GlobeStar Mining Corporation - sedar push GlobeStar Mining Corporation Advancing towardsProduction 1 “Cerro de Maimón is on track to achieve production in the summer of 2008.”

GlobeStar Mining Corporat ion

Advancing towards Product ion2007 Annual Repor t

Cerro de MaimónProduction in the summer of 2008

Advancing towards Product ion2007 Annual Repor t

Cerro de MaimónProduction in the summer of 2008

GlobeStar Mining Corporat ion

Table ofContents

2008 Objectives1

Chairman’s Letterto Shareholders2

President’s Letterto Shareholders3

Cerro de Maimón MineOpen Pit Mine andProcessing Facility4

Cerro de Maimón MineEnvironmental,Health & Safety,and CommunityRelations6

Operating in theDominican Republic7

Growth throughExploration- Nickel Properties8

Growth throughExploration- Copper Properties10

Growth throughExploration- Moblan LithiumPegmatite Property12

Reserves and Resources13

Management’sDiscussion andAnalysis14

Auditors’ Report35

Consolidated FinancialStatements36

Corporate Information60

Our Focus and MissionTo be a premier emerging mining company, creating stakeholdervalue through sustainable and responsible growth.

2007 Achievements

• The construction on the Cerro de Maimón Projectadvanced well towards initial production in the summerof 2008.

• Completed equity funding and finalized the NedbankCredit Agreement which secured the funds to completethe Cerro de Maimón Project.

• Completed a National Instrument 43-101 (“NI 43-101”)compliant Mineral Reserve Estimate resulting in a 3 yearincrease in the Cerro de Maimón estimated mine life.

• Established a NI 43-101 compliant Mineral ResourceEstimate for the Nickel Laterite concessions.

• Migrated our public listing to the TSX from theVenture Exchange.

Cover:Pit operations at the Company’s Cerro de MaimónMine.

GlobeStar Mining Corporat ion Advancing towards Product ion 1

“Cerro de Maimón is on trackto achieve production inthe summer of 2008.”

Advancing towards Production

2008 Objectives

• Commence production in the summer of 2008 fromthe Cerro de Maimón Project.

• Become cash-flow-positive before the end of the year.

• Increase Cerro de Maimón’s mine life throughsuccessful exploration of satellite copper properties.

• Advance our Nickel properties with a view to increaseshareholder value.

Pre-stripping atCerro de Maimón

Mine.

2 2007 Annual Repor t

From the Chairman andInterim Chief Executive Officer

Letters to Shareholders

Larry CiccarelliChairman of the Board

and InterimChief Executive Officer

Dear Shareholder2007 was a year of evolution for GlobeStar Mining Corporation (“GlobeStar”). Under the watchfuleye of JP Chauvin, President and COO and his team, our progress on the construction of theCerro de Maimón copper/gold mine and mill has been text-book; on time and on budget. In 2008,GlobeStar will complete the transition from an exploration company to becoming a producer.

In May 2007, we completed a round of equity financing totalling $30 million which providedthe incremental funding, in conjunction with existing cash resources and our US$45 millionNedbank credit facility, to complete the Cerro de Maimón Project and fund our plannedexploration until Cerro de Maimón achieves positive cash flow.

Most importantly, the economics of the Cerro de Maimón Project continue to be robust andthe estimated capital payback of approximately 15 months, as presented in the TechnicalReport, evidences the value of this project to the Company. If the current metal pricescontinue, the payback period could be considerably shorter.

GlobeStar is committed to the highest standards of environmental and socially responsibleoperations. During 2007, the Company made donations and initiated social and trainingprograms aimed at assisting the local community in its development. In late October 2007,Tropical Storm Noel devastated significant regions of the Dominican Republic, includingthe area encompassing Cerro de Maimón. GlobeStar, along with other mining companiesoperating in the region, suspended operations and sought to provide direct assistance to thelocal community. Manpower and equipment were re-directed to aid in clean-up, restorationand recovery operations. GlobeStar also delivered relief supplies on their chartered oceanvessel which was transporting equipment from Canada to the Dominican Republic. Mineconstruction re-commenced quickly with no negative impact on the mine site and no delayin the construction schedule.

Today, GlobeStar is within months of becoming a copper and gold producer and hassignificant nickel resources along with additional exploration targets. The operational teamis in place and the Company has sufficient funds to meet its commitments to complete theconstruction of the Cerro de Maimón Project.

On behalf of the Board of Directors, I would like to thank the management and staff ofGlobeStar for their dedicated efforts, and you our shareholders, for your continuing support.We look forward to the opportunities for growth in value in the future.

Sincerely,

Larry CiccarelliChairman of the Board and Interim Chief Executive Officer

March 27, 2008


From the President andChief Operating Officer

Jean-Pierre ChauvinPresident and

Chief Operating Officer

Dear ShareholderGlobeStar implemented major steps towards becoming a copper/gold producer by completingthe basic engineering in May, 2007. This enabled us to develop a revised capital costestimate and lead to the commencement of construction in the spring of 2007 on the Cerrode Maimón Project (“Project”). It was my goal when I started as COO with GlobeStar in 2006to achieve production with this Project in the summer of 2008 and I am pleased to report thatthe Project remains on target to meet this aggressive goal. Our success results directly fromthe superior effort from the team of professionals that we have assembled for the Project.

The development of the mine and construction of the infrastructure continue using bestpractices including consideration of the environmental, social, sustainable and ecologicallyresponsible impacts, consistent with the Company’s commitments and objectives.

In addition to the activities at Cerro de Maimón, we are continuing our exploration for copper,gold and nickel in the Dominican Republic, as well as for lithium rich pegmatites in Québec,Canada. In exploring for additional resources around Cerro de Maimón, our goal is for minelife extension. In addition, the expansion of our nickel resource should provide shareholderswith additional value. As we continue to explore for nickel we will investigate all thealternatives to maximize the value of these assets for our shareholders.

Drilling at the Project allowed for the expansion of our National Instrument 43-101(“NI 43-101”) compliant Mineral Reserve and Resources Estimate which was reported in thesummer of 2007. On the nickel side, a NI 43-101 compliant Mineral Resources Estimate wascompleted on our Cumpié Hill property. Both copper and nickel exploration programs willcontinue in 2008 to capitalize on our large exploration potential in the Dominican Republic.

I would like to acknowledge the contribution of our employees and consultants in bothCanada and the Dominican Republic. I would also like to thank the Board of Directorsfor their efforts and guidance throughout the year.

Finally, I would like to thank our shareholders for their support. The GlobeStar team willcontinue to work to enhance shareholder value through exploration and developmentof our properties.

Sincerely yours,

Jean-Pierre ChauvinPresident and Chief Operating Officer

March 27, 2008


Major accomplishments by the Companyand project team in 2007 were:

• Mobilized the construction manager inFebruary.

• Updated capital and operating costestimates in May.

• Erected the buildings for the two processingplants by July.

• Updated NI 43-101 compliant technicalreport by Micon International in August.Included in the update were a 71%increase in sulphide Mineral ReserveEstimate and a 100% increase in oxideMineral Reserve Estimate.

• Mobilized the structural concretecontractor in August.

• Mobilized the mining contractor in August.• All the major mechanical equipment,

including ball mills arrived by December.

Cerro de Maimón Mine

Open Pit Mine and Processing Facility

Mining

The mining contractor, Sococo Costa Rica,S.A., was selected because of their experienceworking in similar environments throughoutCentral America. Mining operations, whichare currently being conducted on two 12 hourshifts, seven days per week, began inSeptember and daily production volumeshave exceeded projections.

Processing

There are two types of ore to be mined andprocessed at Cerro de Maimón. There is agold-and-silver-rich oxide gossan which isunderlain by a copper-rich massive sulphide.Processing at the Cerro de Maimón plantswill be on a continuous basis beginning insummer 2008. The design capacity of thesulphide plant is 1,300 tonnes per day (“tpd”)and the capacity of the oxide plant is 700 tpd.


Cerro de Maimón

Mill construction at theCerro de Maimón Mine.

“Construction of the open-pitmine and related processingfacilities at the Cerro de MaimónMine was the Company’s mainfocus in 2007.”

When the oxide ore is exhausted in late 2012,the oxide milling circuit is projected to beconverted to sulphide; increasing thesulphide capacity to almost 1,950 tpd.

Tailings from both the oxide and sulphideplants will be commingled with waste rockin a co-disposal facility.

Storm water and process water will becollected in a 500,000 cubic metre watercollection pond. The water in the pond will betreated with an in-pond water treatment plantbefore discharging into the environment.

