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Interim Results

14/06/2006 8:01am

UK Regulatory (RNS & others)


RNS Number:5343E
Adastra Minerals Inc
14 June 2006


14th June 2006


ADASTRA MINERALS INC.
Interim Results ended April 30, 2006 and 2005
(Unaudited - Prepared by Management)


MANAGEMENT'S DISCUSSION AND ANALYSIS


The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements of Adastra Minerals Inc. (the "Company") for
the three and six month periods ended April 30, 2006 and 2005, and related notes
(the "Consolidated Financial Statements") prepared in accordance with Canadian
generally accepted accounting principles.  The following discussion and analysis
highlights significant changes since the discussion and analysis in the 2005
Annual Report, which should also be referred to for additional information.  The
discussion is based on events that have occurred up to June 2, 2006. Except as
otherwise noted, all dollar amounts contained in this discussion and analysis
and the Consolidated Financial Statements are stated in U.S. dollars.
Additional information relating to the Company, including the Company's Annual
Information Form ("AIF"), is available on SEDAR at www.sedar.com.


Change of Control

On January 18, 2006 First Quantum Minerals Ltd. ("First Quantum") announced an
unsolicited offer to acquire all the outstanding common shares of the Company.
Under the terms of the offer, the Company's stockholders would receive one First
Quantum share for every 17.5 of the Company's shares held.  On April 11, 2006,
the Company's then Board of Directors entered into a definitive support
agreement with First Quantum with regard to an improved offer for all of the
Company's shares.  This improved offer was for either: (a) Cdn.$2.92 in cash per
Adastra common share or; (b) one First Quantum share plus Cdn.$0.265 in cash for
every 14.76 Adastra common shares tendered, subject to pro-ration based on a
maximum of approximately 4.9 million First Quantum shares and a maximum of
approximately Cdn.$41 million.  After considering the terms of the improved
offer, the then Board of Directors unanimously recommended that the Company's
shareholders accept the improved offer.  When the latter expired on April 28,
2006, a total of 61,191,821 of the Company's common shares had been tendered
into the First Quantum improved offer.  On May 1, 2006, First Quantum announced
that it had acquired control of the Company.  Following the change of control,
Mr. Bernard Vavala resigned from the offices of Director and Chairman of the
Company, and Messrs. John Bentley, Etienne Denis and Patrick Walsh each resigned
from the office of director of the Company.  With effect from May 4, 2006, Mr.
Philip Pascall was appointed Director and Chairman of the Company, and Messrs.
Andrew Adams, Clive Newall, and Martin Rowley were each appointed as a Director
of the Company.


Results of Operations

The Company incurred a net loss for the three months ended April 30, 2006, of
$8,672,434, or $0.11 per share, compared to a net loss of $807,283, or $0.01 per
share, for the three months ended April 30, 2005.

The Company incurred a net loss for the six months ended April 30, 2006, of
$11,865,227, or $0.16 per share, compared to a net loss of $1,549,100 or $0.02
per share, for the six months ended April 30, 2005.

The results for the three and six months ended April 30, 2006, reflect the
following factors:
     
*    The Company incurred $6,244,700 of costs during the three months ended 
     April 30, 2006, in addition to the $2,741,627 incurred during the three 
     months ended January 31, 2006, as a result of the offer by First Quantum 
     Minerals Ltd. ("First Quantum") to acquire all the common shares of the 
     Company.  In order fully to assess the unsolicited offer and the revisions 
     made thereto, the Company appointed a special committee and engaged 
     advisors, which resulted in these costs being incurred.  There were no 
     equivalent expenditures in the first and second quarters of 2005.

*    Administration costs for the three and six months ended April 30, 2006
     increased on an overall basis, compared to the three and six months ended 
     April 30, 2005.  For the three months ended April 30, 2006, administration 
     costs increased to $2,503,140, compared with $894,322 in the corresponding 
     period of 2005.  For the six months ended April 30, 2006, administration 
     costs increased to $3,237,455, compared with $1,796,215 in the 
     corresponding six months of financial year 2005.  The increases were 
     principally due to increases in salaries and wages, stock based 
     compensation, office and administration, and professional fees incurred 
     during the periods.

*    Salaries and wages increased primarily due to United Kingdom employer taxes 
     associated with the exercise or termination of stock options.  No options
     were exercised or terminated during the first six months of 2005; whereas
     582,500 options were during the first quarter, and a further 7,171,209 
     during the second quarter, of 2006.  Reflecting the increasing workload of 
     the Head Office, there was also one additional staff member and more 
     temporary help used compared to the comparable period of the prior year.

*    No options were granted during the six months ended April 30, 2006, whereas 
     30,000 options were granted during the corresponding period in 2005.
     Stock-based compensation for the three and six months ended April 30 was,
     however, higher in 2006 than for the corresponding periods in 2005 as a 
     result of the accelerated vesting of options granted in prior periods due 
     to the change of control of the Company.

*    The higher professional fees during the three and six months ending April 
     30, 2006, compared to the corresponding periods of 2005, were mainly due to 
     higher general corporate legal fees, and to fees associated with filing the
     Company's Annual Report on Form 20-F.  There were also surveyor and legal 
     fees relating to the marketing and assignment of the lease on the Company's 
     previous office in London, England.

