court cases, causing greater concern for the rule of law in Romania, as well as concern for potential setbacks to the Project. Alburnus Maior has commenced legal action in the Alba Court of Appeal seeking an order compelling the National Agency for Mineral Resources (NAMR) to annul the Rosia Montana exploitation concession license, on the basis of a minor administrative fine imposed on state-run mining company Minvest in 2004. This action is the latest in a series of legal actions initiated by Alburnus Maior seeking the annulment of the Rosia Montana mineral license. A similar claim seeking the cancellation of the Rosia Montana mineral license was recently heard by the High Court of Cassation and Justice (the "Supreme Court") and was rejected on its merits. The action before the Alba Court of Appeal was suspended pending this ruling by the Supreme Court, and given the similarity of facts between the two cases, the Company remains hopeful that the law will be applied uniformly in the Alba case as well.

Surface Rights

As a result of the suspension of the EIA review process, and in order to align the Company's activities to the pace of the approval process, management met with the community to discuss a full shut down of the home purchase program. On February 1, 2008, the program was suspended indefinitely.

In an effort to demonstrate continued commitment to the local community in spite of the EIA review suspension, construction of the Alba Iulia resettlement site began in summer 2007. Infrastructure was largely completed during the second quarter 2008 and of the 123 homes to be built, 78 homes are under construction of which 60 are expected to be completed by year end with the balance of all homes completed by June 30, 2009. The access road to the Piatra Alba resettlement site was completed and handed over to the local administration, and tenders for construction for phase one of the new village were received during the second half of 2007. While final construction permits were expected to be issued during the first half of 2008, the Ministry of Forestry has refused to grant our forestry license, essentially preventing RMGC from moving forward on the second resettlement site. In any event, commencement of construction of the resettlement site at Piatra Alba is suspended until EIA approval.

In addition to the private properties required, the Company needs to acquire properties (about 35 percent of the surface area of the Project) which are owned by institutions, including the local administrations of Rosia Montana and Abrud, as well as certain churches and state-owned mining companies. The process to acquire the institutional properties is well underway.

As of February 2008, when the purchase program was suspended, the Company owns or has options on 77 percent of the homes in the industrial zone, protected area and the buffer zone. Once we complete the agreements for institutional properties, our ownership will rise to approximately 85 percent of the three zones of the Project, further demonstrating strong local support for the Project.

Ultimately, the Company's ability to obtain construction permits for the mine and plant is predicated on securing 100 percent of the surface rights in the industrial zone.

Archaeology

An archaeological review of historic mining activity at Rosia Montana is a critical step in the granting of the construction permit to build the Project. An archaeological discharge is required for all of the area under the footprint of the proposed mine. Over the past five years as our program progressed, we have been granted several discharge permits to acknowledge completion of the archaeological program.

Here as on other issues, the opposition has used the Romanian courts to challenge the actions of the various Ministries of the Romanian Government. An NGO commenced legal action in the Alba Court of Appeal in 2004 and obtained an annulment with respect to archaeological discharge Certificate No. 4. After a successful appeal to the Supreme Court and a retrial of the matter on its merits in the Brasov Court of Appeal, a second annulment of archaeological discharge Certificate No. 4 was ordered by the Brasov Court of Appeal. Gabriel has appealed this second annulment to the Supreme Court. The Company expects the Supreme Court to rule on the case by the end of 2008. If archaeological discharge Certificate No. 4 is ultimately annulled, then Gabriel will reapply for a new discharge certificate based on the recommendations cited in the Supreme Court decision.

The opposition has also challenged the issuance of archaeological discharge Certificate No. 5 ("Certificate No. 5") on grounds similar to their challenge of Certificate No. 4, and this matter is also currently before the Romanian courts.

Financing

Cash, cash equivalents at June 30, 2008 totaled $116.5 million. During the second quarter of 2008, we spent $10.5 million for Project development activities compared to $22.2 million in the second quarter of 2007. The higher expenditure rate in 2007 reflects the commencement of the acquisition of properties, which began in the fourth quarter of 2006 and extended throughout 2007, as well as ordering of long-lead-time equipment in addition to other permitting activities. The higher levels of expenditures in 2007 were in response to and in anticipation of Project permitting approval by the Romanian Government in the third quarter of 2007.

The budgeted expenditures for the Rosia Montana Project for 2008 are approximately $66 million, as the Company placed most activities on hold until the EIA permit is approved. This is the minimum level of expenditures required to maintain the value of our investment. The control estimate scheduled for completion during the fourth quarter 2007 has been placed on hold until the EIA permit is approved. No further long-lead-time equipment orders will be placed and installment payments under equipment previously ordered will be deferred to the extent possible under the terms of the agreements. Construction of the Alba Iulia resettlement site will continue while the home purchase program and the development of the Piatra Alba resettlement have been suspended. Once the Company receives the construction permit, the nature and rate of expenditure changes significantly as site construction begins.

Project financing discussions with traditional lenders had been put on hold with the suspension of the EIA process. We expect to restart financing discussions this fall with potential lenders. A key condition to accessing the debt facilities will be acquiring 100 percent of the surface rights in the industrial zone.

Expected Financing Plan

Based on a definitive feasibility study completed in early 2006, the cost to construct the Project was estimated at US$638 million. The Company has placed the updated cost estimate, referred to as the control estimate, on hold until EIA approval. The control estimate updates the feasibility study based on additional engineering undertaken since the definitive feasibility study was prepared, which provides a higher degree of accuracy including firm vendor bids for equipment, materials and labour, as well as incorporating the Company's actual experience to date in the placing of the long-lead-time equipment orders. While the estimate is not complete, costs are higher in line with industry-wide factors. Once the EIA is approved, we will update the control estimate and revise our Financing Plan. As a result, the updated Financing Plan will look very different from the original Financing Plan announced in the spring of 2006. While the feasibility study cost estimate to build and operate the Project contained contingencies, continued strengthening of currencies against the United States dollar and escalating costs exceed the estimated Project contingencies. Inflationary tendencies in the resource industry are causing many projects' costs to materially exceed feasibility study estimates.

While the mining industry continues to witness dramatic capital and operating cost escalation, record high gold prices are more than offsetting the higher costs, resulting in record earnings and improved Project returns.

With the recent and well publicized global credit crises in today's marketplace, credit is more restricted and likely more expensive than management originally contemplated. We believe that based on the recent experience of other mining companies, the high-yield bond market option is closed and we have no basis upon which to predict when it might re-open. While the conventional debt market appears to be open, we believe that any company seeking to finance a project of our magnitude will face additional concerns with respect to a bank's ability to syndicate the transaction; additionally we will need to address the concerns bankers are likely to raise with respect to estimating the required amount of contingent overrun funding in an environment where capital costs are rising. Historically, contingent funding required by banks has been 10-15 percent of capital cost. In the current market we expect it to be higher. This is expected to result in higher financing costs or possibly a larger equity component.

The Company raised $148.6 million during first quarter of 2007 to bring the total equity raised over the past two years to develop the Project to $241.6 million. The proceeds of the offering were and will continue to be used to finance the development of the Rosia Montana Project, specifically to complete the permitting process, acquire necessary surface rights, in addition to covering the costs of engineering, the ordering of long-lead-time equipment, corporate overhead and the construction of resettlement sites.

Board of Directors / Management Additions

At the Company's Annual General Meeting on June 19, 2008, in addition to the eight incumbent Directors who were re-elected, 5 new nominees were elected to the Board of Directors. Three of the new members were nominated by Electrum Strategic Holdings LLC, a shareholder (representing 15.0% of the Company's issued and outstanding shares) and two were nominated by Newmont Mining Corporation, a shareholder (representing 19.7% of the Company's issued and outstanding common shares). Each of these individuals brings significant industry experience to Gabriel, and we look forward to the contributions they will make as we move the Project forward.

The Company further strengthened its management team - both in Toronto and Romania - during the second quarter of 2008. In Toronto, Jonathan Weisstub joined the Company as Vice President, Corporate Affairs. In addition to his legal background, Mr. Weisstub brings with him extensive experience in politics, having worked in the Canadian Prime Minister's Office under the Right Honorable Paul Martin. In Romania, Dragos Tanase, who joined in the first quarter 2008 as Vice-President Finance of RMGC, was promoted to Managing Director. Mr. Tanase further strengthened the Romanian team by hiring some of Romania's top communications, government affairs, legal and financial professionals to join RMGC during the quarter. Yani Roditis, Gabriel's COO, who had been country manager for the past three years, has returned to North America to focus on project engineering and the cost control estimate.

Project Timeline

- The EIA was submitted in the second quarter of 2006.

- In January 2007, the Company received the list of official questions from the Romanian Government, raised during the public consultation process.

- The Company responded to the questions in the form of an Annex to the EIA, in early May 2007.

- TAC and Espoo Convention meetings went well during the third quarter, until TAC meetings were suspended in September 2007.