Electrical power to the Project will besupplied by a Company owned 6.2 megawattpower plant which will be erected on siteand will operate on Bunker C fuel oil.


Environmental

The Company is committed to the higheststandards of environmentally responsibleoperations. An on-site environmental teamcontinuously monitors noise, air and waterquality on a regular basis. The Company will execute concurrent reclamation wherepossible and return the site to its natural state as quickly as possible.

Health & Safety

The Cerro de Maimón Project did not experience a single lost time accident in2007. This is evidence of our commitment to Health & Safety and the quality of thetraining and monitoring programs put in place by GlobeStar. The Company will conduct annual safety audits and makeimprovements in training on a continuousbasis.

Cerro de Maimón - more than a Mine

Community Relations

GlobeStar enjoys excellent relationships withthe local communities. The Company is in theprocess of creating a non-profit foundation,Fundación CORMIDOM, for the purpose ofassisting the local communities. This foundationwill direct contributions to the community fordevelopment needs and look for communityinput on how the contributions are made.

During 2007, the Company initiated severalsocial programs oriented to education, health,and cultural activities. These programsincluded technical training in computer applications, accounting and basic construction techniques. In addition, theCompany made numerous contributions to the local communities throughout the year.

Environmental, Health & Safety, and Community Relations

Presentation of computers to a local

school.

Students in front of the La Raiz school.

GlobeStar funded theschool’s new roof.


The Company’s earthworkreclamation near the

Cerro de Maimón Mine.

The Dominican Republic is a mining friendly,politically and economically stable environment.As evidence of the country’s recognition andfocus on mining, the government created theDirección General de Minería (GovernmentMining Agency) and established theDominican Mining key mining legislation#146 in 1971.

During 2007, total export of goods fromthe Dominican Republic accounted forUS$2.3 billion of which US$1.3 billion or51.3% was related to mineral exports.

The largest existing mine has been inoperation for over 30 years and recentlyannounced a significant expansion. Anadditional mining related investment inexcess of US$2.7 billion has also beenrecently announced evidencing thecommitment to the mining environmentin the Dominican Republic.

Dominican Republic Facts (2007)

Population: 9.4 million

GDP (estimate): US$34.5 billion

GDP Growth: 8.5%

Inflation Rate: 6.14%

Per Capita GDP: US$3,674

Median Age: 24.5 years

Life Expectancy: 73 years

Literacy Rate: 87%

Government: Democratic Republic

Major TradingPartners: USA, Venezuela, UK

Operating in the Dominican Republic

Cerro de Maimón


Exploration Achievements - Nickel Properties

CumpiéSector

CumpiéHill

Project

Corozal RidgeCerro deMaimón

Loma MalaSector

FalcondoPlant

(8 km)

2 km0

View to the south of the Cumpié Hill and Corozal RidgeNi laterite properties and the Cerro de Maimón Project

Nickel (“Ni”) laterite deposits were firstdiscovered in the Dominican Republicin 1916. They form irregular lensesover a 90 kilometre long Peridotitebelt in the Central part of the islandof Hispaniola. Production was initiatedby Falcondo (Xstrata) in 1971 in thenorthern segment of the belt. GlobeStarcontrols the southern 43 kilometresof the belt. An aggressive explorationand evaluation program with a targetto discover at least 10 million tonnesat commercial grades was initiatedat the end of 2006, pursued in 2007and will continue in 2008. Highlightsof the 2007 Nickel exploration programinclude:

• Drilling a total of 127 holes (3,000 metres).• Completion of a NI 43-101 compliant

Mineral Resource Estimate of the CumpiéSector of the Cumpié Hill property. TheMineral Resource Estimate, carried out bySnowden Mining Industry Consultants, wasbased on 75 drill core holes (2,015 metres)and established an Indicated Resource

Estimate of 3.0 million tonnes grading1.49% Ni, and an Inferred ResourceEstimate of 2.5 million tonnes grading1.5% Ni, both at a 1% Ni cut-off grade.

• Preliminary metallurgical acid leach testresults by SGS Mineral Services on thetransition and saprolite samples from theCumpié Sector Ni Laterite propertyshowing Ni extraction of nearly 90%.

• Drilling at Loma Mala sector was completedand subsequent to year end, an InferredResource Estimate added 0.7 million tonnesgrading 1.5% Ni at a cut-off grade of 1%.

• Initiation of a 60 hole program in theCorozal Ridge in November.

• Completion of 45 km long Electromagnetic/Magnetic (“EM/MAG”) airborne survey.

• Identification of a number of Ni Lateritetargets based on the EM/MAG datainterpretation, jointly with slopeanalysis.

Growth through Exploration

Exploration drillingcontinues on our

properties.


“…building a Nickel Resource.”

The GlobeStar exploration program is concentrated in the Central Cordillerraof the Dominican Republic and includes nickel, copper and gold properties.GlobeStar also holds the Moblan Lithium pegmatite property in Québec,Canada. Approximately US$2.5 million was spent in 2007 on explorationprograms in the Dominican Republic and Québec.

30 km0

GlobeStar Copper/Gold ConcessionsGlobeStar Nickel Concessions (with Cu)

Amanda/Loretta(copper)

Kiosko(gold/copper)

Barrick/GoldcorpPueblo Viejo Gold

Loma Pesada(copper/zinc)

Xstrata NickelFalcondo

Cerro de Maimón Mine(copper/gold/zinc/silver)

GlobeStar’sNickel

Properties

Field geologist standingon nickel property

overlooking the Cerro deMaimón property.

10

GlobeStar copper and gold concessionscover most of the Maimón Formationwhich hosts the Cerro de Maimónpolymetallic deposit and is perhapsthe most prospective geological unit forcopper in the Dominican Republic.Additionally, GlobeStar controls theBayaguana district, the largesthydrothermal alteration system in theDominican Republic outside of PuebloViejo. The main goal of the copperexploration program is to increase theCompany’s estimated mineral resourcesand reserves to extend the Cerro deMaimón mine life.

Highlights of the copper explorationprogram in 2007 include:

• Completion of a 24 drill hole program(totalling 2,580 metres) in and around theNI 43-101 compliant Measured andIndicated Mineral Reserve Estimate atCerro de Maimón leading to an increaseof the Proven and Probable Mineral ReserveEstimate by 82% to 6 million tonnes.

• Completion of a 450 km2 EM/MAG airbornesurvey over the most prospective zones ofthe Maimón and Los Ranchos Formations.

• Identification of more than 80 areas ofanomalous electromagnetic response.

• Ground follow up of theeight strongest anomalies that

Exploration Achievements - Copper Properties


Pueblo Viejo

Cerro de MaimónMine

GlobeStar’sCorozal Ni

View to the northeastfrom Corozal property.

Trenching at theCuance property.

Nickel, copper and gold beltsin the Dominican Republic


constitute first order conductors and adrilling target selection.

• Approval of a 2,000 metre drilling programon the Loma Pesada deposit designedto expand the deposit and increase theconfidence of the resource.

• Initiation of a 9 hole drilling program on theCuance and Los Hojanchos joint venture,funded by Everton Resources. This resultsfrom the trenching program discovery of1.07 g/t gold (“Au”) over 22 metres,including 2.01 g/t Au over 9 metres in anarea interpreted as a sulphide gossan.

Helicopter hooking upEM/Mag survey

equipment at theCerro de Maimón site.

“Finding additional resourcesto extend the mine life ofthe Cerro de Maimón Project.”

Analysis and interpretationof EM/Mag survey anomaly.


Moblan Lithium Pegmatite PropertyQuébec

GlobeStar is exploring a high puritypegmatite at Moblan, Quebec,Canada, to produce spodumene andother industrial minerals. Highlightsinclude:

• A twelve-hole diamond drilling program totalling 1,245m was completed in December 2007 on the Moblan West part of the property to test the continuity, geometry and structural control of the pegmatite bodies.

• Drilling along Moblan West Pegmatite indicates that the main pegmatite body is a single 40m thick sill.

• New mapping and logging show that the pegmatite is mineralogically zoned, generally with a feldspar wall zone and a spodumene-quartz core zone.

Although spodumene and feldspars both have separate markets, a growing trend is to use “pegmatite concentrate” for glass and ceramics manufacturing. This productrequires only the removal of mica and heavyminerals and can often be produced using low cost, dry processing.

Spodumene may enhance material performance, reduce energy costs and NOx emissions for the glass and ceramic industries, as well as potentially provide feedstock for the Lithium battery sector.