*    Office and administration fees increased primarily due to the Company's 
     necessary relocation to larger offices during the first quarter of 2006, 
     when the Company incurred moving costs, as well as telephone, and 
     additional information technology costs associated with the relocation.

*    Lower average cash balances resulted in lower interest income during the 
     six months ended April 30, 2006, compared with the corresponding period of
     2005.  The Company holds some of its cash balances in Canadian dollars and
     British pounds, in anticipation of expenditures to be incurred in these
     currencies.  The foreign exchange gain of $198,675 during the six months 
     ended April 30, 2006, arose mainly because the majority of the proceeds of 
     a private placement of shares were received and retained in British pounds, 
     and the U.S. dollar weakened against the British pound after the closing of 
     the placement on December 22, 2005.


Liquidity and Capital Resources

As at April 30, 2006, the Company had cash and cash equivalents of $10,584,484,
compared to $5,595,972 at October 31, 2005, and had working capital of
$5,592,542, compared to $3,794,668 at October 31, 2005.

The increase in the cash balance over the six months is mainly the result of the
exercise by the Industrial Development Corporation of South Africa ("IDC") and
the International Finance Corporation ("IFC") of options to acquire interests in
the Company's Kolwezi Tailings project, and of a private placement of the
Company's shares in December 2005.  In March 2006, the IDC acquired 10.0%, and
the IFC 7.5%, of the Company's subsidiary Kingamyambo Musonoi Tailings S.A.R.L.
("KMT") through their option exercises, and as a result the Company's interest
in KMT is now 65%.  As part of those exercises, the IDC and IFC acquired
corresponding participating interests in the other aspects of the Kolwezi
Tailings project, and the Company's subsidiary Congo Mineral Developments ("CMD
") accordingly received altogether $12,069,858.  The private placement in
December 2005 generated net cash proceeds equivalent to $8,138,669.  In
addition, conventional exercises of 413,500 stock options during the six months
ended April 30, 2006, provided net cash proceeds of Cdn.$298,500; and the
exercise by the IFC of 855,646 warrants in April, 2006, provided a further
Cdn.$641,734.   Offsetting these cash inflows during the six month period were
expenditures on the Kolwezi Tailings, Kolwezi Subsurface, DRC quarries, and
Kipushi properties, the acquisition of a lease and improvements to a new office
in London, and the loss from operations excluding the non-cash stock based
compensation and amortization expense.

The Company's Consolidated Financial Statements have been prepared assuming the
Company will continue on a going-concern basis.  The Company has incurred losses
since inception, and the ability of the Company to continue as a going concern
over the long term depends upon its ability to develop profitable operations and
to continue to raise adequate financing.  On May 1, 2006, First Quantum Minerals
announced that it had acquired control of the Company.

During the six month period ended April 30, 2006, there have been no material
changes in the critical accounting estimates as compared to those disclosed in
the Company's latest annual Management's Discussion and Analysis for the year
ended October 31, 2005 contained in its October 31, 2005 Annual Information
Form, to which the reader is referred.


Tabular Disclosure of Contractual Obligations

The Company is committed to payments under a number of operating leases for
various office premises and other accommodation through to May 2011.  The
following table lists as of April 30, 2006 information with respect to the
Company's known contractual obligations.

In addition to the above, once all financing arrangements for the Kolwezi
Tailings Project to proceed with construction have been completed, CMD, IDC,
IFC, and any other participating parties, are committed pro-rata to pay to
Gecamines the $10,000,000 balance of the consideration for the Tailings
Exploitations Rights ("TER").  (The initial $5,000,000 of the $15,000,000 total
was paid during the 2004 financial year following the transfer of the TER to
KMT).

The Company has not accrued debts, aggregating approximately $246,000, claimed
by certain former shareholders of IDAS, a subsidiary of the Company acquired in
1998, as the Company has not been able to verify the debts.  There remain 13,078
common shares of the Company held in escrow for the same reason.


Mineral Property Projects

As at April 30, 2006, amounts capitalized in respect of mineral properties
decreased to $16,362,833, from $21,760,738 at October 31, 2005, reflecting
$5,932,246 in costs incurred, less $11,368,638 of contributions received towards
costs, on the Company's Kolwezi Tailings Project; $13,791 on the Company's
Kolwezi Subsoil licence; and $24,696 on the Company's DRC Quarry licences.

Capitalized mineral property evaluation costs increased to $4,642,232, from
$4,538,897 at October 31, 2005, reflecting $103,335 of costs incurred on the
Company's Kipushi Project.


Kolwezi Tailings Project, DRC

During the six months ended April 30, 2006, the Company continued to advance its
Kolwezi Tailings Project.  In February 2006, the Company announced that, subject
inter alia to negotiation of definitive documentation and approval of both
companies' Board of Directors, it had reached an agreement under which
Mitsubishi Corporation was to purchase a 14.9% state in the Kolwezi Tailings
Project.  Negotiations ceased when the Company's then Board of Directors
recommended that shareholders should accept First Quantum Minerals' improved
offer for the Company.