The Company is using all means at its disposal to get the TAC process back on track, even as it continues to evaluate the implications associated with a prolonged delay. Once the TAC process recommences and in the absence of any other extraordinary events, legal or otherwise, Gabriel anticipates that it would take at least 6 months to:

- complete the EIA approval process;

- complete the purchase of the outstanding properties;

- receive all other permits and approvals, including initial construction permits; and

- update the control estimate and complete the financing plan.

Construction of the mine would then take approximately 24 months. Ultimately, the Romanian Government determines the timing of issuance of the EIA approval and all other permits and approvals required for the Rosia Montana Project, subject to the Romanian courts dealing with litigation from NGOs in a timely manner.

2008 Outlook

With the current suspension of the EIA review process, our key objectives for 2008 include:

1. Pursuing all political and legal means to get the EIA review process back underway;

2. Obtaining approval of our EIA and all other required permits;

3. Ensuring that the Company maintains all existing licenses and approvals in good standing;

4. Reviewing all Project activities with a goal of reducing spending until the EIA permitting process is underway;

5. Ensuring that we maintain all activities that will position the Company to gain all approvals once the EIA permitting process is recommenced; and

6. Strengthening dialogue and communications with all stakeholders.

Results of Operations

The results of operations are summarized in the following tables, which have been prepared in accordance with Canadian Generally Accepted Accounting Principles:



in thousands of Canadian dollars 2008 Q2 2008 Q1 2007 Q4 2007 Q3
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Statement of Loss (Income)
Loss (Income) $ 16,241 $ (10,970) $ 7,821 $ 6,785
Loss (Income) per share 0.06 (0.04) 0.03 0.03
---------------------------------------------------------------------------
Balance Sheet
Working capital 80,513 110,021 118,299 147,157
Total assets 513,965 521,269 507,955 513,490
---------------------------------------------------------------------------
Statement of Cash Flows
Investments in exploration and
development including working
capital 4,375 17,211 24,708 15,448
changes
Cash flow (used in) provided by 1,015 (52) - (31)
financing activities
---------------------------------------------------------------------------

in thousands of Canadian dollars 2007 Q2 2007 Q1 2006 Q4 2006 Q3
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Statement of Loss (Income)
Loss $ 5,966 $ 2,471 $ 5,103 $ 2,156
Loss per share 0.02 0.01 0.03 0.01
---------------------------------------------------------------------------
Balance Sheet
Working capital 199,073 213,440 79,724 120,201
Total assets 503,381 491,356 338,056 330,489
---------------------------------------------------------------------------
Statement of Cash Flows
Investments in exploration and
development including working
capital 24,107 13,318 31,490 6,663
changes
Cash flow from financing activities 18,389 152,091 1,953 94,641
---------------------------------------------------------------------------

Statement of Loss (Income)

3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars,
except per share amounts 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total operating expenses for the
period $ 4,149 $ 3,899 $ 6,633 $ 6,955

Loss for the period 16,241 5,966 5,271 8,437

Loss per share - basic and diluted 0.06 0.02 0.02 0.04


Total operating expenses for the three-and-six-month periods ending June 30, 2008 remained comparable to the corresponding 2007 periods. Loss for the three-month period ended June 30, 2008 was primarily due to income taxes accrued in response to a Romanian tax assessment received in June 2008. During the second quarter 2008, the Company accrued $9.7 million with respect to the receipt of a third tax assessment, which arose from the disallowance of the application of state tax incentives related to unrealized foreign exchange gains on inter-company debt for the fiscal years 2003 and 2004. In response to the tax assessment received, the Company accrued an additional $1 million in tax liabilities arising from unrealized foreign exchange gains for the six-month period ended June 30, 2008 (2007 - $Nil). The losses in the three-and-six-month periods ended June 30, 2008, are partially offset by interest income and foreign exchange gains on foreign currency cash balances held to finance planned foreign currency expenditures.

We expect to incur operating losses until commercial production commences and revenues are generated.

Expenses

Corporate, General and Administrative



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Finance $ 353 $ 416 $ 699 $ 579
External communications 210 630 497 1,113
Information technology 142 318 271 655
Legal 586 339 703 581
Payroll 684 785 1,424 1,508
Other 376 540 746 1,015
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Corporate, general and
administrative expense $ 2,351 $ 3,028 $ 4,340 $ 5,451
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Corporate, general and administrative costs -- those costs incurred by the corporate office in Toronto -- decreased for the three-and-six-month periods ending June 30, 2008 primarily due to lower external communications and information technology costs partially offset by higher legal costs. Corporate, general and administrative costs are anticipated to remain at current levels for the foreseeable future.

Stock Based Compensation



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
DSUs - expensed (recovered) $ 570 $ 130 $ 447 $ (11)
Stock option compensation -
expensed 471 451 990 840
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Stock based compensation -
expensed 1,041 581 1,437 829
---------------------------------------------------------------------------
---------------------------------------------------------------------------
DSUs - capitalized $ 60 $ 9 $ 45 $ (5)
Stock option compensation -
capitalized 282 304 547 602
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Stock based compensation -
capitalized 342 313 592 597
---------------------------------------------------------------------------
---------------------------------------------------------------------------
DSU compensation
----------------
Number of DSUs granted - 5,319 14,793 11,160
Average value ascribed to each
DSU granted $ - $ 4.70 $ 1.69 $ 4.48



DSUs expensed and capitalized increased for the three-and-six-months ended June 30, 2008 compared to the same periods of 2007. The increase in DSU costs relates to the increase in our share price during the second quarter of 2008. Initially valued at the market price of the stock at date of issue, DSUs are revalued each period based on the closing share price at the period end, with the difference between the total value of the DSUs at period end compared to the value at the end of the previous period. If the value is higher, as it was at the end of the second quarter of 2008, the difference is charged to the Statement of Loss, increasing costs for the period. If the share price declines, as it did for the six-month period ended June 30, 2007, the lower value of the DSUs is credited against costs during the period. Overall, for the three-month period ended June 30, 2008, our share price increased by $1.07 compared to March 31, 2008 and $0.79 compared to December 31, 2007, while for the same period in 2007, our share price increased by $0.47 from March 31, 2007 but decreased by $0.29 compared to December 31, 2006.



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian
dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Stock option compensation
-------------------------
Number of stock options
granted 5,935,000 450,000 5,935,000 1,405,000
Average value ascribed to
each
option granted $ 1.05 $ 1.63 $ 1.05 $ 1.88
Options granted to corporate
employees,
consultants, officers, and
directors 1,900,000 450,000 1,900,000 930,000
Options granted to
development
project
employees and consultants 4,035,000 - 4,035,000 475,000


The fair value of stock options when granted is typically amortized over the period in which the options vest, which is normally three years. For those options that vest on issuance, the entire fair value of the options is recognized immediately, while for those options that begin to vest after a deferral period, the fair value of the options is amortized proportionately over the total vesting and delay period. For options issued where the vesting occurs upon the achievement of a performance milestone, the fair value of those options is measured and recognized upon achievement of the milestone, which serves as the 'measurement date'. Fair value of stock options granted to personnel working on development projects is capitalized over the vesting period.

During the second quarter 2008, the Company granted 3 million options which vest upon completion of certain milestones, including approval of the EIA, completion of project financing commitments, loan documentation and first draw down. The estimated fair value of the options will be recognized and capitalized during the period in which the milestones are achieved and the value can be reasonably measured. For the three-and-six-month period ended June 30, 2008, the amount capitalized was $NIL (2007 - $NIL)

Project Financing Costs



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Project financing costs $ 12 $ 214 $ 34 $ 536


For the three-and-six-months ended June 30, 2008, Project financing costs declined compared to the same period of 2007, as a result of financing activities being put on hold due to the suspension of the EIA review process.

Project financing activities include advisory services for the various facilities under our financing plan. Project finance activities are expected to restart during the second half of 2008.

Severance and Termination Costs

In December 2007, in light of the suspension of the EIA review process, the Company announced and enacted plans to scale back activities. In the fourth-quarter 2007, the Company expensed $1.4 million, being its total liability related to the retrenchment of 170 employees in Romania. During the quarter, concurrent with the modification of payment terms of its remaining obligation, the Company accrued a further $668 thousand in respect of its obligation, and has classified its entire outstanding obligation as a current liability.

As at June 30, 2008 the Company paid $1.3 million in termination benefits.

Interest Income



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Interest income $ 991 $ 2,446 $ 2,334 $ 3,339


Lower interest income in 2008 relates to lower average cash balances and lower interest rates in 2008 compared to 2007. For the remainder of 2008, interest income should decrease as our cash balance declines due to ongoing resettlement site development costs, installment payments made under our long-lead-time equipment orders and corporate and Romanian overhead costs, as well as lower interest rates on cash balances when compared to 2007.

The Company maintains an investment policy that prohibits investments in asset-backed-commercial-paper. As a result, the Company has not been exposed to the credit risk of the asset-backed-commercial-paper market. Approximately 87 percent of cash balances are invested in government guaranteed instruments with the balance invested in Term Deposits.