The program for 2008 includes assaying the core, completing a resource estimateand exploring market options.


Exploration work at Moblan.

Reserves and Resources

2007 Cerro de Maimón Estimated Mineral Reserves

Mineral Type Tonnes Cu (%) Ag (g/t) Au (g/t)

Total OxideProven 927,274 37.1 1.95Probable 230,093 23.9 1.48

Proven + Probable 1,157,367 34.5 1.86

Total SulphideProven 4,285,800 2.66 35.7 0.98Probable 538,760 1.52 28.7 0.78

Proven + Probable 4,824,560 2.54 34.9 0.96

Measured (Mea) and Indicated (Ind) Resources

Contained Metal

Cut-off Category Million Cu % Au g/t Ag g/t Zn % Copper Gold Silver ZincDeposit grade Tonnes (tonnes) (ounces) (ounces) (tonnes)

Maimón Area(1)

Cerro de Maimón Oxides 0.5 g/t eq. Au (2) Mea 0.99 – 1.86 33.2 – – 58,828 1,051,146 –Ind 0.26 – 1.39 23.4 – – 11,713 196,929 –

Cerro de Maimón Sulphides 0.3 % Cu Mea 5.63 2.30 0.91 33.3 1.46 129,668 164,955 6,030,179 82,335 Ind 1.74 1.25 0.73 28.7 1.31 21,710 40,634 1,603,996 22,709

Bayaguana GroupKiosko 0.35 g/t Au Ind 0.57 1.01 1.93 4.20 – 5,707 35,057 76,290 –

Northwestern ConcessionsCerro Verde 0.5 g/t Au Ind 0.52 0.17 1.32 3.09 – 876 21,855 51,161 – Anomaly B 1.0% Cu Ind 0.31 1.81 1.1 12.39 1.34 5,521 10,786 121,294 4,087

Total Measured + Indicated: 10.01 163,482 343,828 9,130,995 109,130

Inferred (Inf) Resources

Contained Metal

Cut-off Category Million Cu % Au g/t Ag g/t Zn % Copper Gold Silver ZincDeposit grade Tonnes (tonnes) (ounces) (ounces) (tonnes)

Maimón AreaCerro de Maimón (sulphides) 0.3 % Cu Inf 0.14 1.20 0.71 34.6 1.12 1,705 3,249 158,491 1,598 Loma Pesada 1.0% Cu Inf 1.09 2.22 0.16 4.36 0.77 24,154 5,597 152,505 8,378

Bayaguana GroupKiosko 0.35 g/t Au Inf 4.36 0.98 2.01 5.17 – 42,728 281,742 724,681 – Doña Amanda 0.15% Cu Inf 127.77 0.31 0.19 1.43 – 396,072 780,432 5,873,781 – Doña Loretta 0.25% Cu Inf 8.20 0.50 – – – 41,005 – – –

Total Inferred 141.56 505,664 1,071,020 6,909,458 9,976

Nickel Resource Inventory3

ContainedMetal

Cut-off Category Million Nickel Nickelgrade Tonnes (%) (000’s tonnes)

Cumpie Sector, Cumpie Hill Nickel Laterite Project 1% Ni Ind 3 1.49 451% Ni Inf 2.5 1.5 36

1 Includes Mineral Reserves from Cerro de Maimón2 eq. Au = Au+AgFactor [Agfactor = 0.01630]3 Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.It is uncertain if further exploration will result in upgrading the Inferred Mineral Resource to an Indicated or Measured Mineral Resource or the Indicated Mineral

Resource to a Measured Mineral Resource category.Figures have been rounded and this may have resulted in minor discrepancies.The most likely cut-off grade for this deposit is not known and will need to be confirmed by the appropriate economic studies.



Management’s Discussion and AnalysisFor the Year ended December 31, 2007 (compared to December 31, 2006)

This Management’s Discussion and Analysis (“MD&A”) provides an analysis of the financial conditionsand results of the operations of GlobeStar Mining Corporation (the “Company” or “GlobeStar”) for the year ended December 31, 2007 as compared to the year ended December 31, 2006 and has beenprepared as of March 31, 2008. This MD&A should be read in conjunction with the annual auditedconsolidated financial statements and notes thereto for the year ended December 31, 2007 as well as the annual audited consolidated financial statements and notes thereto for the fiscal year endedDecember 31, 2006 (“Annual Statements”), which are available at the SEDAR website, www.sedar.com.

All amounts are expressed in Canadian dollars, unless otherwise specified as US dollars.

Description of Business /Overview of Performance GlobeStar is a mining exploration and development company which owns a portfolio of mining propertyassets in the Dominican Republic and Canada (Quebec), either directly or through its subsidiaries.GlobeStar was formed on December 6, 2002 under a plan of arrangement involving GlobeStar whichwas a newly incorporated company under the Canada Business Corporations Act, and TGW Corp. Inc. (“TGW”) a reporting issuer and publicly traded company. As a result of the plan of arrangement,GlobeStar acquired 100% of TGW’s common shares causing TGW to become a wholly-ownedsubsidiary of GlobeStar. In addition, GlobeStar’s common shares became listed for trading on the TSXVenture exchange under the symbol “GMI” and ultimately were listed on the TSX as of January 2007.

In the mining sector generally, the commercially viable recoverability of minerals is dependent upon,among other factors, the existence of economically recoverable mineral reserves, the ability to obtainnecessary funding to complete the exploration and development of the mineral properties on which the reserves are located, receive final environmental and operating permits and upon future profitableproduction or proceeds from the disposal of such properties. The Company has accumulated a significant deficit and to continue operations, it will continue to need sources of financing.

Management has obtained financing through the issuance of new equity instruments, debts from thirdparties and advances from a shareholder to continue its operations until the anticipated commoditysales from the Cerro de Maimón Project, and while it has been successful in raising funds in the past,there can be no assurance it will be able to do so in the future should funding be needed. Withoutsuch funding being available and a delay in sales from the Cerro de Maimón Project, the Companymay be unable to continue its operations, and amounts realized for assets may be less than amountsreflected in these financial statements. Exploration for mineral properties is inherently risky and thesuccess of these strategies is subject to numerous risks, including those set forth under “Risks andUncertainties” below. Management cannot guarantee that its strategy will find mineral deposits, or if discovered, that these deposits will be commercially viable. The stock market in general, and themarket for mineral exploration companies in particular, have experienced extreme price and volumefluctuations that have often been unrelated or disproportionate to the operating results or asset valuesof those companies. These broad market and industry factors may seriously impact the market priceand trading volumes of GlobeStar’s common shares, regardless of the actual operating performance. The majority of the Company’s assets consist of interests in or rights to properties with the potentialand estimated mineral resources to host mineral deposits and cash and cash equivalents. Gold, silverand base metals (copper/zinc/nickel) are the principal commodities sought to be commerciallyrecoverable through the projects in which the Company currently is directly involved.


Principal developments with respect to the Company’s operations have included:

• On March 2, 2006, the Company reported that RMB Resources (a subsidiary of South Africa’sFirstRand Financial Group - “RMB”) received approval to provide an additional US$4.25million loan for the Cerro de Maimón Project. On March 30, 2006, the Company secured thisdebt totaling $4,980,150 and maturing in December 2008, to fund the retirement of a net profitsinterest option in the project held by the 4-Star Group, Inc. and thereby restore 100% control of the project to the Company. This debt was repaid on August 29, 2006.

• In May 2006, the Company received formal credit committee approval from NEDBANK Capitalof South Africa to provide US$38 million of senior debt financing (including US$3,000,000 ofcapitalized interest) to finance construction and completion of the Cerro de Maimón Project. The US$38 million amount was increased to include a US$7 million cost overrun facility. This cost overrun facility can be accessed, subject to certain conditions, once the Company has funded at least US$7 million in cost overruns through equity. The loan documentation wascompleted on April 27, 2007 and the closing of the increased facility of US$45 million tookplace in August 2007. As of December 31, 2007, there had been no drawdown of this debtfacility. An initial drawdown of US$12 million was made in January 2008 as discussed below.

• In June 2006, the Company announced the appointment of Mr. Jean Pierre Chauvin as Presidentand Chief Operating Officer. Mr. Chauvin has over 25 years of operational experience in themining sector, including the start-up of four mines and specific experience in copper and goldmining. In August 2006, the Company announced the appointment of Mr. Eric Olson as VicePresident-Projects. Mr. Olson has over 25 years of experience in international mining anddevelopment. The experience of Mr. Chauvin and Mr. Olson in mine development will be ofsignificant value as the Company advances Cerro de Maimón towards production. In November2006, the Company engaged Mr. David Massola as CFO. Mr. Massola has over 25 years ofexperience in mine development and financing, including co-coordinating the mine finance of BHP-Billiton’s Escondida and Ekati mines. He was also the CFO of copper and diamondoperations for two major mining companies.