As a result of the acquisitions from CMD of interests in the Kolwezi Tailings
Project that were completed by IDC and IFC in March 2006, the shareholdings in
KMT are now:
                              
     CMD                    65.0%
     Gecamines              12.5%
     IDC                    10.0%
     IFC                     7.5%
     Government of DRC       5.0%

The Kolwezi Tailings Project Definitive Feasibility Study ("DFS") was completed
in early March 2006.  The projected annual production capacities of
approximately 5,900 tonnes of cobalt and 33,200 tonnes of copper are more than
7% higher for cobalt, and 10% higher for copper, than the estimates Adastra
announced in December 2004.  Total project capital costs (including owners'
costs, engineering, procurement and construction fees and contingencies,
insurance, first-fill, and spares) are anticipated to be $305 million in October
2005 terms.  The higher projected production levels more than offset the
operating and capital cost increases when calculating the net present value of
the Kolwezi Tailings Project.

Following the approval of the Environmental Assessment Plan by the DRC Ministry
of Mines' Direction chargee de la Protection de l'Environnement Minier ("DPEM")
in August 2005, work continued on an Environmental & Social Impact Assessment 
("ESIA") meeting Equator Principles and World Bank Guidelines: key requirements 
of project finance lenders.  The ESIA was completed and released in conjunction
with the DFS in early March 2006; and the IFC confirmed that it had been
completed to "international best practice on social and environmental 
assessment".

In parallel with the DFS and ESIA, negotiations continued on a long term
electricity supply contract for the Project, on long term sales agreements and
marketing arrangements for the Project's output of cobalt and copper, and on
preparations for project financing.

In December 2005, the Company announced that it had mandated the Royal Bank of
Scotland as a senior arranger for an untied commercial bank tranche of the
Kolwezi Tailings Project financing for US$60-75 million with an eight year
maturity; and, in January 2006, that it had mandated Investec Bank Limited and
the Industrial Development Corporation of South Africa Limited to co-arrange a
South African export credit tranche of the project financing for $80-120 million
with a ten year maturity.  Progression into lender due diligence and detailed
documentation was suspended near the end of the second quarter of financial year
2006 when the Company's then Board of Directors recommended that shareholders
should accept First Quantum Minerals' improved offer for the Company.


Kipushi Project, DRC

In fiscal year 2003, the Company and Gecamines agreed that priority should be
given to finalising the Kolwezi Contract of Association.  Following the
execution of the latter in March 2004, negotiations on the proposed revisions to
the Kipushi Framework Agreement were planned to recommence.  Meetings were,
however, postponed until after the end of fiscal year 2004, pending Gecamines'
detailed review of, and response to, the proposals previously submitted by the
Company.

Gecamines' response was received during the quarter ended January 31, 2005, and,
following discussion as to the appropriate way to take the Kipushi Project
forward, the Company began a technical and economic reassessment of the project
during the quarter ended July 31, 2005.  The results of this reassessment formed
the basis for a proposal to progress the project that was submitted to Gecamines
during the second quarter of financial year 2006.  Once agreement on a revised
framework has been reached with Gecamines, and necessary approvals have been
obtained from the government of the DRC, the Company expects that a full
feasibility study of the project will be undertaken.  Kumba Base Metals Limited
can earn up to 50% of the Company's interest in the Kipushi Project by incurring
$3,500,000 (less already recognized expenditure by Kumba of $300,000) of
expenditures on the Project, including the conducting of feasibility studies.


Angolan Projects

During the year ended October 31, 2004, the Company found it impossible to
progress matters further with Endiama in relation to its rights with regard to
two mineral properties in Angola.  In September 2004, it became clear that
Endiama had repudiated its contractual obligations.  Consequently, the Company
announced that it would be seeking legal redress.  The Company filed a legal
suit against Endiama in Texas, United States of America in May 2005 citing
breach of contract, negligent misrepresentations and other causes of action, and
requesting damages including loss of benefits, costs and expenses incurred in
connection with IDAS's efforts to acquire and develop the licences, and
professional fees.  The case was transferred from a Texas State court to a Texas
Federal court on application by Endiama's lawyers, following which the Company's
lawyers withdrew the legal suit in Texas and re-filed suit with a US Federal
court in Washington D.C..  In mid-May 2006, the Company's lawyers served a
summons on Endiama and another party.  Although the Company has been advised by
counsel that it has a strong case, the outcome of litigation can never be
predicted with certainty.

The Company's presence in Angola remains at a minimal level pending the outcome
of the legal action being taken in the United States of America, and the Company
has expensed all costs incurred in connection with Angola since the end of the
2005 Financial Year.


Kolwezi Subsoil, DRC

The Company's wholly owned subsidiary, Roan Prospecting and Mining Sprl, holds
the subsurface copper and cobalt exploration rights under the whole of the
Kolwezi Tailings Project licence area in the DRC.  In March, the Company
announced encouraging results from initial reconnaissance sampling work; and a
drilling programme to be undertaken during the dry season is being prepared.


DRC Quarries

During the quarter ended January 31, 2006, the Company announced that it had
acquired ten quarry licences in the DRC (two for aggregates, located close to
Kolwezi; and eight for limestone, located approximately 45 km north-east of
Kolwezi).  Work has begun on evaluating these licences, and in particular
regarding the quarries' potential to supply aggregate for use during
construction of the Kolwezi Tailings plant, and to supply limestone and lime
during the plant's operations.


Related Party Transactions

During the six months ended April 30, 2006, the Company paid or accrued an
aggregate of $204,252 for legal and offer assessment services (2005 - $85,952
for legal services) to a law firm in which a director of the Company is a
partner.  In addition, the Company has paid or accrued $nil (2005 - $1,000) for
consulting services to a non-executive director, and $nil (2005 - $7,860) for
consulting services to a company in which a then director has an interest.


