Consolidated Financial Statements December 31, 2004 and 2003

ATNA RESOURCES LTD.

Consolidated Balance Sheets

As at December 31,

(Expressed in Canadian dollars)

    2004  

  2003  

  $  

$  

A S S E T S

Current  

          Cash and cash equivalents  

6,597,455  

3,691,757  

          Amounts receivable  

19,197  

12,175  

          Marketable securities (note 3)  

2,411,483  

57,575  

          Prepaid expenses  

22,714  

7,993  

9,050,849  

3,769,500  

Reclamation deposit  

6,950  

-  

Resource properties (note 5)  

5,134,894  

9,736,561  

Equipment  

65,471  

41,355  

14,258,164  

13,547,416  

L I A B I L I T I E S

Current

  Accounts payable and accrued liabilities

671,188

65,217

S H A R E H O L D E R S' E Q U I T Y

Share capital (note 8) (38,950,872 common shares outstanding at December 31, 2004)  

40,795,561

36,524,790

Contributed surplus (note 8b)  

151,193

94,576

Deficit  

(27,359,778

)  

(23,137,167

13,586,976

13,482,199

14,258,164

13,547,416

Approved on behalf of the Board of Directors  

“Glen D. Dickson”  

“David H. Watkins”  

Glen D. Dickson  

David H. Watkins  

ATNA RESOURCES LTD.

Consolidated Statements of Operations and Deficit

For the Years Ended December 31,

(Expressed in Canadian dollars)

2004

2003

2002

$

$

$

Expenses  

      Amortization  

7,929

11,860

14,555

      Exploration and business development  

208,268

717,756

1,906,424

      Foreign exchange loss  

7,306

99,488

49,442

      Listing and transfer agent fees  

42,086

35,156

19,488

      Office  

51,272

65,414

81,463

      Professional fees  

45,628

69,597

72,756

      Rent and services  

80,661

61,349

90,449

      Severance payments  

-

175,175

378,356

      Shareholder communications  

363,859

176,922

185,495

      Stock-based compensation expense (note 8b)  

94,770

94,576

-

      Wages and benefits  

202,546

139,464

180,637

1,104,325

1,646,757

2,979,065

      Less interest and other income  

(119,315

)  

(69,167

)  

(101,209

)  

Net loss before the following  

985,010

1,577,590

2,877,856

      Net loss (gain) on sale of equipment  

(1,288

)  

1,526

-

      Net loss (gain) on sales of marketable securities  

(45,858

)  

(38,492

)  

2,410

      Net loss (gain) on sale of resource property (note 5)  

1,359,561

(4,586

)  

-

      Write-down of investment in VGCG LP  

-

-

78,098

      Write-down of marketable securities  

-

32,799

485,455

      Write-off of equipment  

3,494

4,088

4,994

      Write-off of resource properties  

1,881,155

743

1,824,956

      Write-off of VAT receivable (note 4)  

40,537

191,267

-

Net loss for the year  

(4,222,611

)  

(1,764,935

)  

(5,273,769

)  

Deficit - beginning of year  

(23,137,167

)  

(21,372,232

)  

(16,098,463

)  

Deficit - end of year  

(27,359,778

)  

(23,137,167

)  

(21,372,232

)  

Loss per share (note 11)  

$  

(0.14

)  

  $  

(0.08

)  

$  

(0.24

)  

Weighted-Average Number of  

Common Shares Outstanding  

31,156,922

22,323,260

21,757,037

ATNA RESOURCES LTD.