Foreign Exchange



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Foreign exchange gain (loss) -
realized $ 3,752 $ (1,158) $ 4,168 $ (1,047)
Foreign exchange gain (loss) -
unrealized (6,115) (3,355) 5,580 (3,774)
---------------------------------------------------------------------------
Total foreign exchange gain (loss) $ (2,363) $ (4,513) $ 9,748 $ (4,821)
---------------------------------------------------------------------------
---------------------------------------------------------------------------


During 2007, we converted the majority of our Canadian dollar cash balances to foreign currencies to match anticipated foreign denominated expenditures. In the three-months ended June 30, 2008, the Canadian dollar weakened relative to the remaining foreign currencies acquired, causing unrealized foreign exchange losses in the period. Offsetting these losses were realized foreign exchange gains caused by selling some foreign currency positions when rebalancing our cash position.

The Company maintains a Canadian dollar cash position to fund corporate, general and administrative activities, while the balance of its cash resources are in foreign currencies to match foreign denominated expenditures.

We would expect to continue to report foreign currency gains and losses as we continue to hold foreign currencies.

Taxes

The Company has subsidiaries in countries that have differing tax laws and rates, primarily Canada and Romania. The provision for income taxes is based on a number of estimates and assumptions made by management including its understanding of domestic and international tax rules. Advice is also sought from professional tax advisors.

Domestic tax authorities in Romania regularly initiate various tax audits to assess the appropriateness of the Company's tax filing positions. Regulators may interpret tax regulations different than the Company which may cause changes to the estimates made.

During the third quarter of 2007, tax authorities in Romania initiated various tax audits to assess the appropriateness of the Company's tax filing positions since January 1, 2005. As a consequence of the tax audits being undertaken, during the third quarter 2007, the Company accrued $700 thousand of withholding tax liabilities arising from payments made to non-Romanian resident suppliers of services. The entire accrual was charged to mineral properties in the period.

During the first quarter of 2008, the Company received a tax assessment for $4.8 million related to a second Romanian tax audit completed during the first quarter of 2008. The Company, having accrued in 2006 its then estimated tax liability, accrued an additional $3.7 million in respect of the assessment, which arose from the disallowance of the application of state tax incentives related to unrealized foreign exchange gains on inter-company debt.

On April 10, 2008, the Company was advised by the Romanian tax authorities that they were re-opening fiscal years 2003 and 2004 which had been previously audited.

On June 24, 2008, the Company received a tax assessment for $9.7 million related to the third tax audit, for the years 2003 and 2004, initiated and completed during the second quarter of 2008. This assessment also arose from the disallowance of the application of state tax incentives related to unrealized foreign exchange gains on inter-company debt.

In response to the tax assessments received, the Company accrued an additional $1 million in respect of tax liabilities arising from unrealized foreign exchange gains for the six-month period ended June 30, 2008 (2007 - $Nil).

Based on the advice of its professional tax advisors, the Company believes that the tax authorities have misapplied the legislation and we plan to vigorously contest the State's position in court. It is expected to take approximately 18 months to resolve the court case.

Investing Activities

The most significant ongoing investing activities are for our Rosia Montana development Project in Romania. Most of the expenditures to date have been for identifying and defining the size of the four ore bodies, for engineering to design the size and scope of the Project, for environmental assessment and permitting, as well as surface rights/property acquisition. Once we receive our construction permit, the nature and magnitude of the expenditures will increase as we build roads, production facilities, open pits, tailings management facilities and associated infrastructure.

Mineral Properties

We capitalize all costs incurred in Romania related to our development and exploration projects -- Rosia Montana, Bucium and Baisoara -- to mineral properties.

Listed below is a summary of expenditures at Rosia Montana for the three-and-six months ended June 30, 2008 and 2007.



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Finance and administration $ 5,606 $ 4,093 $ 10,977 $ 8,822
Permitting 594 2,051 1,250 3,006
Community development 3,158 13,416 12,237 20,632
Project management and
engineering 2,128 4,163 4,654 6,537
Exploration - Rosia Montana 111 168 214 272
Exploration - Bucium 41 416 82 798
Exploration - Baisoara 52 34 92 64
Capitalized depreciation net of
disposals (130) (146) (261) (304)
Capitalized stock based
compensation (342) (313) (592) (597)
Reclassification to mineral
properties - - (25) -
Increase in resettlement
liabilities (750) (1,638) (4,320) (2,269)
---------------------------------------------------------------------------
Total cash exploration and
development
expenditures $ 10,468 $ 22,244 $ 24,308 $ 36,961
---------------------------------------------------------------------------
---------------------------------------------------------------------------


During the three-and-six-months ended June 30, 2008, finance and administration costs increased due to higher legal and advisory costs related to ongoing legal challenges. Apart from finance and administrative costs, all other costs decreased in the three-and-six-month periods of 2008 compared to the corresponding periods in 2007, due to lower levels of activity as a result of the EIA process suspension.

Management believes that its planned expenditures in 2008 represent only those required to maintain the value of its investments in Romania; accordingly, investments in Mineral Properties are anticipated to decrease from 2007 levels.

The major expenditures on Mineral Properties in 2008 revolve around those activities to maintain our existing licenses and permits in good standing and our efforts to restart the EIA permitting process. No additional work is planned on the Bucium property until the exploration license is converted to an exploitation license and the Rosia Montana EIA is approved.

Capital Assets



3 months ended 6 months ended
June 30, June 30,
in thousands of Canadian dollars 2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Resettlement site development
costs $ 2,368 $ 985 $ 3,681 $ 1,360
Investment in long-lead-time
equipment 1,041 684 1,902 2,988
Other 43 294 63 605
---------------------------------------------------------------------------
Total investment in capital
assets $ 3,452 $ 1,963 $ 5,646 $ 4,953
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Depreciation - expensed $ 77 $ 76 $ 154 $ 139
Depreciation - capitalized to
mineral properties $ 130 $ 146 $ 261 $ 304


Although hampered during the first quarter of 2008 by poor weather, construction activities on the Alba Iulia resettlement site accelerated during the second quarter 2008. The Company expects the first 60 homes to be handed over to resettled homeowners during the upcoming winter months, while construction is expected to continue and be completed on 40 additional homes during the first quarter 2009.

While we were able to delay several installment payments for long-lead-time equipment during the first half of 2008, we expect to make approximately $20 million in long-lead-time equipment payments during the second half of 2008.

Cash Flow Statement

Liquidity and Capital Resources

Our only sources of liquidity until we receive our environmental permits for Rosia Montana -- at which point we will be in a position to move toward completion of debt financing -- are our cash balance, bridge financing, exercise of stock options outstanding, and the equity markets. We updated the cost to construct the Project in first quarter 2006 to US$638 million. While we halted the update to our control estimate for Project construction during the fourth quarter of 2007 due to the suspension of the EIA process, initial capital costs are trending higher, as a result of several factors, including the Romanian RON and Euro's appreciation against the US dollar, design improvements from ongoing engineering and higher material and labour costs.

To complete the development of the Project, the Company will need additional external financing. The ability to develop Rosia Montana hinges on our ability to raise the necessary financing for construction. If we were unable to raise the required funds, we would seek strategic alternatives to move the Project toward development.

As we move towards receipt of construction permits, management will be in a position to develop and finalize the financing plan in light of market conditions at that time. At present, management remains confident that it can obtain conventional project financing for the Project. However, the overall financing plan will differ materially from the plan originally contemplated due to rising costs of the Project and the state of the credit markets at the time of financing. This is expected to impact the cost of financing and potentially the ratio of debt to equity and timing of financing.

As at June 30, 2008, we had cash, cash equivalents of $116.5 million compared to $147.2 million at December 31, 2007. Substantially all of these amounts are invested in government guaranteed investments. As the Company's investment policy prohibits investments in asset-backed-securities, we have no need to write down any investments due to the "credit crisis".

The Company manages its foreign currency risks through matching its expected foreign denominated expenditures with foreign currency investments. The Company has not entered into any derivatives hedging activities. The Company maintains Canadian dollar investments to fund corporate costs while most investments are denominated in either US dollars or Euros to match planned foreign currency expenditures. The Company incurs foreign currency gains and losses on those foreign denominated investments as the currencies move against each other. Accordingly, the Company will continue to experience foreign exchange gains and losses as long as it maintains foreign currency investments.

Based on management's knowledge and experience of the financial markets, the Company believes the following movements are "reasonably possible" over a three month period.

- Cash and cash equivalents include deposits which are at floating interest rates. Sensitivity of cash and cash equivalents to a plus or minus 1% change in earned interest rates would affect net income by $290 thousand.

- The Company holds significant balances in foreign currencies, and this gives rise to exposure to foreign exchange risk. Sensitivity to a plus or minus 1% change in foreign exchange rates would affect net income by $947 thousand.