Risk Factors

The risk factors affecting the Company are substantially unchanged from those
disclosed in the October 31, 2005 annual Management's Discussion & Analysis
contained in its October 31, 2005 Annual Information Form, to which the reader
is referred.


Summary of quarterly results

A summary of quarterly results for each of the eight most recently completed
quarters is as follows:


                                                2006                          2005                                  2004
                                      Q2          Q1         Q4         Q3         Q2         Q1          Q4          Q3

Interest income                 $ 87,586    $ 72,454   $ 61,045   $ 81,339   $ 99,126  $ 110,172    $ 101,794   $ 99,675
                                                             
Loss for period              $ 8,672,434 $ 3,192,793  $ 583,602  $ 485,774  $ 807,283  $ 741,817    $ 429,328  $ 601,173

Basic and diluted      
loss per share                    $ 0.11      $ 0.04     $ 0.01     $ 0.01     $ 0.01     $ 0.01       $ 0.01     $ 0.01


The main factors underlying the variations in these quarterly results are the
unsolicited offer for all of the Company's common shares that was announced by
First Quantum in the first quarter, and that continued throughout the second
quarter of 2006 (significant costs were incurred in evaluating the offer and
revisions thereof), exchange rate fluctuations (particularly in the value of the
U.S. dollar against the Canadian dollar and British pound), and the timing of
the vesting of options (all those outstanding at the time of the close of the
First Quantum offer vested due to the change in control).


Forward Looking Statements

This discussion contains forward-looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995 concerning the
Company's plans for its Kolwezi Tailings Project, Kipushi Project, Angolan
Projects, Kolwezi Subsoil, and DRC Quarries, and the resource size and economic
potential of those projects.  These forward-looking statements are subject to a
variety of risks and uncertainties which could cause actual events or results to
differ materially from those reflected in the forward-looking statements,
including without limitation, risks and uncertainties relating to political
risks involving the Company's operations and the policies of other nations and
organizations towards companies doing business in such jurisdictions, the
inherent uncertainty of production and cost estimates and the potential for
unexpected costs and expenses, commodity price fluctuations, the inability or
failure to obtain adequate financing on a timely basis, and other risks and
uncertainties, including those described in the Company's Annual Report on Form
20-F for the year ended October 31, 2005 and Reports on Form 6-K filed with the
Securities and Exchange Commission.


Contact us:

London

 Tim Read                                  Justine Howarth / Annabel Leather
 Chief Executive Officer                   Parkgreen Communications
 T: +44 (0)20 7355 3552                    T: +44 (0)20 7493 3713
 F: +44 (0)20 7355 3554                    F: +44 (0)20 7491 3936
 E: london@adastramin.com                  E: justine.howarth@parkgreenmedia.com

North America

 Martti Kangas
 The Equicom Group
 T: +1 416 815 0700 x. 243
    +1 800 385 5451 (toll free)
 F: +1 416 815 0080
 E: mkangas@equicomgroup.com


Consolidated Financial Statements

(Expressed in United States dollars)

ADASTRA MINERALS INC.

Three and six months ended April 30, 2006 and 2005
(Unaudited - Prepared by Management)

Notice of no auditor review of interiM financial statements

Under National Instrument 51-109 Part 4 Subsection 4.3(3)(a), if an auditor has
not performed a review of interim financial statements, they must be accompanied
by a notice indicating that the financial statements have not been reviewed by
an auditor.

The unaudited interim financial statements of the Company as at April 30, 2006
and for the three and six months ended April 30, 2006 and 2005, were prepared
by, and are the responsibility of the Company's management.

The Company's independent auditor did not perform a review of these interim
financial statements in accordance with the standards established by the
Canadian Institute of Chartered Accountants for a review of interim financial
statements by an entity's auditor.



Adastra MINERALs INC.
Consolidated Balance Sheets
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

                                               April 30,    October 31,
                                                    2006           2005
Assets

Current assets:
Cash and cash equivalents                   $ 10,584,484    $ 5,595,972
Cash held in trust (note 7)                    2,971,959              -
Amounts receivable and prepaid expenses          708,652        486,538

                                              14,265,095      6,082,510

Equipment                                        489,383        199,802

Mineral properties (note 2)                   16,362,833     21,760,738

Mineral property evaluation costs (note 3)     4,642,232      4,538,897

                                            $ 35,759,543   $ 32,581,947

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued liabilities     $ 8,672,553    $ 2,287,842

Long-term debt (note 4)                        1,059,280              -

Non-controlling interest                          17,500          8,750

Shareholders' equity:
Share capital (note 5(a))                     80,262,595     67,348,642
Contributed surplus (note 5(d))                  361,158      5,685,029
Deficit                                      (54,613,543)   (42,748,316)

                                              26,010,210     30,285,355

                                            $ 35,759,543   $ 32,581,947

See accompanying notes to consolidated financial statements



Adastra MINERALs INC.
Consolidated Statements of Operations and Deficit
(Unaudited - Prepared by Management)
(Expressed in United States dollars)


                              Three months ended April 30,     Six months ended April 30,
                                     2006            2005             2006           2005