• A significant increase in the Company’s estimated mineral resources as defined in the release of an updated, National Instrument 43-101 compliant mineral inventory for the Company’sproperties in the Dominican Republic in February 2006;

• The discovery of high-grade nickel laterite mineralization on the Company’s 100%-owned C1concession (“Laterita Cerro de Maimón”), which abuts Falconbridge’s (now Xstrata’s) Falcondonickel mine and smelter in the Dominican Republic;

• The granting of two new nickel laterite exploration concessions in the Dominican Republic, and the consolidation of a 198 square kilometre nickel laterite concession package throughagreements with Everton Resources Inc. (EVR.V) and Energold Drilling Corp. (EGD.V);


• Drill testing of several promising targets in the Dominican Republic defined by soil geochemistryand ground geophysics, including the 2J/Doña Cristina target on the Maimón concession, and asecond target on the Cuance concession. While neither drilling program encountered economicintersections, the results at Cuance were sufficiently encouraging to justify a follow-up drillingprogram in Q3 of 2006;

• The release of increased estimated mineral reserves and resources in the Micron InternationalAugust 2007 NI 43-101 complaint Technical Report referred to below. This report also detailedthe proposed development plan and included updated capital and operating cost estimates forCerro de Maimón.

Cerro de Maimón

Beginning in 2004, the focus and priority of the Company has been the completion of the copper/goldfeasibility study on the Cerro de Maimón deposit located in the Dominican Republic and the executionof this project’s resulting development plan. In the fourth quarter of fiscal 2004, the Company receiveda completed feasibility study and retained Behre Dolbear Engineering Consultants to review thefeasibility study and, pursuant to the requirements of NI 43-101, prepare the relevant TechnicalReport which was received and duly filed in May 2005. This Technical Report was updated with thepreparation of a production schedule sensitivity analysis and optimization plan which was filed onSEDAR on July 13, 2006. The Technical Report was subsequently amended on September 20, 2006.In August 2007, Micon International Ltd. prepared an updated NI 43-101 compliant Technical Reportentitled “Updated Mineral Resource and Reserve Estimate for the Cerro De Maimón Project, Msnr.Nouel Province, Dominican Republic”. This report included updated estimated mineral resources,reserves, and capital and operating costs for the project. The report was filed on SEDAR on August 22, 2007. These documents may be viewed at www.sedar.com.

Having completed both a feasibility study and the May 2005 Technical Report, the Companyaccelerated project development activities with Auramet Trading LLC, retained as financial advisors to assist and advise the Company in evaluating financing options and securing financing for thedevelopment of the Cerro de Maimón Project.

In September 2006, the Company retained Golder and Associates to complete the geotechnicaltestwork and additional testing required for the Cerro de Maimón Project’s Environmental ManagementPlan. Golder continues to be a consultant on the project.

In December 2006, the Company appointed Met-Chem Canada Inc. as the consulting engineer tocomplete basic engineering, detailed engineering and procurement for the project under a so-calledEngineering and Procurement or “EP” type contract. As of December 31, 2007, Met-Chem Canadahad completed approximately 95% of the detailed engineering. Met-Chem is being assisted by MiconInternational Ltd on the metallurgical and processing areas. In the first quarter of 2007, the Companyappointed RSW International Consulting Engineers as the Construction Manager.

Development of the Cerro de Maimón Project and exploration on the Company’s other properties in the Dominican Republic continued throughout 2006 and 2007.

The Company continues to hire operating personnel in anticipation of the commencement ofproduction and expects to continue adding personnel during 2008 in anticipation of advancing the project to production in the summer of 2008.

In July 2007, the Company selected Sococo de Costa Rica as the mining contractor. Sococo de Costa Rica mobilized their mining equipment in early August 2007 and pre-stripping of the minecommenced in late August.

Construction at site continued throughout 2007 with no major delays. In December 2007, TropicalStorm Noel hit the project area, causing severe flooding and loss of life. The storm caused nosignificant damage at the project and full operations resumed within seven days.


Financing Activity

(i) Debt FacilityIn early August 2007 the Company announced the closing of its increased US$45 million debtfinancing facility with NEDBANK Capital of South Africa. GlobeStar expects to use the proceedsof this facility to partially fund the continued development of its 100% owned Cerro de MaimónProject. The term of the facility will run through December 31, 2013 or 5 years aftercommissioning the Cerro de Maimón plant, whichever is earlier. This facility carries an interestrate based on a London Interbank Offered Rate (LIBOR) plus 300 basis points during operationsand a LIBOR plus 350 basis points during the construction phase of the project. Mandatoryprepayments are required at 25% of the project’s excess available cash flow, as defined under the facility. The facility requires certain commodity hedging covering some of the first three years of production and contains a number of customary terms and conditions applicable to a facility like this one.

(ii) Issue of 15,905,000 common shares On May 4, 2007, the Company entered into an agreement with a syndicate led by DesjardinsSecurities Inc., and including Westwind Partners Inc., to raise $20 million on a bought deal basis consisting of a private placement of 10 million Common Shares at a price of $2.00 perCommon Share. The syndicate was also granted an option to place, prior to closing, up to anadditional 5.9 million common shares at a price of $2.00 per share. Given the exercise of thisoption, the private placement resulted in the Company receiving total gross proceeds of $31.8 million on May 29, 2007.

(iii) Issue of 26,086,900 Special WarrantsOn July 31, 2006, the Company completed an underwritten offering of 26,086,900 SpecialWarrants through Jennings Capital Inc., Westwind Partners Inc. and Canaccord CapitalCorporation for gross proceeds of $29,999,935. Each Special Warrant entitled the holder thereof to receive, at any time and without payment of any additional consideration, one common share of the Company (the “Special Warrant Shares). As compensation for their services, theunderwriters received an aggregate fee of $1,956,518 as well as a broker special warrant (the“Broker Special Warrant”) giving them the right, upon exercise, to acquire 1,695,649 commonshares of the Company at a price of $1.15 per common share for a period of 18 monthscommencing July 31, 2006.

(iv) Secondary Offering of Common Shares by Karr SecuritiesOn August 1, 2006, Karr Securities Inc. (“Karr”), a major holder of common shares of theCompany completed the sale of 8,695,650 special warrants of Karr (“Karr Special Warrants”)through Jennings Capital Inc. and Canaccord Capital Corporation for gross proceeds to Karr of approximately $10.0 million. Each Karr Special Warrant entitled the holder thereof to receive,at any time and without payment of any additional consideration, one previously issued commonshare of GlobeStar currently held by Karr (the “Karr Special Warrant Shares”). GlobeStar did not receive any proceeds from the sale of the Special Warrants by Karr.

Future Outlook

For 2008, the Company intends to continue to advance development of the Cerro de Maimón Project in order to achieve its target of commissioning and start-up in the summer of 2008. Further, it expectsto continue the various exploration initiatives underway and described fully in the “Exploration”section below.


Selected Financial Information, For Years Ending December 31

2007 2006 2005($ Except Shares ($ Except Shares ($ Except Shares

Outstanding) Outstanding) Outstanding)

Revenues 1,254,312 1,960,124 39,410Expenses for the year 13,945,672 4,241,195 1,535,179Loss for the year 12,691,360 2,281,071 1,495,769Loss per share for the year 0.136 0.039 0.034Total Assets 76,707,932 41,238,934 12,142,758Working Capital 18,928,121 19,032,817 669,809Long-term Debt Nil Nil NilDividends paid Nil Nil Nil

2007 2006 2005

Shares Outstanding 102,354,397 77,734,050 50,365,900

Results of Operations

Revenues earned by the Company, except for the gain on the sale of investment in public companiesincluded in revenue in 2006, have been and continue to be insignificant to date as the Company isstill in the exploration and development stage and does not have any producing properties. Revenue is derived from interest income on cash balances and cash equivalents invested in GuaranteedInvestment Certificates plus a gain on the sale of shares of a public company. For the year endedDecember 31, 2007 the interest portion of revenue amounted to $1,254,312 as compared to $379,934in the prior year. This increase in revenue of interest earned is attributable to higher cash balancesand cash deposits during 2007.