The Company's objective when managing capital is to safeguard its accumulated capital in order to fund development of its Rosia Montana project. The Company manages its capital structure and makes adjustments to it based on the level of funds on hand and anticipated future expenditures. While the Company expects that it will be able to obtain equity, long-term debt and/or project-based financing sufficient to build and operate the Rosia Montana project, there are no assurances that these initiatives will be successful. To safeguard capital and to mitigate currency risk, the Company invests its surplus capital in highly liquid, highly rated financial instruments that reflect the currency of the planned expenditure.

The Company is forecasting a cash, cash equivalents and short-term investments position at December 31, 2008 of approximately $65 million. This forecast assumes total 2008 spending on the Rosia Montana Project of $66 million, which includes: approximately $21 million on long-lead-time equipment in order to avoid substantial cost escalation for milling equipment should management choose to postpone scheduled fabrication activities; $23 million for community development activities associated with construction of the Alba Iulia resettlement site and property purchases -- both expenditures being contemplated in the original US$638 million cost estimate; and other permitting activities and overheads in Romania. Corporate overheads are expected to total $10 million net of interest income in 2008. This forecast includes a payment of $5.2 million for tax arising from the second Romanian tax assessment paid in April 2008 and second payment of $10.1 million was made in July 2008 arising from a third tax assessment. The Company is challenging the tax assessments but expects that challenge to take approximately 18 months to resolve.

Working Capital

As at June 30, 2008, we had working capital of $80.5 million versus $118.3 million as at December 31, 2007. The decrease in working capital in 2008 relates to the investment in capital assets and mineral properties offset by the foreign exchange gains and interest income during the period.

Net Change in Non-Cash Working Capital

The net change in operating non-cash working capital decreased for the three-months ended June 30, 2008 compared to same period of 2007 due to a decrease in trade payables and accrued liabilities during the 2008 period.

The net change in investing non-cash working capital increased for the three-months ended June 30, 2008 due to an increase in trade payables and accrued liabilities.

Financing non-cash working capital changed minimally in the three-month period ended June 30, 2008, while the increase in cash during the same quarter last year is due to the collection of proceeds from warrants exercised in the first quarter 2007.

Related Party Transactions

The Company paid $6 thousand (2007 - Nil) during the six-months-ended June 30, 2008 to a director of the Company for consultation services provided to the Company.

In December 2004, the Company loaned a total of US$971 thousand to the four minority shareholders, who hold an aggregate of 20 percent of the shares of RMGC, to facilitate a statutory requirement to increase RMGC's total share capital. The loans are non-interest bearing and are to be repaid as and when RMGC distributes dividends to its shareholders.

The loans and related minority interest contribution have been offset on the balance sheet until such time as the loans are repaid. Once the loans are repaid the minority interest component will be reflected on the balance sheet.

Resettlement Liabilities

During the fourth quarter of 2006, the Company recommenced purchasing homes in the Project area. Residents had two choices. They could either choose to take the sale proceeds and move to a new location of their choosing or they could exchange their properties for a new property to be built by the Company at one of the two new resettlement sites. At June 30, 2008, the Company had resettlement liabilities totaling $21.5 million, obligating the Company to deliver new homes under those contracts between September 30, 2007 and August 1, 2008. The Company was unable to meet the original deadlines stipulated in those contracts. As a result, the Company is accruing a penalty of 0.5% of the agreed upon unpaid property value per month of delay as required by the agreement including all amendments. Under the terms of the original resettlement contracts, if the Company failed to fulfill its obligation by the end of the 12-month penalty period, the Company would be required to pay the owner the agreed-upon unpaid property value, plus the related penalties, and the owner would retain the right to occupy the home for an undetermined period of time. The Company has been working with those residents who chose the resettlement option to extend the delivery dates of the contracts for an additional six months. Management believes most of the residents will ultimately agree to the extension. For those residents who have not agreed to the extension, we are working to provide their homes within the agreed-upon time frame. As at June 30, 2008 the Company has accrued $0.9 million (December 31, 2007 - $0.5 million) in respect to the additional delay penalties.

Contractual Obligations

During third quarter 2006, the Company received the Baisoara exploration license which obligates the Company to spend US$3.2 million over its five-year term, which expires July 2011. As at June 30, 2008, the remaining expenditure commitment was US$2.9 million (December 31, 2007 - US$3.0).

The Company and its subsidiaries have a number of agreements with arms-length third parties who provide a wide range of goods and services which totaled $8.2 million at June 30, 2008 (December 31, 2007 - $9.3 million). Typically, the service agreements are for a term of not more than one year and permit either party to terminate for convenience on notice periods ranging from 15 to 90 days. Upon termination, the Company has to pay for services rendered and costs incurred to the date of termination.

During 2007, the Company entered into purchase agreements for long-lead-time equipment, the cost of which is to be paid over three years beginning 2007. As at June 30, 2008 outstanding commitments under such agreements totaled $36 million (December 31, 2007 - $42.4 million). Contractual obligations are not expected to rise during 2008 as no further long-lead-time equipment orders are expected to be placed until the EIA is approved; however, the reported amount in the Company's financial statements will fluctuate as currencies fluctuate on the foreign denominated obligations.

The following is a summary of contractual commitments of the Company including payments due for each of the next five years and thereafter



2012
and
there-
Total 2008 2009 2010 2011 after
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Baisoara exploration
license
(note 5) $ 2,949 $ 163 $ 644 $ 1,320 $ 822 $ -
Resettlement (note
6) 21,460 15,238 6,222 - - -
Goods and services
(a) 8,228 5,973 1,818 10 10 417
Long lead time
equipment (b) 35,956 21,214 14,712 30 - -
Rosia Montana
exploitation
license (c) 287 26 26 26 26 183
Surface concession
rights (d) 857 10 20 20 20 787
Lease agreements (e) 1,523 317 636 401 169 -
--------------------------------------------------------------------------
Total commitments $ 71,260 $ 42,941 $ 24,078 $ 1,807 $ 1,047 $ 1,387
--------------------------------------------------------------------------



The following is a summary of the long-lead-time equipment orders and the
payment status:

June 30, December 31,
2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total purchase agreements:
Grinding area systems $ 44,249 $ 46,140
Crusher facilities 4,155 6,976
Other process equipment - 2,646
Foreign exchange movement 2,743 -
---------------------------------------------------------------------------
51,147 55,762

Amounts paid as at June 30, 2008:
Grinding area systems (12,524) (11,043)
Crusher facilities (1,896) (2,018)
Other process equipment - (267)
Foreign exchange movement (771) -
---------------------------------------------------------------------------
Outstanding payment obligation $ 35,956 $ 42,434
---------------------------------------------------------------------------
---------------------------------------------------------------------------


During the second quarter 2008, the Company elected not to exercise its manufacturing order option on $7.4 million of orders, pending the restart of the permitting process. We have therefore excluded the orders' value from the commitments table.

CEO/CFO Certification

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded at June 30, 2008 that these controls and procedures are operating effectively. In addition, our Chief Executive Officer and Chief Financial Officer have concluded at June 30, 2008 that management has designed such internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting as required by the Ontario Securities Commission Internal Control certification requirements.

New Accounting Policies

Capital Disclosures and Financial Instruments - Disclosures and Presentation

The CICA issued three new accounting standards: Handbook Section 1535, "Capital Disclosures", Handbook Section 3862, "Financial Instruments - Disclosures", and Handbook Section 3863, "Financial Instruments - Presentation". These standards are effective for interim and annual consolidated financial statements for the Company's reporting period beginning on October 1, 2007.

Section 1535 specifies the disclosure of (i) an entity's objectives, policies and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; and (iv) if it has not complied, the consequences of such non-compliance. The Company has included disclosures recommended by the new Handbook section in note 16 to the interim financial statements.

The new Sections 3862 and 3863 replace Handbook Section 3861, "Financial Instruments - Disclosure and Presentation", revising and enhancing its disclosure requirements, and carrying forward unchanged its presentation requirements. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks. The Company has included disclosures recommended by the new Handbook section in note 15 to the interim financial statements.

Other New Accounting Pronouncement

CICA 1400 "General Standards of Financial Statement Presentation" has been amended to include requirements for management to assess and disclose an entity's ability to continue as a going concern, effective for interim and annual financial statements for years beginning on/after January 1, 2008. The Company has included disclosures recommended by the new Handbook section in note 1 to the interim financial statements.

Outstanding Share Data

The Company's fully diluted share capital as at the report date was:



Outstanding
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Preferred shares Nil
Common shares 255,424,278
Common stock options 17,495,711
Common stock warrants 2,625,000
Deferred share units - common shares 600,558
---------------------------------------------------------------------------
Fully diluted share capital 276,145,547
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Forward-Looking Statements

Certain statements included herein, including capital costs estimates, future ability to finance the Project and other statements that express management's expectations or estimates regarding the timing of completion of various aspects of the Projects' development or of our future performance, constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities legislation. The words "believe", "expect", "anticipate", "contemplate", "target", "plan", "intends", "continue", "budget", "estimate", "may", "will", "schedule", and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. In particular, the Management's Discussion and Analysis includes many such forward-looking statements and such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of the Company to be materially different from its estimated future results, performance or achievements expressed or implied by those forward-looking statements and its forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: changes in the worldwide price of precious metals; fluctuations in exchange rates; legislative, political or economic developments including changes to mining and other relevant legislation in Romania; operating or technical difficulties in connection with exploration, development or mining; environmental risks; the speculative nature of gold exploration and development, including the risks of diminishing quantities or grades of reserves; and the Company's requirements for substantial additional funding.