Consolidated Statements of Cash Flows

For the Years Ended December 31,

(Expressed in Canadian dollars)

2004

2003

2002

$

      $

      $

Cash provided by (used for):  

Operating Activities  

Net loss for the year  

(4,222,611

)  

(1,764,935

)  

(5,273,769

)  

Adjustments for items not involving cash:  

  Amortization  

7,929

11,860

14,555

  Equipment written-off  

3,494

4,088

4,994

  Investment in VGCG limited partnership written-down  

-

-

78,098

  Marketable securities written-down  

-

32,799

485,455

  Net loss (gain) on sales of equipment  

(1,288

)  

1,526

-

  Net loss (gain) on sales of marketable securities  

(45,858

)  

(38,492

)  

2,410

  Net loss (gain) on sales of resource properties  

1,359,561

(4,586

)  

-

  Resource properties written-off  

1,881,155

743

1,824,956

  Shares issued in settlement of severance obligations  

-

175,175

-

  Stock-based compensation expense  

94,770

94,576

-

  VAT receivable written-off  

-

191,267

-

Changes in non-cash working capital components:  

  Amounts receivable  

(7,022

)  

47,542

(43,852

)  

  Accounts payable  

605,971

(287,562

)  

162,764

  Prepaid expenses  

(14,721

)  

19,680

557

  VAT receivable  

-

(9,950

)  

(114,634

)  

(338,620

)  

(1,526,269

)  

(2,858,466

)  

Investing Activities  

Acquisition of resource properties  

(618,513

)  

(239,426

)  

(372,585

)  

Exploration and development  

(2,815,617

)  

(455,489

)  

(680,584

)  

Option payments received  

152,427

-

-

Exploration recoveries and operating fees  

207,747

-

-

Government grants received  

-

-

7,517

Investment in VGCG limited partnership  

-

-

(78,098

)  

Net (purchases)/proceeds of equipment  

(55,444

)  

2,725

(30,624

)  

Purchase of marketable securities  

-

(39,375

)  

(700,560

)  

Proceeds from sales of marketable securities  

163,950

63,353

663,268

Proceeds from sales of resource properties  

2,000,000

-

-

Reclamation deposits (paid)/refunded  

(6,950

)  

-

2,500

(972,400

)  

(668,212

)  

(1,189,166

)  

Financing Activity  

Proceeds from issuance of share capital  

4,571,961

2,540,849

-

Share issue costs  

(355,243

)  

(342,322

)  

-

4,216,718

2,198,527

-

Net increase (decrease) in cash and cash equivalents  

2,905,698

4,046

(4,047,632

)  

Cash and cash equivalents - beginning of year  

3,691,757

3,687,711

7,735,343

Cash and cash equivalents - end of year  

6,597,455

3,691,757

3,687,711

1.      

NATURE OF OPERATIONS

The Company is incorporated in British Columbia and involved in the acquisition of resource properties that are considered sites of potential economic mineralization, and is currently engaged in the exploration of these properties. Certain of the Company’s properties contain defined mineral resources that cannot be considered economic until a commercial feasibility study is carried out. The ability of the Company to realize the costs it has incurred to date on these properties is dependent upon it being able to develop a commercial ore body, to finance the required exploration and development costs and to acquire environmental, regulatory, and other such permits as may be required for the successful development of the property.

2.      

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Atna Resources Inc., incorporated in the State of Nevada, U.S.A.; Minera Atna Chile Limitada, incorporated in Chile; and Atna Cayman Ltd., incorporated in Cayman Islands. Atna Cayman Ltd. was wound up during 2004. The financial statements are prepared in accordance with Canadian generally accepted accounting principles (“GAAP”), which differ from U.S. GAAP as described in note 13.

Resource Properties

The cost of mineral properties and their related direct exploration costs are deferred until the properties are placed into production, sold or abandoned. These deferred costs will be amortized on a unit-of-production basis over the estimated useful life of the properties following the commencement of production, or written-off if the properties are sold, allowed to lapse or abandoned.

Cost includes any cash consideration and advance royalties paid, and the fair market value of shares issued, if any, on the acquisition of mineral properties. Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are recorded in the accounts when the payments are made. The amounts recorded for mineral claim acquisitions and their related deferred exploration and development costs represent actual expenditures incurred and are not intended to reflect present or future values.