Administration costs:
Amortization                     $ 17,595         $ 2,887         $ 21,749        $ 5,797
Bank charges and interest           2,226           1,235           4,783           2,801
Investor relations                148,290         128,489         202,461         206,624
Office and administration         197,336          86,660         303,370         178,662
Professional fees                  60,963          36,613         205,797         112,039
Regulatory authorities
filing fees                        42,701          30,554         113,474          87,785
Salaries and wages              1,131,838         207,875       1,367,388         375,026
Stock-based compensation
(note 5)                          883,445         389,436         986,456         808,489
Transfer agent                     12,543           6,473          17,385           7,733
Travel and accommodation            6,203           4,100          14,592          11,259

                                2,503,140         894,322       3,237,455       1,796,215

Other items:
Interest income                   (87,586)        (99,126)       (160,040)       (209,298)
Mineral property evaluation
costs                                  25              43             160              43
Foreign exchange loss
(gain)                             12,155          12,044        (198,675)        (37,860)
Offer assessment
costs (note 7)                  6,244,700               -       8,986,327               -

                                6,169,294         (87,039)      8,627,772        (247,115)

Loss for the period            (8,672,434)       (807,283)    (11,865,227)     (1,549,100)

Deficit, beginning of
period                        (45,941,109)    (40,871,657)    (42,748,316)    (40,129,840)

Deficit, end of period      $ (54,613,543)  $ (41,678,940)  $ (54,613,543)  $ (41,678,940)

Basic and diluted loss
per share                         $ (0.11)        $ (0.01)        $ (0.16)        $ (0.02)

Weighted average number of
common shares outstanding      77,562,094      70,735,925      75,685,577      70,735,925

See accompanying notes to consolidated financial statements.



Adastra Minerals Inc.
Consolidated Statements of Cash Flows
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

                                               Three months ended April 30,       Six months ended April 30,
                                                       2006            2005            2006             2005
Cash provided by (used in):

Operations:
Loss for the period                            $ (8,672,434)     $ (807,283)  $ (11,865,227)    $ (1,549,100)
Items not involving cash:
Amortization                                         17,595           2,887          21,749            5,797 
Stock-based compensation                            883,445         389,436         986,456          808,489

                                                 (7,771,394)       (414,960)    (10,857,022)        (734,814)

Changes in non-cash operating working capital:
Cash held in trust                               (2,971,959)              -      (2,971,959)               -
Decrease (increase) in amounts
receivable and prepaid expenses                    (135,222)       (120,041)       (222,114)         (47,612)
Increase (decrease) in accounts
payable and accrued liabilities                   1,366,903         182,269       3,842,087          (93,822)

                                                 (9,511,672)       (352,732)    (10,209,008)        (876,248)

Investments:
Purchase of property, plant and equipment           (69,433)        (18,248)      (314,785)          (24,664)
Expenditures on mineral properties               (2,808,845)     (2,325,986)    (5,366,678)       (4,010,782)
Contribution towards mineral properties          11,001,828               -     11,001,828                 -
Expenditures on mineral property evaluation
costs                                               (15,617)         (5,522)      (103,153)          (30,763)

                                                  8,107,933      (2,349,756)     5,217,212        (4,066,209)

Financing:
Issue of share capital on private
placement, net                                      (21,545)              -      8,138,669                 -
Cash settlement of taxes on option exercises              -               -        (59,967)                -
Proceeds from long-term debt                      1,059,280               -      1,059,280                 -
Issue of share capital on exercise of options 
and warrants                                        661,387               -        833,576                 -
Sale of interest (note 2(a))                          8,750               -          8,750                 -

                                                  1,707,872               -      9,980,308                 -

Increase (decrease) in cash and cash
equivalents                                         304,133      (2,702,488)     4,988,512        (4,942,457)

Cash and cash equivalents, beginning
of period                                        10,280,351      14,024,345      5,595,972        16,264,314

Cash and cash equivalents, end of period       $ 10,584,484    $ 11,321,857   $ 10,584,484      $ 11,321,857

Cash is defined as cash and cash equivalents and joint venture cash.

Supplementary disclosure:
Interest received, net                             $ 87,586        $ 99,126      $ 160,040         $ 209,298
Non-cash investing and financing activities:
Stock-based compensation for mineral
property expenditures                               233,972               -        233,972                 -

See accompanying notes to consolidated financial statements.



Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005

     
1.   Significant accounting policies:

These consolidated financial statements of Adastra Minerals Inc. (the "Company")
do not include all disclosures required by Canadian generally accepted
accounting principles for annual financial statements, and accordingly, these
consolidated financial statements should be read in conjunction with the
Company's most recent annual consolidated financial statements.  These
consolidated financial statements follow the same accounting policies and
methods of application used in the Company's annual audited consolidated
financial statements as at and for the year ended October 31, 2005.