While Gabriel may elect to, Gabriel is under no obligation to and does not undertake to update this information at any particular time, except as required by law.



Gabriel Resources Ltd.

Interim Consolidated Financial Statements
(Unaudited)
For the period ended June 30, 2008

Consolidated Balance Sheets
As at June 30, 2008 and December 31, 2007
(Unaudited and expressed in thousands of Canadian dollars)


2008 2007
------------------------------------------------------------------
------------------------------------------------------------------

Assets

Current Assets

Cash and cash equivalents $ 116,478 $ 147,244

Accounts receivable 2,907 1,237

Prepaid expenses and supplies 1,270 990
------------------------------------------------------------------

120,655 149,471

Restricted cash (note 3) 185 162

Capital assets (note 4) 24,258 18,961

Mineral properties (note 5) 368,867 339,361
------------------------------------------------------------------

$ 513,965 $ 507,955
------------------------------------------------------------------
------------------------------------------------------------------

Liabilities

Current Liabilities

Accounts payable and accrued liabilities $ 18,682 $ 14,032

Resettlement liabilities (note 6) 21,460 17,140
------------------------------------------------------------------
40,142 31,172

Other Liabilities (note 7) 2,335 2,688
------------------------------------------------------------------

42,477 33,860
------------------------------------------------------------------

Shareholders' Equity

Capital Stock (note 9) 559,933 558,277

Contributed Surplus (note 12) 9,815 8,807

Deficit (98,260) (92,989)
------------------------------------------------------------------

471,488 474,095
------------------------------------------------------------------

$ 513,965 $ 507,955
------------------------------------------------------------------
------------------------------------------------------------------

Nature of operations and going concern (note 1)

Minority interest (note 8(b))

Commitments and contingencies (note 17)

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



Consolidated Statements of Loss and Deficit
For the three-and-six-month periods ended June 30, 2008 and 2007
(Unaudited and expressed in thousands of Canadian dollars, except
per share data)


3 months ended June 30, 6 months ended June 30,
2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Expenses

Corporate, general and
administrative $ 2,351 $ 3,028 $ 4,340 $ 5,451

Stock based
compensation (note 7&
11) 1,041 581 1,437 829

Project financing costs 12 214 34 536

Severance costs (note 7
(c)) 668 - 668 -

Amortization 77 76 154 139
---------------------------------------------------------------------------

4,149 3,899 6,633 6,955
---------------------------------------------------------------------------

Other expense (income)

Interest (991) (2,446) (2,334) (3,339)

Foreign exchange loss
(gain) 2,363 4,513 (9,748) 4,821
---------------------------------------------------------------------------

Loss (income) before
income taxes 5,521 5,966 (5,449) 8,437

Provision for income
taxes (note 13) 10,720 - 10,720 -
---------------------------------------------------------------------------

Loss for the period 16,241 5,966 5,271 8,437

Deficit - beginning of
period 82,019 72,417 92,989 69,946
---------------------------------------------------------------------------

Deficit - end of
period $ 98,260 $ 78,383 $ 98,260 $ 78,383
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Loss per share (basic
and diluted) $ 0.06 $ 0.02 $ 0.02 $ 0.04
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Weighted average number
of shares 254,958,552 254,463,284 254,928,519 234,372,735
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Consolidated Statements of Comprehensive Loss
For the three-and-six month periods ended June 30, 2008 and 2007
(Unaudited and expressed in thousands of Canadian dollars)


3 months ended June 30, 6 months ended June 30,
2008 2007 2008 2007
---------------------------------------------------------------------------

Loss for the period $ 16,241 $ 5,966 $ 5,271 $ 8,437

Other comprehensive loss - - - -
---------------------------------------------------------------------------

Comprehensive loss $ 16,241 $ 5,966 $ 5,271 $ 8,437
---------------------------------------------------------------------------
---------------------------------------------------------------------------

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



Consolidated Statements of Cash Flows
For the three-and-six-month periods ended June 30, 2008 and 2007
(Unaudited and expressed in thousands of Canadian dollars)


3 months ended June 30, 6 months ended June 30,
2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Cash flows from (used
in) operating
activities

Loss for the period $ (16,241) $ (5,966) $ (5,271) $ (8,437)

Items not affecting
cash

Amortization 77 76 154 139

Stock-based
compensation 1,041 581 1,437 829
Unrealized foreign
exchange loss (gain)
on cash and
cash equivalents 5,718 3,618 (5,595) 3,773
---------------------------------------------------------------------------
(9,405) (1,691) (9,275) (3,696)

Net changes in
non-cash working
capital (note 18) (188) 493 (780) 958
---------------------------------------------------------------------------
(9, 593) (1,198) (10,055) (2,738)
---------------------------------------------------------------------------
Cash flows (used in)
provided by investing
activities

Decrease (increase)
in short-term
investments 10,157 231 (23) 68,444

Development and
exploration
expenditures (10,468) (22,244) (24,308) (36,961)

Purchase of capital
assets (3,452) (1,963) (5,646) (4,953)

Net changes in
non-cash working
capital (note 18) 6,093 (1,863) 2,723 (200)
---------------------------------------------------------------------------
2,330 (25,839) (27,254) 26,330
---------------------------------------------------------------------------
Cash flows from (used
in) financing
activities

Proceeds from (used
in) issuance of
capital stock, net of
issue costs - (173) - 148,543

Proceeds from the
exercise of share
purchase warrants - 16,100 - 20,489

Proceeds from the
exercise of stock
options 1,127 807 1,127 1,102

Proceeds from (used
in) DSU settlement - - (52) -

Net changes in
non-cash working
capital (note 18) (112) 1,655 (112) 346
---------------------------------------------------------------------------
1,015 18,389 963 170,480
---------------------------------------------------------------------------
Increase (decrease)
in cash and cash
equivalents (6,248) (8,648) (36,346) 194,072

Effect of foreign
exchange on cash,
cash equivalents
and non-cash working
capital (6,114) (3,356) 5,580 (3,774)

Cash and cash
equivalents -
beginning of period 128,840 214,900 147,244 12,598
---------------------------------------------------------------------------
Cash and cash
equivalents - end of
period $ 116,478 $ 202,896 $ 116,478 $ 202,896
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Supplemental cash flow information (note 18)

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


Notes to Consolidated Financial Statements

For the three-and-six month periods ended June 30, 2008 and 2007

(Unaudited and tabular amounts in thousands of Canadian dollars, unless otherwise stated)

1. Nature of operations and going concern

Gabriel Resources Ltd. (the "Company") is a Canadian based resource company engaged in the exploration and development of mineral properties in Romania and is presently developing its 80% owned Rosia Montana gold project (the "Project"). Since acquiring the exploitation license, the Company has been focused on identifying and defining the size of the four ore bodies, engineering to design the size and scope of the Project, environmental assessment and permitting, rescue archaeology and surface rights acquisitions.

The underlying value of the Company's mineral properties is dependent upon the existence and economic recovery of such reserves in the future and the ability of the Company to obtain all necessary permits and raise long-term financing to complete the development of the properties. In addition, the Project may be subject to sovereign risk, including political and economic instability, changes in existing government regulations, for example, a ban on the use of cyanide in mining, re-designation of project area as a natural or cultural reserve, government regulations relating to mining which may withhold the receipt of required permits or impede the Company's ability to acquire the necessary surface rights, as well as currency fluctuations and local inflation. The suspension of the EIA process by the Minister of Environment in September 2007 demonstrates the significant risks that this Project faces. These risks may adversely affect the investment and may result in the impairment or loss of all or part of the Company's investment.

These consolidated financial statements have been prepared on the basis of Canadian generally accepted accounting principles ("Canadian GAAP") applicable to a 'going concern', which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at June 30, 2008 the Company had no sources of operating cash flows, does not have sufficient cash to fund the development of the Project and therefore will require additional funding which, if not raised, would result in the curtailment of activities and result in project delays. Management expects that additional financing will be available and may be sourced in time to allow the Company to continue its planned activities in the normal course. However, there can be no assurances that the Company's activities will be successful and as a result there is substantial doubt regarding the "going concern" assumption. These consolidated financial statements do not reflect adjustments that would be necessary if the "going concern" assumption were not appropriate. If the 'going concern' assumption were not appropriate for these consolidated financial statements, then adjustments to the carrying values of the assets and liabilities, the reported expenses and the balance sheet classifications, which could be material, may be necessary.