The Company reviews capitalized costs on its resource properties on a periodic basis and will recognize an impairment in value based upon current exploration results, if any, and upon management’s assessment of the probability of future profitable revenues from the property or from the sale of the property. Management’s assessment of the property’s estimated current fair market value is also based upon a review of other property transactions that have occurred in the same geographic area as that of the property under review.

Administrative costs are expensed as incurred.

Title to Assets

Although the Company has taken steps to insure the title to mineral properties in which it has an interest, in accordance with industry standards for the current stage of exploration of such properties, these procedures may not guarantee the Company’s title. Property title may be subject to unregistered prior agreements or transfers and title may be affected by undetected defects.

Foreign Currency Translation

The Company translates its foreign operations on the following basis: monetary assets and liabilities are translated at the rate of exchange in effect as at the balance sheet date and non-monetary assets and liabilities are translated at their applicable historical rates. Revenues and expenses are translated at the average rates prevailing for the year, except for amortization which is translated at the historical rates associated with the assets being amortized.

Foreign exchange gains and losses from the translation of foreign operations are recognized in the current period.

Equipment

Equipment is recorded at cost and amortized over its estimated useful economic life on a declining balance basis at annual rates of 30% and 20%, respectively, for computer and office equipment, and on a straight-line basis over three years for exploration equipment and the assets of Minera Atna Chile Limitada.

2.      

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash Equivalents

Cash equivalents consist of temporary investments in commercial paper and money market deposits that are highly liquid and readily convertible to known amounts of cash, although in some cases their maturity dates extend beyond one year from the date of the financial statements. All cash equivalents are carried at their current market values, with any adjustments from cost recorded with interest income. Cash equivalents are inclusive of accrued interest amounts on securities that bear coupon interest, as receipt of these amounts is also considered to be certain and measurable.

Fair Value of Financial Instruments

The carrying amounts of cash and temporary investments, amounts receivable, marketable securities, and accounts payable and accrued liabilities approximate their aggregate fair values due to the short term nature of virtually all of their component balances.

Joint Ventures

The Company conducts some of its mineral property exploration activities in conjunction with other companies in unincorporated joint ventures. Under Canadian GAAP, the Company accounts for its interests in joint ventures using the proportionate consolidation method; under U.S. GAAP, joint ventures are accounted for by the equity method. There is currently no material impact upon the Company’s financial statement presentation resulting from the difference in Canadian and U.S. accounting standards for joint ventures as the Company’s share of all expenditures incurred by joint ventures has to date been deferred within mineral property costs. Refer to note 13 for a description of differences in financial statements line items that would result from an application of U.S. GAAP.

Share Capital

Common shares issued for non-monetary consideration are recorded at their fair market value, based either upon the trading price of the Company’s shares on the Toronto Stock Exchange (“TSX”) on the date of the agreement to issue the shares or the average closing price of the last ten trading days of the Company’s shares on the TSX prior to the date of issue. Costs incurred to issue common shares are deducted from share capital.

Income Taxes

The Company accounts for potential future tax assets and liabilities by recognizing the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income in the years in which those temporary differences are expected to be settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of the change. When the future realization of income tax assets does not meet the test of being more likely than not to occur, a valuation allowance in the amount of the potential future benefit is taken and no net future tax asset is recognized. Such an allowance currently applies fully to all of the Company’s potential income tax assets.

Stock-Based Compensation

The Company records compensation associated with stock options granted to consultants, directors and employees using a fair value measured basis and records the expense as the options vest with the recipients.

The adoption of this accounting policy for stock-based compensation has been applied prospectively to all stock options granted subsequent to January 1, 2003. During 2002 the Company followed the policy of disclosing on a pro-forma basis only the effect of accounting for stock options granted to employees and directors on a fair value basis. On the exercise of options, the proceeds received by the Company and the expense recognized at the time of the initial grant are credited to share capital.

2.      

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Asset Retirement Obligations

The fair value of a liability for an asset retirement obligation is recognized on an undiscounted cash flow basis when a reasonable estimate of the fair value of the obligations can be made. The asset retirement obligation is recorded as a liability with a corresponding increase to the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost is allocated to expense using a systematic and rational method is adjusted to reflect period-to-period changes in the liability resulting from the passage of time and from revisions to either expected payment dates or the amounts comprising the original estimate of the obligation. The Company does not currently have any asset retirement obligations reflected in its financial statements.