2.     Mineral properties:

Amounts deferred in respect of mineral properties consist of the following:

                                 DRC Kolwezi             DRC Quarry                  Zambia
                          Tailings       Sub-surface       Licenses        Angola   Solwezi             Total

Balance, October 31,
2005                  $ 20,546,346               $ -            $ -   $ 1,214,391       $ 1      $ 21,760,738

Amortization                 3,273                 -              -             -         -             3,273
Consulting               3,612,988                 -         23,296             -         -         3,636,284
Contribution 
from IFIs              (11,368,638)                -              -             -         -       (11,368,638)
Exploration office
and accounting             315,482            13,791              -             -         -           329,273
Geology                     10,448                 -              -             -         -            10,448
Interest received          (28,656)                -              -             -         -           (28,656)
Legal                      509,485                 -          1,400             -         -           510,885
Salaries                   707,683                 -              -             -         -           707,683
Site management             18,567                 -              -             -         -            18,567
Travel                     782,976                 -              -             -         -           782,976
                        (5,436,392)           13,791         24,696             -         -        (5,397,905)

Balance, April 30,
2006                  $ 15,109,954          $ 13,791       $ 24,696   $ 1,214,391       $ 1      $ 16,362,833

     
(a)  Democratic Republic of Congo - Kolwezi:

Since October 1998, the Company's wholly-owned subsidiary, Congo Mineral
Developments Limited ("CMD"), has signed and/or initialled various agreements
with La Generale des Carrieres et des Mines ("Gecamines") and/or the Government
of the Democratic Republic of Congo ("GDRC"), governing the terms of the Kolwezi
Tailings Project (the "Project").  In March 2004, CMD, GDRC and Gecamines signed
a Contract of Association (the "CoA") governing the Project and the ownership
and management of Kingamyambo Musonoi Tailings S.A.R.L. ("KMT"), the company
incorporated earlier that month in the Democratic Republic of Congo ("DRC") to
own the mining title to the tailings and develop the Project.  In accordance
with the CoA, the Tailings Exploitation Rights to the Project have been
transferred to KMT.


Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005

     
2.   Mineral properties (continued):

     (a)  Democratic Republic of Congo - Kolwezi (continued):

The Company initially owned 82.5% of KMT, with Gecamines and GDRC owning 12.5%
and 5.0% respectively.  The CoA recognizes the framework agreement that was
entered into by the Company in February 2003 for the Industrial Development
Corporation of South Africa Limited ("IDC") and the International Finance
Corporation ("IFC") to participate in the Project.

During the quarter ended April 30, 2006, the IDC and IFC exercised options and
acquired 10% and 7.5% interests respectively in KMT.  As a result, the IFC and
IDC paid combined proceeds of $8,750 for the purchase of their interests,
$1,059,280 for their participation in loans to KMT, and $11,368,638 as their
contributions towards expenditure on the Project.  The contributions towards
expenditure on the Project have been applied against the mineral properties
expenditure relating to the Project.  Under the CoA, KMT is to pay Gecamines a
total of $15,000,000 as consideration for the Tailings Exploitation Rights ("TER
"): $5,000,000 was paid following the transfer to KMT of the TER on May 27,
2004, and $10,000,000 will be paid following the completion of all financing
arrangements for the Project.  The $15,000,000 is to be provided to KMT by CMD
and other participating parties such as the IDC and IFC based on their pro rata
ownership of the Project excluding Gecamines and GDRC's percentage ownership.
Gecamines is to receive an annual dividend of the greater of its ordinary
dividend and 2.5% of free cash flow (as defined) for each year from start-up
until senior debt and subordinated loans (including all interest thereon) have
been fully reimbursed.  Thereafter, Gecamines will be entitled to an annual
dividend based on 10% of the average price realized for cobalt sold in a year in
excess of $10.00 per pound (adjusted for inflation) in addition to any ordinary
dividend received by Gecamines, providing that ordinary dividends are paid in
such year.

CMD and the participating parties are to complete feasibility studies, carry out
an environmental impact study, draw up an environmental management plan and
obtain commitments for financing the Project by November 27, 2007 (a time period
of three years and six months from transfer date of the mining rights).

     (b)  Democratic Republic of Congo - Quarries:

In 2005, the Company's subsidiary, Roan Prospecting and Mining Sprl, obtained
exploration rights for quarries in the DRC.  The rights cover ten concession
areas: eight for limestone, and two for aggregates.  The renewable licences have
an initial term of one year.  During the six months ended April 30, 2006, the
Company began work on these licences.


Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005
     

2.   Mineral properties (continued):
          
     (c)  Angola:

During the year ended October 31, 2001, the Government of Angola awarded two
licences to Endiama E.P. ("Endiama"), the Angola state mining company, for
properties to be explored and developed with the Company's wholly owned
subsidiary, IDAS Resources N.V. ("IDAS"), a Netherlands Antilles company.  These
properties are a prospecting licence which comprises approximately 2,690 km2 in
the Cuango River floodplain and an adjacent exploitation licence ("Camutue")
which comprises approximately 246 km2.  Both licences are in the Provinces of
Luanda-Norte and Malange, Angola.  IDAS was acquired by the Company in 1998, and
under the terms of the share purchase agreement, the vendors retained a net
profits interest equal to 20% of the profits, to a maximum of $56,000,000,
resulting from IDAS' share of income from operations of its then Angola mineral
properties.  The covered properties include the licence areas mentioned above.
"Profits" means the actual and distributable proceeds received by IDAS from the
properties, to be calculated based on international generally accepted
accounting principles.