2. Basis of presentation and new accounting policies

The accompanying interim consolidated financial statements have been prepared in accordance with Canadian GAAP for the preparation of interim financial information. Accordingly, they do not include all of the information and disclosures required by Canadian GAAP for annual consolidated financial statements. The accounting policies and methods of computation used in the preparation of these unaudited interim consolidated financial statements are the same as those described in our audited consolidated financial statements and notes thereto for the year ended December 31, 2007. To ensure comparability of financial information, certain prior period amounts have been reclassified to conform to the current year presentation.

In the opinion of management, the accompanying interim financial statements include all adjustments considered necessary for fair and consistent presentation of financial statements. These interim consolidated financial statements should be read in conjunction with the Company's audited annual consolidated financial statements and notes for the year ended December 31, 2007.

Capital Disclosures and Financial Instruments - Disclosures and Presentation

The CICA issued three new accounting standards: Handbook Section 1535, 'Capital Disclosures', Handbook Section 3862, 'Financial Instruments - Disclosures', and Handbook Section 3863, 'Financial Instruments - Presentation'. These standards are effective for interim and annual consolidated financial statements for the Company's reporting period beginning on October 1, 2007.

Section 1535 specifies the disclosure of (i) an entity's objectives, policies and processes for managing capital; (ii) quantitative data about what the entity regards as capital; (iii) whether the entity has complied with any capital requirements; and (iv) if it has not complied, the consequences of such non-compliance. The Company has included disclosures recommended by the new Handbook section in note 16 to these interim financial statements.

The new Sections 3862 and 3863 replace Handbook Section 3861, 'Financial Instruments - Disclosure and Presentation', revising and enhancing its disclosure requirements, and carrying forward unchanged its presentation requirements. These new sections place increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks. The Company has included disclosures recommended by the new Handbook section in note 15 to these interim financial statements.



3. Restricted cash

June 30, December 31,
2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Restricted cash (1) 185 162
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Restricted cash represents environmental guarantees for future clean up
costs.



4. Capital Assets


June 30, December 31,
2008 2007
----------------------------------------------------------------------
----------------------------------------------------------------------

Office equipment $ 3,966 $ 3,908

Buildings 1,082 1,082

Vehicles 1,270 1,270

Leasehold improvements 211 206

Construction in progress (1) 21,330 15,681
----------------------------------------------------------------------
27,859 22,147
----------------------------------------------------------------------

Less: Accumulated amortization

Office equipment 2,258 1,949

Buildings 48 43

Vehicles 1,154 1,065

Leasehold improvements 141 129
----------------------------------------------------------------------
3,601 3,186
----------------------------------------------------------------------

Net book value

Office equipment 1,708 1,959

Buildings 1,034 1,039

Vehicles 116 205

Leasehold improvements 70 77

Construction in progress (1) 21,330 15,681
----------------------------------------------------------------------
$ 24,258 $ 18,961
----------------------------------------------------------------------
----------------------------------------------------------------------

(1) Amounts included in construction in progress are not subject to
amortization. Construction in progress includes the following amounts:


2008 2007
-------------------------------------------------------------------
-------------------------------------------------------------------

Resettlement site development costs $ 6,100 $ 2,353

Long-lead-time equipment 15,230 13,328
-------------------------------------------------------------------
$ 21,330 $ 15,681
-------------------------------------------------------------------
-------------------------------------------------------------------



5. Mineral Properties


Rosia Montana Bucium Baisoara Total
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Balance - December 31, 2006 $ 231,910 $ 9,390 $ 41 $ 241,341

Development costs 96,192 - - 96,192

Exploration costs 702 985 141 1,828

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

Balance - December 31, 2007 328,804 10,375 182 339,361

Development costs (1) 29,118 - - 29,118

Exploration costs (1) 214 82 92 388
--------------------------------------------------------------------------

Balance - June 30, 2008 $ 358,136 $ 10,457 $ 274 $ 368,867
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(1) Mineral property additions of $29,506 thousand includes $5,198 thousand
of non-cash items principally related to amortization, stock based
compensation, and resettlement liabilities, therefore the net cash
investment during the six-month period ended June 30, 2008 was $24,308
thousand.


The Company's principal asset is its 80% direct ownership interest in a Romanian company, Rosia Montana Gold Corporation ("RMGC"), which holds two mineral licenses in Romania, being Rosia Montana and Bucium. Minvest S.A. ("Minvest"), a Romanian state-owned mining company, together with three other private Romanian companies, hold a 20% interest in RMGC, and RMGC holds the pre-emptive right to acquire the 20% minority interest. RMGC is required to fund 100% of all expenditures related to the exploration and development of these properties and holds a preferential right to recover all funding plus interest from future cash flows prior to the shareholders receiving dividends.

An exploitation license is held by RMGC as the titleholder in respect of the Rosia Montana property. RMGC has the exclusive right to conduct mining operations at the Rosia Montana property for an initial term of 20 years commencing in 1998, and thereafter with successive five-year renewal periods.

RMGC holds an exploration license over the Bucium property. The license, which was extended in 2004, expired on May 19, 2007. The Company spent US$3.4 million over the term of the license extension period. The expiring exploration license can be converted into an exploitation license upon submission and approval of a feasibility study. During the third quarter of 2007, the Company filed the necessary documentation to convert the exploration license into an exploitation license. No additional work on Bucium's project economics is planned until the license is converted from an exploration to an exploitation license and until the EIA is approved.

The Company, through its wholly owned subsidiary Rom Aur SRL ("Rom Aur"), holds an exploration license with respect to the Baisoara property in Western Romania. The license is for an initial term of 5 years and expires in July 2011. The Company is obligated to spend US$3.2 million over the term of the license. Field work commenced in the fourth quarter of 2006.

6. Resettlement liabilities

During the fourth quarter of 2006, the Company recommenced purchasing homes in the Project area. Residents had two choices. They could either choose to take the sale proceeds and move to a new location of their choosing or they could exchange their properties for a new property to be built by the Company at one of the two new resettlement sites. At June 30, 2008, the Company had resettlement liabilities totaling $21.5 million, obligating the Company to deliver new homes under those contracts between September 30, 2007 and August 1, 2008. The Company was unable to meet the original deadlines stipulated in those contracts, as a result, the Company is accruing a penalty of 0.5% of the agreed upon unpaid property value per month of delay as required by the agreement including all amendments. Under the terms of the original resettlement contracts, if the Company failed to fulfill its obligation by the end of the 12-month penalty period, the Company would be required to pay the owner the agreed upon unpaid property value, plus the related penalties, and the owner would retain the right to occupy the home for an undetermined period of time. The Company has been working with those residents who chose the resettlement option to extend the delivery dates of the contracts for an additional six months. Management believes most of the residents will ultimately agree to the extension. For those residents who have not agreed to the extension, we are working to provide their homes within the agreed upon time frame. As at June 30, 2008 the Company has accrued $0.9 million (December 31, 2007 - $0.5 million) in respect of the additional delay penalties.

7. Other liabilities



Price per
DSU's Common Share
Deferred Share Units ("DSU") (a) (000's) (dollars) Value
---------------------------------------------------------------------------
Outstanding - December 31, 2006 238 $ 5.06 $ 1,204

Granted 370 1.62 599

Settled (5) 4.75 (24)

Change in fair value - - (592)
---------------------------------------------------------------------------
Outstanding - December 31, 2007 603 1.97 1,187

Granted 15 1.69 25

Settled (28) 1.82 (52)

Change in fair value - - 465
---------------------------------------------------------------------------
Balance - June 30, 2008 589 $ 2.76 $ 1,626
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Fidelity bonus and other benefits (b) Value
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance accrued - December 31, 2006 $ 184

Additions 665
---------------------------------------------------------------------------
Balance accrued - December 31, 2007 849

Reductions (212)

Foreign exchange impact 72
---------------------------------------------------------------------------
Balance accrued - June 30, 2008 $ 709
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Long-term portion of Severance and
Termination costs (c) Value
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance accrued - December 31, 2007 $ 652

Current portion (included in accounts
payable) (652)
---------------------------------------------------------------------------

Balance accrued - June 30, 2008 $ -

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

Total Other liabilities $ 2,335
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(a) DSUs

The Company implemented a DSU Plan under which qualifying participants receive certain compensation in the form of DSUs in lieu of cash. On retirement, participants may redeem their DSUs for common shares of the Company, cash, or a combination of common shares and cash. It is at the holder's discretion as to whether he/she elects to settle the DSU in cash or shares of Gabriel. If the holder elects to settle the DSU in shares of Gabriel, the Company, at its sole discretion, can elect to pay the amount in common shares either purchased from the open market, or issued from treasury.

The change in the fair market value of the DSU liability has been recorded in stock based compensation expense except for costs relating to personnel working on projects in Romania, which are capitalized.