Expenses for the year ended December 31, 2007 totaled $4,398,705 (excluding derivative relatedlosses), representing an increase of $157,510 compared with total expenses of $4,241,195 for the year ended 2006. This increase is due mainly to an increase in the exchange gain for the year of$1,054,253 due to the strengthening of the Canadian dollar and a reduction in interest on long-termdebt of $169,942 and amortization of deferred financing charges of $951,624 that were recorded in2006. The specified amount was paid in full in 2006 and no charges were recognized in 2007. Thisvariance is partially offset by an increase in compensation and benefits costs of $1,799,674 due to an increase in staff and higher stock-based compensation. The financial statements use the fair value method in accordance with Canadian GAAP to recognize these expenses. Also professional and maintenance fees increased by $113,239 in 2007 due to an increase in engineering services andcertain legal and other fees incurred which were associated with an ongoing evaluation conducted by one of the committees of the board relative to certain activities involving the Company dating back to 2001.

The Company also recorded in 2007 a $9,546,967 unrealized loss on derivative related contracts.These contracts were placed in 2007 and as discussed above were required as part of the debt facilitywith Nedbank. Further explanation of these hedging contracts is described below in the “FinancialInstruments” section.

The net result is that the Company recorded a consolidated loss for the year ended December 31, 2007 of $12,691,360 (or $0.136 per share) as compared with a loss of $2,281,071 (or $0.039 pershare) for the prior year ended December 31, 2006.


Summary of Quarterly Results

The following table sets forth unaudited quarterly financial information prepared by management of the Company for the periods indicated:

Three Months Ended,

Dec. 31/07 Sep. 30/07 June. 30/07 Mar. 31/07

Revenues $ 845,521 $ 101,958 $ 148,384 $ 158,449Expenses $ 1,026,339 $ 6,532,753 $ 5,332,480 $ 1,054,100Net (earnings) loss for the period $ 180,818 $ 6,430,795 $ 5,184,096 $ 895,651Loss (earnings) per share-basic $ 0.002 $ 0.064 $ 0.055 $ 0.011Loss (earnings) per share-diluted $ 0.002 $ 0.064 $ 0.055 $ 0.011

Balance Sheet Information

Total assets as at $ 76,707,932 $ 76,523,081 $ 71,745,068 $ 42,149,120

Three Months Ended,

Dec. 31/06 Sep. 30/06 June. 30/06 Mar. 31/06

Revenues $ 249,610 $ 128,462 $ 963,031 $ 619,021Expenses $ 755,414 $ 2,349,762 $ 728,630 $ 407,389Net (profit) loss for the period $ 505,804 $ 2,221,300 $ (234,401) $ (211,632)Loss per share - basic $ 0.006 $ 0.042 $ (0.005) $ (0.004)Loss per share - diluted $ 0.006 $ 0.042 $ (0.004) $ (0.004)



Three Months Ended,

Dec. 31/05 Sep. 30/05 June. 30/05 Mar. 31/05

Revenues $ 16,664 $ 28,438 $ 15,740 $ 3,695Expenses $ 735,553 $ 369,327 $ 231,113 $ 224,313Net loss (earnings) for the period $ 718,889 $ 340,889 $ 215,373 $ 220,618Loss per share - basic $ 0.016 $ 0.008 $ 0.005 $ 0.005Loss per share - diluted $ 0.016 $ 0.008 $ 0.005 $ 0.005



Fluctuations in quarterly results for revenues are primarily due to factors such as gains on sale of investments in public companies and interest earned per quarter based on the cash and cashequivalents and deposit certificates held by the Company during the quarter. Interest rates paid on cash and cash equivalents rose slightly in 2007 over 2006, and the Company disposed of all of its investments in public companies in 2006.

Expense fluctuations in quarterly results are due primarily to factors such as administrative expenses,hedging gains or losses, and exchange gains or losses due to fluctuation of the US dollar to theCanadian dollar between quarterly reporting periods.


Related party transactionsThe Company entered into the following transactions with related parties:

$ 2007 $ 2006

Companies owned by a shareholderManagement fees 45,000 60,000Professional fees – 40,000Rent – 40,000Office expenses – 35,000

DirectorsManagement fees – 390,000Compensation 144,000 214,000

Expenditures on Mining Properties and Interest

As noted above, GlobeStar is engaged in the acquisition, exploration and development of mineralproperties for mineral resource deposits both within Canada (Quebec) and the Dominican Republic.

Other than in respect of the Cerro de Maimón Project for which feasibility and optimization studieshave been completed, the Company has not yet determined whether its other properties containestimated mineral reserves that would be economically recoverable. All of the other Company’sproperties are in the exploration stage and there can be no assurance that any of them will reach thestage of production. The recoverability of the amounts shown for mining properties is dependent upon,among other factors, the existence of economically recoverable estimated mineral reserves, the abilityof the Company to obtain necessary financing to complete the exploration and development of itsproperties, receive final environmental and operating permits and upon future profitable production or proceeds from the disposal of properties.

The Company records its interests in mineral properties and areas of geological interest at cost lessoption payments received and other recoveries. Exploration and development costs relating to theseinterests and projects are capitalized on the basis of specific claim blocks or areas of geologicalinterest until the properties to which they relate are placed into production, sold or allowed to lapse.

Management reviews the carrying values of mineral properties on a regular basis to determine whetherany writedowns are necessary. These costs will be amortized over the estimated useful life of themining properties following commencement of production or written off if the mining properties orprojects are sold or allowed to lapse. General exploration expenditures not related to specific miningproperties are expensed as incurred.

The Company expended a total of $34,290,312 in exploration and development cost on its mineralproperties during the year ended December 31, 2007, compared to $9,015,023 for the prior 2006 year.The Company records its interests in mineral properties and areas of geological interest at cost lessoption payments received and other recoveries.

In the Dominican Republic, the Company expended a total of $34,000,476 on its mineral propertiesduring the 2007 fiscal year, compared to expenditures of $8,993,842 in the Dominican Republic forthe prior 2006 third quarter. The majority of these expenditures have been incurred on the Cerro deMaimón mining concession as the Company has continued progress towards the development of theproject. These properties are expected to continue to be the focus of the Company’s explorationprogram in 2008.

In the Dominican Republic, the Company recovered $277,476 of the expenditures on its mineralproperties during the 2007 year, as compared to a recovery of expenditures of $139,958 for the prioryear. The recoveries of expenditures relate primarily to properties in the Dominican Republic that are under a joint venture with Everton Resources Inc., whereby the Company acts as operator and is thereby entitled to reimbursement or contribution for amounts spent. It is anticipated that theseproperties will continue to be explored during 2008.


In Quebec on the Moblan property, the Company spent $289,834 in exploration on this miningproperty during the 2007 year, compared to expenditures of $21,181 for the previous year, of which the Quebec government will refund an amount of $141,741 compared to nil for the previous year.

Changes in Mining Properties

Dominican Republic No changes to the Company’s mineral properties were made during 2007.

In May 2006, the Company executed an agreement with Everton Resources Inc. (EVR.V) to acquire100% ownership of the Corozal and Cercadillo nickel laterite concessions, which had previously been held under a 50:50 joint venture with Everton. Under the agreement with Everton, GlobeStarexchanged its 100% interest in the “La Mireya” concession in the eastern portion of the DominicanRepublic in exchange for (i) Everton’s 50% joint venture interest in the Corozal and Cercadillo nickellaterite concessions and (ii) formal title to the Cercadillo concession, resulting in GlobeStar’sundivided 100% ownership of the two nickel laterite concessions. Everton will retain a 1% net smelter return (“NSR”) on Corozal and Cercadillo while GlobeStar will retain a 2% NSR on La Mireya. GlobeStar and Everton also each have the right to purchase half of the other’s NSR at any time for US$500,000. This transaction closed on July 26, 2006.

The Company was also granted an option from Energold Drilling Corp. (EGD.V) to acquire up to a 100% interest in another four nickel laterite concessions. Under the binding letter of intent withEnergold entered into in 2006, GlobeStar can earn up to a 100% interest in any nickel lateritedeposits within the Elsa 1, Loma Cambronal, La Parcela and Loma Bambara concessions, which totalapproximately 116.6 square kilometres. GlobeStar is the operator and can earn an initial 75% interestby completing a US$900,000 work program and making payments of US$50,000 per year for threeyears, payable in cash or shares. GlobeStar has the right to scale back the work program toUS$300,000 if it is discovered that there is potential for less than 5 million tonnes of ore. GlobeStaralso has the right to purchase Energold’s remaining 25% interest for a payment of US$500,000 in cash or shares, with Energold receiving a 2% NSR. Subsequently, GlobeStar may purchase one-half of Energold’s NSR at any time for US$1 million in cash or shares.