During the year ended October 31, 2002, IDAS entered into a Heads of Agreement
with Endiama and Twins Ltd. ("Twins"), a company representing private sector
Angolan interests.  The Heads of Agreement governed the ownership structure
relating to the two licences in Angola and the obligations of the parties.  The
parties agreed to the formation of a new company (later agreed to be called "
Luminas") which would exercise the mining rights.  The financing of the project
was to be undertaken by IDAS.  IDAS was to own 51% of the share capital of
Luminas for the period of time that any loans to Luminas by IDAS remained
outstanding.  Endiama was to own 38% and Twins 11%.  Once the loans had been
repaid in full, IDAS was to own 49%, Endiama 38% and Twins 13%.  IDAS also
verbally agreed, and subsequently completed formal drafting of, arrangements
with Twins to ensure IDAS' continued voting control of Luminas.  The Heads of
Agreement and a subsequent agreement entered into by the parties set out the
repayment terms of the loans from cash flows and called for a minimum investment
of $1,500,000 by IDAS for each of the two licences.  IDAS was to pay 10% of its
dividends to Endiama during the first eighteen months of production.  The board
of directors of Luminas was to be comprised of five members of whom three were
to be nominated by IDAS.  However, IDAS was unable to progress matters further,
and the Company believes that Endiama has repudiated its contractual
obligations.  Consequently, the Company filed a legal suit against Endiama in
Texas, USA, on May 18, 2005 citing breach of contract, negligent
misrepresentation and other causes of action, and requested damages including
loss of benefits, costs and expenses incurred in connection with IDAS's efforts
to acquire and develop the licences, and professional fees.  Legal action
continues to be pursued in the United States of America.
          
     (d)  Zambia:

The Company held a prospecting licence, which covered approximately 950 km2 in
the Solwezi District in the Republic of Zambia.  The Company applied for renewal
of the licence in relation to a reduced area of 441 km2.  This was received in
October 2005 and is valid until September 30, 2006.


Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005

     
3.   Mineral property evaluation costs:

Amounts deferred in respect of mineral property evaluation costs consist of the
following:

Democratic Republic of Congo - Kipushi evaluation costs:

                                                               Amount
                                             
Balance, October 31, 2005                                 $ 4,538,897

Amortization                                                      182

Consulting                                                     57,427

Contribution from joint venture partner                        (7,500)

Exploration office and accounting                               9,602

Legal                                                             303

Salaries                                                       40,312

Travel                                                          3,009

                                                              103,335

Balance, April 30, 2006                                    $ 4,642,232


During the year ended October 31, 1996, the Company entered into a two-year
exclusive framework agreement (the "Gecamines Agreement") with Gecamines
relating to the rehabilitation of the Kipushi zinc and copper mine (the "Kipushi
Project"), in the southern region of the DRC.  During the year ended October 31,
1998, the Company received confirmation from Gecamines that, because delays had
occurred in the research of the definition of the mining and metallurgical
treatment phase of the project, requirements for the completion of feasibility
studies by the Company would be delayed until a period of up to 12 months after
the completion of this definition phase, such starting date to be agreed upon by
the Company and Gecamines, and which the Company now expects to be in 2006.

As part of the Gecamines Agreement, the Company has agreed to prepare, at its
expense, feasibility studies covering the rehabilitation and resumption of
production at the Kipushi Project, various options for processing the
copper-zinc ore, and an examination of the viability of the re-treatment of
existing tailings.  The Gecamines Agreement gives the Company the exclusive
right to examine the Kipushi Project, to enter into joint ventures for ore
processing and tailings processing, and to make suitable arrangements for the
resumption of production.  The Gecamines Agreement does not give the Company any
interests in the Kipushi Project.  The Company will only acquire interests in
the Kipushi Project if satisfactory results are obtained from the feasibility
studies and if agreements, both satisfactory and conforming with the New Mining
Code, can be negotiated with Gecamines and the GDRC.

The agreement also specifies that the Company and Gecamines will collaborate on
exploration and development over the area of certain Gecamines concessions.


Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005

     
3.   Mineral property evaluation costs (continued):

On July 17, 2000, the Company entered into an option agreement (the "Option
Agreement") with the Zinc Corporation of South Africa Limited, since renamed
Kumba Base Metals Limited ("Kumba").  Pursuant to the Option Agreement, Kumba
had an option to elect to earn up to a 50% interest in the Kipushi Project.
During the year ended October 31, 2001, following the performance of due
diligence, Kumba exercised its option to participate in the Kipushi Project.  On
execution of the option, Kumba deposited the option fee of $100,000 into a joint
account, to meet expenditures incurred in negotiating commercial agreements
between the Company, Kumba and Gecamines.

On January 30, 2002, the Company signed, and, in November 2004 and September
2005, amended, a joint venture agreement with Kumba, whereby Kumba could earn up
to 50% of the Company's interest in the Kipushi Project by incurring $3,500,000
of expenditures on the Project, including the conducting of feasibility studies.
  Kumba was not obliged to conduct the feasibility studies until commercial
agreements for the rehabilitation and resumption of the Kipushi mine had been
entered into between the Company, Kumba and Gecamines, security of tenure
achieved via an agreement with Gecamines, and Governmental approval received.
During 2003, Kumba deposited a further $100,000 into the joint venture account
to meet expenditures incurred towards achieving such an agreement.  Kumba was
required to fund the $3,500,000 of expenditures, less already recognized
expenditures of $300,000 by Kumba, over a 28 month period commencing with the
completion of these items, which must be no later than October 31, 2006,
otherwise the agreement will terminate.


4.   Long-term debt:

During the quarter ended April 30, 2006, the IDC and IFC paid combined proceeds
of $1,059,280 for their participation in the loans made by CMD to KMT.  The
loans currently bear interest at 12% per annum and are repayable after KMT
commences production on the Kolwezi project and generates adequate positive cash
flow.