3 months ended 6 months ended
June 30, June 30,
Deferred Share Units ("DSUs") 2008 2007 2008 2007
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Expensed (recovered) $ 570 130 $ 447 (11)

Capitalized $ 60 9 $ 45 (5)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


(b) Fidelity Bonus

Under the Collective Bargaining Agreement between RMGC and its employees, under certain conditions, employees of RMGC are entitled to a bonus equal to one month of average gross salary when celebrating 3, 5, 10, 15, 20, and 25 years of uninterrupted service as well as other benefits related to death benefits and termination of employment. As of June 30, 2008, $709 thousand (December 31, 2007 - $849 thousand) has been accrued for these benefits.

(c) Severance and Termination Costs

On December 4, 2007, in light of the suspension of the EIA review process, the Company announced and enacted plans to scale back activities. In the fourth-quarter 2007, the Company accrued $1.4 million in costs related to the retrenchment of 170 employees. During the quarter, concurrent with the modification of payment terms of its remaining obligation, the Company revised its estimated cost and accrued a further $668 thousand in respect of its total obligation and has classified its entire outstanding obligation as a current liability.

As at June 30, 2008 the Company paid $1.3 million in respect of termination benefits. The Company has modified the payment terms of its remaining obligation and has classified the remaining obligation as a current liability.



Foreign
December exchange Reclassi- June 30,
31, 2007 Payment Addition movement fication 2008
------------------------------------------------------------
------------------------------------------------------------
Current
portion $ 796 $ (1,269) $ 668 $ 74 $ 706 $ 975
Long term
portion 652 - - 54 (706) -
------------------------------------------------------------
Total Costs $ 1,448 $ (1,269) $ 668 $ 128 $ - $ 975
------------------------------------------------------------
------------------------------------------------------------


8. Related Party Transactions

The Company had related party transactions, with directors, officers and employees of the Company or associated corporations, which were in the normal course of operations and were measured at the exchange amounts as follows:

(a) For the six months ended June 30, 2008 the Company paid $6 thousand (2007 - $5 thousand) to a director of the Company for consultation services provided to the Company.

(b) In December 2004, the Company loaned a total of US$971 thousand to the four minority shareholders of RMGC, who hold an aggregate of 20% of the shares of RMGC, to facilitate a statutory requirement to increase RMGC's total share capital. The loans are non-interest bearing and are to be repaid as and when RMGC distributes dividends to its shareholders.

The loans and related minority interest contribution have been offset on the balance sheet until such time as the loans are repaid. Once the loans are repaid the minority interest component will be reflected on the balance sheet

9. Capital Stock

Authorized

Unlimited number of common shares without par value

Unlimited number of preferred shares, issuable in series, without par value



Common shares issued and outstanding

Number of shares (000's) Amount
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Balance - December 31, 2006 210,891 $ 385,444
Shares issued from a public
offering (a) 35,937 156,328
Less: Share issue costs (7,778)
Shares issued on the exercise
of stock options (note 11) 614 1,213
Stock-based compensation -
exercise of stock options
(note 12) - 620
Stock-based compensation -
settlement of DSUs (note 7(a)) 5 24
Shares issued from the exercise
of share purchase warrants
(note 10 (a)) 7,451 20,489
Exercise of share purchase
warrants - transfer from
common share
Purchase warrants - 1,937
---------------------------------------------------------------------------
Balance - December 31, 2007 254,898 $ 558,277
Shares issued on the exercise
of stock options (note 11) 507 1,127
Stock-based compensation -
exercise of stock options
(note 12) - 529
---------------------------------------------------------------------------
Balance - June 30, 2008 255,405 $ 559,933
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(a) In the first quarter of 2007, the Company issued 35.9 million common shares at $4.35 per share to a syndicate of underwriters and Newmont Canada Limited ("NCL"). Aggregate net proceeds of $148.6 million were received, after deducting underwriting fees of $6.9 million plus various professional fees related to the offering of $0.7 million. The net proceeds of the offering are being used to advance the development of the Rosia Montana gold deposit in Romania including completing surface rights acquisition, advancing detailed engineering, purchasing of long-lead-time equipment, development of the new resettlement sites, site mobilization costs and general corporate purposes.

NCL, a subsidiary of Newmont Mining Corporation, participated to acquire 20% (7.2 million common shares) of the total offering.

10. Share Purchase Warrants

During fourth quarter 2006, the Company entered into mandate letters with two international financial institutions to arrange project debt financing for the development of the Rosia Montana project. As part of the proposed compensation of the financial institutions, the Company is prepared to issue up to a total of 2.625 million common share purchase warrants (the "Warrants"). The Warrants have an exercise price of $4.88 per warrant, a four year term and will vest upon achievement of project financing milestones, including public announcement of a committed underwriting by such financial institutions of a syndicated bank credit facility in an amount up to US$350 million (the "Facility"), execution of definitive credit documentation for the Facility, and first draw-down under the Facility.

11. Stock Options

The Incentive Stock Option Plan (the "Plan") authorizes the Directors to grant options to purchase shares of the Company to directors, officers, employees and consultants. The exercise price of the options equals the five-day weighted average closing price prior to the option allotment. The majority of options granted vest over three years and are exercisable over five years from the date of issuance.

The Plan was amended on May 8, 2007 to allow for the maximum number of common shares issuable under the Plan to equal 10% of the issued and outstanding common shares of the Company at any point in time, and that options once exercised would be re-endorsed into the pool of ungranted options.

As at June 30, 2008, 8.0 million options are available for issuance under the Plan (December 31, 2007 - 12.6 million).

As at June 30, 2008, common share stock options held by directors, officers, employees and consultants are as follows:



Outstanding Exercisable
----------------------------------- -----------------------
Weighted Weighted Weighted
average average Average
Range of exercise remaining Exercise
exercise Number of price contractual Number of Price
prices options (dollars) life(Years) options (dollars)
------------- ----------------------------------- -----------------------
$1.48 - $2.00 10,429 $ 1.55 3.8 3,276 $ 1.55
2.01 - 3.00 4,654 2.52 3.8 1,773 2.51
3.01 - 5.00 2,437 4.49 3.6 1,224 4.53
----------------------------------- -----------------------
17,520 $ 2.22 3.8 6,273 $ 2.40
----------------------------------- -----------------------
----------------------------------- -----------------------


During the year ended 2007 and the six-month period ended June 30, 2008, director, officer, employee and consultants stock options were granted, exercised and cancelled as follows:



Weighted average
Number of exercise price
options (dollars)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance - December 31, 2006 9,583 $ 2.96
Options granted 5,965 2.34
Options expired (941) 5.17
Options forfeited / cancelled (1,067) 4.46
Options exercised (614) 1.98
---------------------------------------------------------------------------
Balance - December 31, 2007 12,926 2.44
Options granted 5,935 1.95
Options expired (279) 4.51
Options forfeited / cancelled (555) 3.39
Options exercised (507) 2.22
---------------------------------------------------------------------------
Balance - June 30, 2008 17,520 $ 2.22
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The exercise of the outstanding stock options would be anti-dilutive in the
loss per share calculation.


The estimated fair value of stock options is typically amortized over the period in which the options vest which is normally three years. For those options that vest on issuance, the entire fair value of the options is recognized immediately, while for those options that begin to vest after a deferral period, the fair value of the options is amortized proportionately over the total vesting and delay period. For options issued to non-employees where the vesting occurs upon the achievement of a performance milestone, the fair value of those options is measured and recognized upon achievement of the milestone, that is, the 'measurement date'. Fair value of stock options granted to personnel working on development projects is capitalized over the vesting period.

During second quarter 2008, the Company granted 3 million options that will vest upon completion of certain milestones including approval of EIA, completion of project financing commitment, loan documentation and first draw down. The estimated fair value of the options will be recognized and capitalized at the measurement date, or the period in which milestones are achieved and the value can be reasonably measured. For the six-month period ended June 30, 2008, the amount capitalized was $Nil.