ExplorationExploration in 2007 was carried on by the Company acting alone as well as jointly with the Company’sjoint venture partner, Everton Resources, in the Dominican Republic.

In addition to advancing the Cerro de Maimón Project, the Company continues to explore its othermineral properties in the Dominican Republic. The Company also initiated a limited explorationprogram on the Moblan property in Quebec during the third quarter of 2007. The following representsan updated summary of the Company’s exploration activities in the Dominican Republic and Canada.

Copper/gold exploration

On the Cuance and Los Hojanchos concessions, in the Dominican Republic, which the Companyoperates as part of its joint venture with Everton, initial drilling was undertaken in 2005 on apromising target along the northern border of the Cuance concession, approximately 10 kilometresSouth East of the Cerro de Maimón Project. While the 2005 drilling failed to intercept economicmineralization, subsequent drilling by Everton Resources and Linear Gold on the Tres Boca propertyled to the discovery of a massive sulphide body only 120 metres from GlobeStar’s Cuance concessionboundary. This discovery (labeled drill hole TBM-07) returned a massive sulphide intercept of 10.58metres, grading 2.96 g/t gold, 104.91 g/t silver, 2.03% copper and 9.41% zinc beginning 14 metresbelow surface, although drilling has not as yet been sufficient to establish a true width.

In August 2006, the Company commenced a 7 hole (737 metre) diamond drilling program at theCuance concession, located 12 kilometres east of the Cerro de Maimón Project. This drill program is adjacent to the Everton/Linear Tres Bocas massive sulphide discovery. Globe Star’s drilling program was based on consolidating all geophysical and geological data and recent detailed mapping.Interpretation of ground Induced Polarization data by the independent geophysical consultants, GerardLambert Géosciences, Inc., proposed that conductive bodies plunge in a south easterly direction fromthe property boundary into the Cuance concession for a distance up to 300 metres. Exploration on the


Cuance and adjacent Los Hojanchos concessions is fully funded by Everton Resources, who arespending US$1.17 million over three years to earn a 50% interest in the properties. Everton can earnan additional 20% by funding a feasibility study to bring the project into production. No significantresults were encountered through the end of 2007.

Exploration on the Cuance concession in 2007 first focused on geochemical sampling of soil andtrenches. In June 2007, a total of 182 metres of sampling along two trenches were completed. The program was followed by mapping and trenching over an area considered to be part of the MaimónFormation, host rocks to the Cerro de Maimón Project. Two trenches, T1 and T2 totalling 182 metres,were completed in the summer of 2007, over an area of coincident cadmium, barium, gold and coppergeochemical anomalies. Trench T1 cut strong argilic-silica alteration and intersected 1.07 g/t gold(“Au”) over 22 metres, including 2.01 g/t Au over 9 metres, which has been interpreted as a sulphidegossan. Trench T2 cut quartz, sulphide and oxide veinlets, including 0.82 g/t Au over 12 metres, which may represent stringer mineralization.

Results from the trench assays led to a drilling program that started in November 2007. By year end2007, 4 holes were drilled from a total 9 hole (1,200 metre) program. The drill program encounteredpervasive altered sericite-epidote-chlorite schists and disseminated and stockwork-type mineralizationof pyrite-chalcopyrite-covellite-sphalerite with local secondary enrichments of chalcocite-covellite.Alteration assemblage includes quartz-sericite-chlorite-pyrophylite. Results of the first 4 holes weredisclosed in March 2008 and a brief description is included in the subsequent events section of thisreport.

In late January 2007, Fugro Airborne Survey (“Fugro”) commenced a 3,500 line kilometres EM/Mag(ElectroMagnetic (“EM”)/Magnetic) program over GlobeStar’s Maimón, Cuance/Los Hojanchos andBayaguana concessions. By late May 2007, 100% of the survey had been completed. The survey wasflown at 100 metre line spacing with some peripheral areas flown at 200 metre line spacing. Thesurvey’s scope was to test deeper extensions of known mineralized massive sulphides and to seek new,non-outcropping mineralization which was not detected by the shallow detection methods used in thepast, as this system has demonstrated over 300 metre depth penetration in previous surveys. The onlyprevious EM survey in the Dominican Republic was done in 1982 with a DIGHEM® Electromagneticand magnetic system, which has a penetration below surface of approximately 80 metres. Filtered andleveled data was received from Fugro in mid June followed by target selection and drilling in thesecond half of the year.

Final processing products of the HeliGEOTEM® Electromagnetic and magnetic survey were deliveredby Fugro in late August 2007, including final databases (both ASCII and geosoft), grids, decayconstant and apparent conductivity maps, profiles and processing report. Decay constant and apparent conductivity maps can be directly used for Target Selection.

Karl Kwan of Paterson, Grant & Watson Limited, (“PGW”), geoconsultant retained by the Company,processed the airborne data base for target selection purposes. A total of 297 anomalies were identifiedin the Maimón Block/San Antonio and Cuance-Los Hojanchos blocks. The selected EM anomaliesinclude cultural and geological ones, the latter range from low to strong conductivity. This processinghighlights Cerro De Maimón and Doña Amanda as the most outstanding EM anomalies in the survey.The known massive sulphides at Loma Pesada and Loma Barbuito show the presence of strongconductors.

The target prioritization plan assembles all the available geological and geochemical data over the EManomalies and establishes priorities for subsequent field geological reconnaissance. PGW will alsoprocess targets using a range of filtering methods. PGW concluded reports on the Cerro Gordo, LomaPesada and Sierra Hombre Muerto zones. The three zones show strong conductors that can beinterpreted as massive sulphide lenses. Ground follow up has been done on those targets and drilling targets laid out. Drilling of these targets should be carried out in 2008.

A preliminary overview of unfiltered data led to the identification of an EM geophysical anomaly in theDoña Amanda deposit in the Byaguana District in May 2007. Inversion done by PGW using EMFLOW(ENCOM software) showed a highly conductive deep core system underlying the southern portion of


the Doña Amanda enrichment blanket. The EM anomaly is a deep and strong, southerly dipping,conductor against a background of strongly conductive Donna Amanda blanket to the north. Initialinterpretation suggests that this anomaly may be at 180 metres in depth, and is at least 400 metres by 400 metres in area, and continues to below the detection depth of the airborne geophysicalequipment (approximately 200 metres). In addition, the EM anomaly is delineated structurally by a major EW fault zone, interpreted from the measured magnetic data. A two hole program was carried out in Doña Amanda but results did not identify any economic grades.

Nickel Exploration

Cumpié Hill/Loma Mala Development ProgramIn mid-March 2007, the Company began an infill drilling program at 71 metre drill centres in CumpiéHill and Loma Mala in the Dominican Republic. Cumpié Hill and Loma Mala are located in thenorthern part of GlobeStar’s 43 kilometre long peridotite belt on a massif located between the Leonora and Maimón rivers, some 8.5 kilometres from Xstrata’s Falcondo smelter.

This infill program was designed by GlobeStar’s nickel consultant, Roger Billington, P. Geo. ConsultantGeologist. The program is expected to generate data suitable for an independently prepared NI 43-101compliant estimated mineral resource calculation. The initial resource evaluation program isconcentrated in the Cumpié Hill area, on saprolite bearing ridge tops, similar to the adjacent Loma Peguera area, where Xstrata’s Falcondo subsidiary has been mining since 1971.

In September 2007, the infill program was completed in the Cumpié sector of the Cumpié Hillproperty, including 64 new holes drilled in Cumpié and 22 holes at Loma Mala. This infill programfollowed the 2006 discovery drilling campaigns that included a 65 NTW diamond drill.

In November 2007, GlobeStar announced the completion of a NI 43-101 compliant Technical Reportthat disclosed a mineral resource estimate and the results of preliminary metallurgical test work for the Cumpié sector. An indicated resource of 3.0 million tonnes grading 1.5% nickel (“Ni”) and aninferred resource of 2.5 million tonnes grading 1.5% Ni were estimated at a cut-off grade of 1% Ni by Snowden Mining Industry Consultants Inc. (“Snowden”) based on 75 drill holes. Results of preliminary metallurgical leach test work by SGS Mineral Services in Lakefield, Ontario on material from this deposit show Ni extraction nearly 90% in the transition and saprolite samples.