     
5.   Share capital:
          
     (a)  Share capital:

                                                    Number
                                                 of shares          Amount

Balance, October 31, 2005                       70,940,022    $ 67,348,642
For options exercised cashlessly                 3,319,947       3,289,946
For options exercised conventionally               413,500         587,582
For warrants exercised conventionally              855,646         897,756
For private placement, net of issuance costs     6,000,000       8,138,669

Balance April 30, 2006                          81,529,115    $ 80,262,595



Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005

     
5.   Share capital (continued):
          
     (b)  Share purchase warrants:

Warrants outstanding at April 30, 2006:

    Balance                                Balance
October 31,                              April 30,
       2005       Issued    Exercised         2006    Exercise price          Expiry date

  1,690,122       21,170     (855,646)     855,646          CDN$0.75    February 12, 2008

There were 21,170 warrants granted during the six months ended April 30, 2006.

During the six months, there were 855,646 warrants exercised for total cash
proceeds of CDN$641,734.

The Company recorded stock-based compensation within Mineral Property
expenditures of $41,918 in respect of the 21,170 warrants granted during the six
months to April 30, 2006 and $183,282 as a result of the vesting of warrants
granted in previous periods.

          
     (c)  Share options:

                                                               Weighted
                                                          average price
                                                                 (CDN $)

Options outstanding, October 31, 2005     7,991,209          CDN$  1.47
Granted                                           -                   -
Cancelled / expired                        (237,500)               1.46
Exercised                                (7,753,709)               1.47

Options outstanding, April 30, 2006               -          CDN$     -

There were no stock options granted during the six months ended April 30, 2006.

During the six months there were 413,500 options exercised in the conventional
manner for total proceeds of CDN$298,500.  In addition, 7,340,209 options were
exercised using the cashless exercise arrangement, and resulting in the issuing
of a further 3,319,947 shares.

There were also 205,000 unvested share options with an exercise price of
CDN$1.60 per share and 32,500 unvested share options with an exercise price of
CDN$0.60 per share cancelled during the six months ended April 30, 2006.

The Company recorded stock-based compensation expense within Mineral Property
expenditures of $8,772 and stock-based compensation expense of $986,456 as a
result of the vesting of options granted in previous periods.


Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005

     
5.   Share capital (continued):
          
     (d)  Contributed surplus:

Balance, October 31, 2005                                           $ 5,685,029
Stock-based compensation (note 5(c))                                    986,456
Stock-based compensation included in consulting costs
deferred in mineral properties                                          233,972
Transferred to share capital on exercise of stock options for cash     (328,265)
Transferred to share capital on cashless exercise of options         (6,216,034)

Balance, April 30, 2006                                               $ 361,158

     
6.   Segmented information:

The Company's operations are primarily directed towards the acquisition,
exploration and development of mineral resource properties and represent a
single reportable segment.  All material revenues of the Company are
attributable to the corporate head office.

Property, plant and equipment, including mineral properties and mineral property
evaluation costs, by geographic area are as follows:

                                            April 30,     October 31,
                                                2006            2005

Capital assets by geographic area:
Democratic Republic of Congo            $ 19,961,459     $ 25,250,214
Angola                                     1,214,391        1,214,391
Zambia                                             1                1
United Kingdom                               318,597           34,831

                                        $ 21,494,448     $ 26,499,437
 
          
7.   Offer assessment costs:

On January 18, 2006 First Quantum Minerals Ltd. ("First Quantum") announced an
unsolicited offer to acquire all the outstanding common shares of the Company.
Under the terms of the offer, the Company's stockholders would receive one First
Quantum share for every 17.5 of the Company's shares held.  In order to assess
the unsolicited offer, the Company appointed a Special Committee and engaged
advisors, which has resulted in $2,741,627 in costs being incurred during the
quarter ended January 31, 2006.


Adastra MINERALs INC.
Notes to Consolidated Financial Statements
(Unaudited - Prepared by Management)
(Expressed in United States dollars)

Three and six months ended April 30, 2006 and 2005

     
7.   Offer assessment costs (continued):

On April 11, 2006, the Company's then Board of Directors entered into a
definitive support agreement with First Quantum with regard to an improved offer
from First Quantum.  The improved offer to the Company's shareholders was for
either:  (a) CDN$2.92 in cash per Adastra share or (b) one First Quantum share
plus CDN$0.265 in cash for every 14.76 Adastra shares tendered subject to
pro-ration based on a maximum of approximately 4.9 million First Quantum shares
and a maximum of approximately CDN$41 million in cash.  On consideration of the
terms of the improved offer, the then Board of Directors unanimously recommended
that the Company's shareholders accept the improved offer.  As a result of
considering this improved offer, the Company incurred a further $6,244,700 in
assessment costs during the three months ended April 30, 2006.

On April 28, 2006, the offer expired.  As of this date, 61,191,821 Adastra
shares had been tendered into the First Quantum offer.  As all of the Company's
outstanding stock options vest as a result of this change in control, the
Company has recorded stock compensation expense of $986,456 for the vesting of
these options which were granted in prior periods.

As at April 30, 2006, cash of $2,971,959 had been paid into trust in respect of
offer assessment costs, pending the outcome of the offer.  These costs were paid
subsequent to April 30, 2006, with a corresponding decrease in accounts payable
and accrued liabilities recorded at the time of payment.

On May 1, 2006, First Quantum announced that it had acquired control of the
Company.



                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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