Excluding the 3 million options that vest conditional on the achievement of milestones, the fair value of the remaining 2,935 thousand options granted during the six-month period ended June 30, 2008 (June 30, 2007 - 1,405 thousand) has been estimated at the date of grant using a Black-Scholes option pricing model. The current period's valuation was calculated with the following assumptions:



3 months ended June 30, 6 months ended June 30,
2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Weighted average risk-
free interest rate 3.16% 4.56% 3.16% 4.22%
Volatility of the
expected market price
of share 67% 56% 67% 61%
Weighted average expected
life of options 2.7 years 2.7 years 2.7 years 2.7 years
Weighted average cost
per option $ 1.05 $ 1.63 $ 1.05 $ 1.88


For the three-and-six-month periods ended June 30, 2008 and 2007, fair value of stock options are expensed and capitalized as follows:



3 months ended June 30, 6 months ended June 30,
2008 2007 2008 2007
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Expensed $ 471 $ 451 $ 990 $ 840

Capitalized $ 282 $ 304 $ 547 $ 602
---------------------------------------------------------------------------
---------------------------------------------------------------------------


12. Contributed Surplus

The following table identifies the changes in contributed surplus for the periods indicated:



Total
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Balance - December 31, 2006 $ 5,904
Stock-based compensation 3,516
Exercise of stock options (620)
Expiry of unexercised warrants 7
---------------------------------------------------------------------------
Balance - December 31, 2007 8,807
Stock-based compensation 1,537
Exercise of stock options (529)
Expiry of unexercised warrants -
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Balance - June 30, 2008 $ 9,815
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13. Income Taxes

In response to a Romanian tax assessment received in the second quarter of 2008, being the result of the second tax audit undertaken in the last 12 months, the Company accrued $9.7 million in respect of tax liabilities arising from the disallowance of the application of state tax incentives to unrealized foreign exchange gains on inter company debt for the fiscal years 2003 and 2004. Additionally, in response to the tax assessments received, as of June 30, 2008, the Company accrued an additional $1.0 million in respect of tax liabilities arising from unrealized foreign exchange gains for the six-month period ended June 30, 2008 (2007 - $Nil). The Company, based on the advice of its professional tax advisors, believes that the Romanian tax authorities are misapplying their domestic legislation and the Company plans to vigorously contest the State's position in court.

14. Segmented Information

The Company has one operating segment: the acquisition, exploration and development of precious metal projects located in Romania.

Geographic segmentation of capital assets and mineral properties is as follows:



June 30, December 31,
2008 2007
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Romania $ 392,509 $ 357,558

Canada 616 764
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$ 393,125 $ 358,322
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15. Financial Instruments

The recorded amounts for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair values based on the short-term nature of those instruments.

The Company's risk exposures and the impact on the Company's financial instruments are summarized below:

Credit risk

The Company's credit risk is primarily attributable to value-added taxes receivable. Value-added taxes receivable are collectable from the Romanian government. In addition, the majority of the Company's cash and cash equivalents are held in investment accounts with two Canadian banks, with a lesser amount held in local banks in Romania.

Liquidity risk

The Company has sufficient funds as at June 30, 2008 to settle current and long-term liabilities.

Market risk

(a) Interest rate risk

The Company has significant cash balances and no interest-bearing debt. The Company's policy is to primarily invest excess cash in government guaranteed investments. The Company monitors the investments it makes and is satisfied with the credit ratings.

(b) Foreign currency risk

The Company's functional currency is the Canadian dollar. The Company's operations expose it to significant fluctuations in foreign exchange rates. The Company has monetary assets and liabilities denominated in Romanian Ron, United States dollars and European Union Euros, and are, therefore, subject to exchange variations against the functional and reporting currency, the Canadian dollar.

Sensitivity analysis

The Company has designated its cash and cash equivalents as held-for-trading, which are measured at fair value. As of June 30, 2008, the carrying amount of the financial instruments equals fair market value. Based on management's knowledge and experience of the financial markets, the Company believes the following movements are "reasonably possible" over a three month period.

- Cash and cash equivalents include deposits which are at floating interest rates. Sensitivity of cash and cash equivalents to a plus or minus 1% change in earned interest rates would affect net income by $290 thousand.

- The Company holds significant balances in foreign currencies, and this gives rise to exposure to foreign exchange risk. Sensitivity of the foreign currency balance as of June 30, 2008 to a plus or minus 1% change in foreign exchange rates would affect net income by $947 thousand.

16. Capital Management

The Company's objective when managing capital is to safeguard its accumulated capital in order to fund development of its Rosia Montana project. The Company manages its capital structure and makes adjustments to it based on the level of funds on hand and anticipated future expenditures. The Company expects that it will be able to obtain equity, long-term debt and/or project-based financing sufficient to build and operate the Rosia Montana project. There are no assurances that these initiatives will be successful. To safeguard capital and to mitigate currency risk, the Company invests its surplus capital in highly liquid, highly rated financial instruments that reflect the currency of the planned expenditure.

17. Commitments and Contingencies

The following is a summary of contractual commitments of the Company including payments due for each of the next five years and thereafter.



2012 and
Total 2008 2009 2010 2011 thereafter
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Baisoara
exploration
license (note 5) $ 2,949 $ 163 $ 644 $1,320 $ 822 $ -
Resettlement (note 6) 21,460 5,238 6,222 - - -
Goods and services (a) 8,228 5,973 1,818 10 10 417
Long lead time
equipment (b) 35,956 21,214 14,712 30 - -
Rosia Montana
exploitation
license (c) 287 26 26 26 26 183
Surface concession
rights (d) 857 10 20 20 20 787
Lease agreements (e) 1,523 317 636 401 169 -
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Total commitments $71,260 $42,941 $24,078 $1,807 $1,047 $1,387
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(a) The Company and its subsidiaries have a number of agreements with arms-length third parties who provide a wide range of goods and services which totaled $8.2 million at June 30, 2008 (December 31, 2007 - $9.3 million). Typically, the service agreements are for a term of not more than one year and permit either party to terminate for convenience on notice periods ranging from 15 to 90 days. Upon termination, the Company has to pay for services rendered and costs incurred to the date of termination.

(b) During 2007, the Company entered into purchase agreements for long-lead-time equipment, the cost of which is to be paid over three years beginning 2007. The following is a summary of the long-lead-time equipment orders and the payment status:



June 30, December 31,
2008 2007
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Total purchase agreements:
Grinding area systems $ 44,249 $ 46,140
Crusher facilities 4,155 6,976
Other process equipment - 2,646
Foreign exchange movement 2,743 -
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51,147 55,762
Amounts paid as at June 30, 2008:
Grinding area systems (12,524) (11,043)
Crusher facilities (1,896) (2,018)
Other process equipment - (267)
Foreign exchange movement (771) -
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Outstanding payment obligation $ 35,956 $ 42,434
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During the second quarter 2008, the Company elected not to exercise its manufacturing order option on $7.4 million of orders, pending the restart of the permitting process and therefore has excluded the orders value from the commitments table.

(c) Under the terms of the Company's exploitation mineral license for the Rosia Montana project, an annual fee is required to be paid to maintain the license in good standing. The current annual fee is approximately $26 thousand. These fees are indexed annually by the Romanian Government and the license has 11 years remaining.

(d) RMGC has approximately 43 years remaining on a concession agreement with the Local Council of Rosia Montana Commune by which it is granted exploitation rights in property located on and around the proposed Cirnic pit for an annual payment of $20 thousand.

(e) The Company has entered into agreements to lease premises for various periods until May 31, 2011. The annual rent of premises consists of minimum rent plus realty taxes, maintenance and utilities.

The Company has an agreement with a consulting firm to provide financial advisory services in relation to defining and implementing the financing plan for development of the Rosia Montana gold project. A success fee of up to US$4 million will be payable on execution of definitive credit agreements and/or financing documents for the senior, mezzanine and cost overrun debt facilities for the Project. No amount has been accrued for this item.

18. Supplemental Cash Flow Information



(a) Net changes in non-cash working capital

3 months ended June 30, 6 months ended June 30,
2008 2007 2008 2007
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Operating activities:
Accounts receivable,
prepaid expenses
and supplies $ (5) $ 25 $ (323) $ 1,005
Accounts payable and
accrued liabilities (168) 467 (472) (48)
Unrealized foreign
exchange loss (gain)
on working capital (15) 1 15 1
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$ (188) $ 493 $ (780) $ 958
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Investing activities:
Accounts receivable,
prepaid expenses
and supplies $ (275) $ 90 $ (1,718) $ 166
Accounts payable and
accrued liabilities 5,958 (1,689) 4,441 (366)
Unrealized foreign
exchange loss (gain)
on short-term
investments 410 (264) - -
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$ 6,093 $ (1,863) $ 2,723 $ (200)
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Financing activities:
Accounts receivable
for exercise of
purchase warrants $ - $ 1,709 $ - $ -
Accrued legal costs
for public equity
issue (112) (54) (112) 346
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$ (112) $ 1,655 $ (112) $ 346
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(b) Exploration and
development expenditures

Balance sheet change
in Mineral properties $(11,690) $(24,341) $(29,506) $(40,131)
Reclassification of
mineral properties
from prepaid
expenses - - 25 -
Increase in
resettlement
liabilities 750 1,638 4,320 2,269
Non-cash depreciation
and disposal
capitalized 130 146 261 304
Stock based
compensation
capitalized 342 313 592 597
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Exploration and
development
expenditures per
cash flow statement $(10,468) $(22,244) $(24,308) $(36,961)
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(c) Cash and cash equivalents is comprised of:

June 30, December 31,
2008 2007
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Cash $ 955 $ 1,947
Short-term investments (less than
90 days) - weighted average
interest of 3.1% (2007 - 3.9%) 115,523 145,297
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$116,478 $147,244
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The Company paid $5.3 million of income taxes including interest and penalties during the six-month period ended June 30, 2008 (2007 -$Nil).

19. Reclassification of Comparative Figures

Certain comparative figures have been reclassified to conform to the current year's presentation.

Contact Information