The Loma Mala nickel laterite mineralization, located on the western part of the Cumpié Hill massif,was discovered by GlobeStar in December 2006 and results of a scouting program were included in a press release on February 9, 2007, noting intersections of 13 metres grading 2.01% nickel and 11metres grading 1.94% nickel. The summer/fall 2007 drilling program consisted of 28 holes. The first 6 holes were drilled to test continuity of laterite development south of the previously mapped LomaMala laterites. Twenty-two holes were drilled within and marginally outside of the confining outline of the known lateritic development nominally on 71 metre centres following the same grid pattern used in the Cumpié Hill resource evaluation.

By year end 2007, the complete data base was finalized and was submitted to Snowden Consultants Inc in January 2008 for the preparation of an updated resource estimate.

In late 2007, GlobeStar obtained from the Dominican Republic Secretaria de Estado de MedioAmbiente y Recursos Naturales (SEMARENA) the terms of references to complete the environmentalstudies required to obtain the license to exploit the nickel resources from Mining Block C1. Currently,an external environmental consultant is undertaking these studies.

Corozal Ridge Program The Corozal Ridge nickel lateritic zone is located approximately 3.5 kilometres east of GlobeStar’sCumpié Hill nickel deposit and 1.5 kilometres west of the Company’s Cerro de Maimón Project.GlobeStar first identified nickel laterite at Corozal from a shallow test pit which contained saprolitegrading 1.8% nickel. Drilling at the Corozal Ridge target began in mid-November 2007 on 50 metrecentres. By year end 2007, 10 diamond drill-holes out of the programmed total of 60 holes werecompleted.


Scout Regional ProgramThe Company’s nickel exploration program beyond Cumpié Hill has been progressing in two phases. A pre-drilling phase includes an airborne geophysical survey over the complete belt (completed inMay 2007) and mapping and pitting to select areas of potential. A second phase consists of selectingareas for diamond drilling, where appropriate, to establish grades and thicknesses of the nickel andnickel/cobalt mineralization.

Fugro completed in March 2007 a 490 line kilometre DIGHEM Electro Magnetic (EM)/ magneticsurvey covering 95 square kilometres of GlobeStar’s nickel bearing peridotite concessions, along a strike length of 45 kilometres. Review of the data in the Cumpié Hill area shows an excellentcorrelation between limonotic development and low resistivity areas.

A systematic surface mapping program is intended in areas of intense magnetic signature and lowresistivity. By the end of 2007, the areas of Osama Arriba and Cuaba Quemada at the south east of the Corrozal/Cabirmas ridge were recognized as a promising exploration target.

Preliminary mapping was carried out southeast of Cumpié Hill in February 2007 over the Corozal andLoma Las Cabirmas ridges. In the Corozal ridge an area of about 600 metres in length and 80 metresin width was recognized and subsequent drilling was started in November 2007. Las Cabirmas ridgeshows very little lateritic development. The mapping program will cover the entire belt in the comingmonths. Pitting done in 2006 further south along the belt also revealed mineralization at Loma Prietain the Cercedillo claim blocks, 43 kilometres south of Cumpié Hill, demonstrating nickel lateritedevelopment in places along the complete belt.

Moblan Property, Quebec, CanadaThe Moblan property is a highly fractionated pegmatite deposit north of Chibougamau, Quebec.Preliminary work on the deposit has demonstrated that the Moblan pegmatites contain lithium andfeldspar minerals suitable for the glass and ceramic industries, as well as a number of by-productminerals containing tantalum, niobium, cesium and rubidium. The extremely low iron content of the feldspars makes them particularly attractive for sale to industrial users.

Gary Pearse of Equapolar who co-coordinated the original work at Moblan designed a drilling programthat was finalized in December 2007. The program consisted of a twelve-hole diamond drillingprogram totalling 1,245 metres drilled on the Moblan West part of the property and was laid out to testthe continuity, geometry and structural control of the pegmatite bodies. Drilling along the east-west-striking part of the Moblan West Pegmatite indicates that the main pegmatite body is a single large sill40 metres thick where it is intersected by consecutive holes MS 07-04 to 08. At hole MS 07-09, thesill has thinned to 30 metres and is 34 metres thick at hole MS 07-10. The sill has been dislocatedabout 50 metres to the north between holes MS 07-09 and 10 just east of the central pond. Going eastof hole MS 07-10, the sill splays into a number of thinner sills from less than 1 metre to 9 metres thickstacked one above the other. Strikes swing to north west and dips shallow to 20-25 degrees north eastabove the north shore of Lac Moblan and to 10 degrees on the south side of the lake.

Mapping and logging of the new cores revealed that typically the pegmatite is mineralogically zoned,generally with a feldspar wall zone and a spodumene-quartz core zone. In detail, the zoning is complexindicating several pulses of fluids creating alternating zones of spodumene-quartz, feldspar-qtz-mica,albite-rich layers and mixed zones. Spotted aplitic zones also occur. Wall zones are often albite richbut K-feldspar rich wall zones also occur. In the case of the south west dyke, almost the entirethickness is of K-feldspar zone with minor spodumene and albite. The wall zones, particularly the south west dyke, carry abundant very fine grained black oxides thought to be, in part, tantalite.Assays are pending.

Although spodumene and feldspars each have separate markets, a growing trend is for “pegmatiteconcentrate” for glass and ceramics manufacture. This product requires only removal of mica andheavy minerals and can often be done with low cost, dry processing.


Mineral Inventory

A summary of the Company’s estimated mineral reserve and resource inventory is presented in the following table:

Summary tables of contained metal in GlobeStar’s Total Estimated Mineral Resource Inventory:

2007 Cerro de Maimón Estimated Mineral Reserves

Mineral Type Tonnes Cu (%) Ag (g/t) Au (g/t)

Total OxideProven 927,274 37.1 1.95Probable 230,093 23.9 1.48

Proven + Probable 1,157,367 34.5 1.86

Total SulphideProven 4,285,800 2.66 35.7 0.98Probable 538,760 1.52 28.7 0.78

Proven + Probable 4,824,560 2.54 34.9 0.96

Measured (Mea) and Indicated (Ind) Resources

Contained Metal

Deposit Cut-off grade Category Million Cu % Au g/t Ag g/t Zn % Copper Gold Silver ZincTons (tonnes) (ounces) (ounces) (tonnes)

Maimón Area(1)

Cerro de Maimón Oxides 0.5 g/t eq. Au (2) Mea 0.99 – 1.86 33.2 – – 58,828 1,051,146 –Ind 0.26 – 1.39 23.4 – – 11,713 196,929 –

Cerro de Maimón Sulphides 0.3 % Cu Mea 5.63 2.3 0.91 33.3 1.46 129,668 164,955 6,030,179 82,335 Ind 1.74 1.25 0.73 28.7 1.31 21,710 40,634 1,603,996 22,709

Bayaguana GroupKiosko 0.35 g/t Au Ind 0.57 1.01 1.93 4.2 – 5,707 35,057 76,290 –

Northwestern ConcessionsCerro Verde 0.5 g/t Au Ind 0.52 0.17 1.32 3.09 – 876 21,855 51,161 –

Anomaly B 1.0% Cu Ind 0.31 1.81 1.1 12.4 1.34 5,521 10,786 121,294 4,087

Total Measured + Indicated: 10.01 163,482 343,828 9,130,995 109,130

Inferred (Inf) Resources

Contained Metal

Deposit Cut-off grade Category Million Cu % Au g/t Ag g/t Zn % Copper Gold Silver ZincTons (tonnes) (ounces) (ounces) (tonnes)

Maimón AreaCerro de Maimón (sulphides) 0.3 % Cu Inf 0.14 1.2 0.71 34.6 1.12 1,705 3,249 158,491 1,598 Loma Pesada 1.0% Cu Inf 1.09 2.22 0.16 4.36 0.77 24,154 5,597 152,505 8,378

Bayaguana GroupKiosko 0.35 g/t Au Inf 4.36 0.98 2.01 5.17 – 42,728 281,742 724,681 – Doña Amanda 0.15% Cu Inf 127.77 0.31 0.19 1.43 – 396,072 780,432 5,873,781 – Doña Loretta 0.25% Cu Inf 8.20 0.5 – – – 41,005 – – –

Total Inferred 141.56 505,664 1,071,020 6,909,458 9,976

1 Includes Mineral Reserves from Cerro de Maimón2 eq. Au = Au+AgFactor [Agfactor=0.01630]

Estimated Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral Resourceestimates do not account for mineability, selectivity, mining loss and dilution. These Mineral Resources estimates include InferredMineral Resources that are normally considered too speculative geologically to have economic considerations applied to them thatwould enable them to be categorized as mineral reserves. There is also no certainty that these estimated Inferred Mineral Resourceswill be converted into Measured and Indicated categories through further drilling or into Mineral Reserves once economicconsiderations are applied.