Impairment of Long-Lived Assets

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

Marketable Securities

Marketable securities are recorded at cost and are subject to adjustment, on an aggregate basis, to the lower of cost and market value at the end of each reporting period.

3.      

MARKETABLE SECURITIES

At December 31, 2004, the Company held marketable securities as follows:

December 31, 2004  

December 31, 2003  

Number of  

Carrying  

Market  

Carrying  

Market  

Company  

  Shares  

Amount  

Value  

Amount  

Value  

        $  

        $  

      $  

      $  

Novicourt Inc.  

20,000  

26,200  

37,800  

26,200  

32,600  

Doublestar Resources Ltd.  

100,000  

22,000  

25,500  

22,000  

23,000  

Southern Rio Resources  

62,500  

9,375  

6,875  

9,375  

20,625  

Granderu Resources Corp.  

300,000  

75,000  

69,000  

-  

-  

Pacific Ridge Exploration Ltd.  

100,000  

10,000  

10,500  

-  

-  

Prospector Consolidated Resources Ltd.  

300,000  

36,000  

52,500  

-  

-  

Pacifica Resources Ltd.  

872,393  

193,221  

222,460  

-  

-  

Yukon Zinc Corp.  

9,480,000  

1,959,687  

2,844,000  

-  

-  

Yukon Gold Corporation Inc.  

133,333  

80,000  

80,000  

-  

-  

2,411,483  

3,348,635  

57,575  

76,225  

4.      

WRITE-OFF OF VALUE-ADDED TAX (“VAT”) RECEIVABLE

Value-added tax (“VAT”) is levied by the Internal Revenue Service of Chile on imports and local sales and services at the rate of 18 percent. VAT paid on imports and on acquisitions and services incurred in order to export may be recovered either as a credit against tax due or by requesting reimbursement. The Company anticipates that all or a portion of VAT incurred will be refunded to it, however, since it is not possible to estimate the date of receipt or the amount that will be refunded the Company has written-off any VAT receivable. Any amounts received in the future will be recorded as a recovery at that time.

5.      

RESOURCE PROPERTIES

The Company incurred acquisition and exploration expenditures on its mineral properties as follows:

Balance  

Balance

Writeoffs/

Balance

December 31,  

December 31,

Sale of

December 31,

2002  

Expenditures

2003

Expenditures

Property

2004

CANADA  

YUKON  

Wolverine Property  

Exploration costs  

5,564,069  

923

5,564,992

65,569

(5,630,561

)  

-

Wolf Property  

Acquisition costs  

210,000  

-

210,000

-

(210,000

)  

-

Exploration costs  

1,476,001  

2,480

1,478,481

-

(1,478,480

)  

1

1,686,001  

2,480

1,688,481

-

(1,688,480

)  

1

Marg Property  

Acquisition costs  

250,000  

-

250,000

80,000

-

330,000

Exploration costs  

131,453  

-

131,453

11,051

-

142,504

  Option payments received  

-  

-

-

(210,000

)  

-

(210,000

)  

381,453  

-

381,453

(118,949

)  

-

262,504

BRITISH COLUMBIA  

Ecstall Property  

292,428  

657

293,085

3,498

-

296,583

White Bull Property  

153,089  

277

153,366

7,033

-

160,399

Uduk Property  

10,689  

(10,689

)  

-

-

-

-

456,206  

(9,755

)  

446,451

10,531

-

456,982

CANADA TOTAL  

8,087,729  

(6,352

)  

8,081,377

(42,849

)  

(7,319,041

)  

719,487

UNITED STATES  

ARIZONA  

Lone Pine Property  

Acquisition costs  

100,000  

756

100,756

739

-

101,495

Exploration costs  

253,743  

-

253,743

-

-

253,743