The following is a summary of the current Cumpié Sector estimated mineral resource:

Cumpié Sector, Cumpié Hill Nickel Resources

Category Cut-off (%Ni) Tonnage (Mt) Grade (%Ni) Contained Ni (kt)

Indicated 0.8 3.7 1.38 510.9 3.4 1.43 491.0 3.0 1.49 451.1 2.6 1.55 411.2 2.3 1.61 371.3 2.0 1.67 331.4 1.7 1.72 30

Inferred 0.8 3.1 1.3 420.9 2.8 1.4 391.0 2.5 1.5 361.1 2.1 1.5 321.2 1.8 1.6 291.3 1.6 1.6 261.4 1.3 1.7 22

Note:Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.

The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.

It is uncertain if further exploration will result in upgrading the Inferred Mineral Resource to an Indicated or Measured Mineral Resource category of the Indicated Mineral Resource to a Measured Mineral Resource.

Figures have been rounded and this may have resulted in minor discrepancies.

The cut-off grade for this deposit is not known and will need to be confirmed by the appropriate economic studies.

One of the Company’s goals continues to be to increase its mineral resource inventory throughcontinued exploration on its various concessions in the Dominican Republic.

The following table sets forth certain information relative to the mineral properties of the Company bysummarizing the principal mineral(s) found, ownership percentage, capitalized expenditures for 2007and total capitalized costs on the balance sheet as of December 31, 2006:

Mining Properties Capitalized Total CostsExpenditures Capitalized at

Property During 2007 Dec. 31, 2006 Type % Owned

Canada:Moblan-Quebec $ 289,834 $ 150,051 Industrial Mineral 100%

Dominican Republic:Maimón and Cerro de Maimón $ 32,474,223 $ 4,330,679 copper and gold 100%Managua $ 13,932 $ 3,112,885 gold and copper 100%Trinidad $ 33,434 $ 661,478 gold and copper 100% Rincón Abajo $ 63,109 $ 259,755 gold and copper 100%Los Hojanchos $ 71,433 $ 74,363 gold and base metals 100%Cuance $ 131,680 $ NIL gold and copper 100%El Anón $ NIL $ 7,913 gold 100% Jatubey $ NIL $ 1,486 gold 100%Barbuito $ NIL $ 6,411 copper and gold 100%Laterita Cerro de Maimón $ 687,699 $ 152,221 nickel 100%Other Laterites $ 235,331 $ 10,648 nickel 100%Maimón Concessions $ 227,378 $ 2,922 gold and copper 100%Other $ 62,257 $ 22,226 base metals 100%


Liquidity and Capital Resources

Working Capital

GlobeStar had working capital of $18,928,121 at December 31, 2007 (compared to working capital of $19,032,817 as at December 31, 2006), consisting primarily of cash and cash equivalents of short-term investments in Guaranteed Investment Certificates (GICs). The decrease in working capitalis attributable to slightly lower balance in cash and cash equivalents and investments in depositcertificates as well as higher accrued liabilities for future payments for the Cerro de Maimón Project.The Company financed its operations and investments primarily through the issuance of share capitaland debt financing. There can be no assurance that additional financing will be available at any giventime in the future to develop the Company’s properties.

Operating Activities

Cash flows used in operating activities during the year ended December 31, 2007 were $(1,188,562)compared to cash flows used of $844,301 for the corresponding year in 2006.

For the year 2007, cash flows used in operating activities were due to the items not affecting cash and equivalents of $908,838 and cash inflows from non-cash working capital items of $2,097,400(primarily change in accounts payable and accrued liabilities of $2,657,249).

For the year 2006, cash flows used in operating activities were primarily due to the items not affectingcash and equivalents of $2,090,059 (primarily the amortization of deferred charges of $951,624) andcash flows from non-cash working capital items of $1,245,758 (primarily change in accounts payableand accrued liabilities of $1,438,275).

Financing Activities

Cash flows from financing activities during the year ended December 31, 2007 were $34,247,300compared to cash flows of $27,841,138 for the prior year ended 2006.

For the year ended 2007, cash flows from financing activities were primarily due to the issuance of shares and the exercising of broker warrants and stock options.

For the year ended 2006, cash flows from financing activities were primarily due to the issuance of shares of $27,841,138.

Investing Activities

Cash flows used in investing activities were $38,529,519 for the year ended December 31, 2007compared to cash flows provided by investing activities of $5,943,394 for the prior year ended.

For the year 2007, cash flows used in investing activities were primarily due to the investment in mining properties of $33,561,133 and the purchase of a certificate of deposit of $3,568,867.

For the year 2006, cash flows used in investing activities were primarily due to the investment in mining properties of $8,418,060


Balance Sheet

Assets

The Company had consolidated assets totaling $76,707,932 at December 31, 2007 as compared to $41,238,934 as at December 31, 2006.

The majority of the assets of the Company of $52,664,133 are capitalized as Mining Properties(compared to $18,793,038 as at December 31, 2006) and cash and cash equivalent, of $18,206,364(compared to $21,300,021 as at December 31, 2006). The principal mining properties were listed in the table above by name, cost, type and location.

Long-term Liabilities

The Company had no long-term debt as of December 31, 2007. The Company incurred long-term debtin 2006 in the amount of $4,980,150. This debt was repaid on August 29, 2006. As noted above theCompany has recorded an unrealized derivative related liability as at December 31, 2007 ofUS$9,546,967.

Capitalization

The Company had 102,354,397 common shares outstanding at December 31, 2007 as compared tocommon shares outstanding as at December 31, 2006 of 77,734,050. The increase relates to 6,587,660exercised warrants during 2007, as well as 2,127,687 options exercised and the previously notedequity issue of 15,905,000 common shares.

As at December 31, 2007, the Company’s fully diluted common shares were 109,649,489 (whichcompares to the fully diluted amount outstanding at December 31, 2006 of 91,771,933 commonshares). The potential dilution comes from 6,118,000 stock options issued to officers, directors,employees and consultants (at weighted average exercise price of $1.18) and 1,177,092 warrantsoutstanding at December 31, 2007 (at weighted average exercise price of $0.68).

As at December 31, 2006, the Company’s fully diluted share capital were 91,771,933. The potentialdilution comes from 6,273,131 stock options issued to officers, directors, employees and consultants(at weighted average exercise price of $0.78) and 7,764,752 warrants outstanding at December 31,2006 (at weighted average exercise price of $0.65).

Subsequent Event On January 30, 2008, the Company borrowed an initial amount of US$12 million from the US$45million NEDBANK Capital of South Africa credit facility. This facility carries an interest rate based on a LIBOR plus 300 basis points during operations and a LIBOR plus 350 basis points during theconstruction phase of the project.

On January 31, 2008, the Company announced that William Fisher, CEO and a director, had resignedfrom his positions to pursue other interests. Mr. Fisher agreed to provide certain consulting services for the Company. The Board appointed Larry Ciccarelli, one of the founders of GlobeStar and currentlychairman of the Board of Directors, as interim CEO. The Company has begun a comprehensive searchprocess for a new CEO.

Snowden jointly with Roger Billington finalized a NI 43-101 compliant report in February 2008 withan update of the Ni estimated mineral resources in the Cumpié hill property. The Loma Mala sectoradded an Inferred Resource of 0.7 million tonnes (“Mt”) grading 1.5% Ni at cut-off grade of 1.0% Ni.The mineral resource estimate for the total Cumpié Hill Nickel laterite property including the estimatefor the Cumpié Hill sector and the new estimate for the Loma Mala sector, is an Indicated Resource of 3.0 Mt grading 1.49% Ni and an Inferred Resource of 3.2 Mt grading 1.5% Ni, both estimated at a cut-off grade of 1.0% Ni. At a cut-off grade of 0.9% Ni, the Indicated Resource is 3.4 Mt grading 1.43% Ni and the Inferred Resource is 3.7 Mt grading 1.4% Ni.


GlobeStar jointly with Everton Resources disclosed in March 2008 partial results of the nine-hole drillprogram totaling 1,022 metres on the Cuance concession in the central Dominican Republic. Theseresults included 15 metres averaging 1.22 g/t Au, 2.84 g/t Ag, 0.35% Cu and 2.42% Zn (hole CUA-04)and 3.50 metres averaging 2.44 g/t Au, 8.20 g/t Ag, 1.37% Cu and 0.51% Zn (hole CUA-02).

Changes in Accounting Policies

Accounting Changes

Effective January 1, 2007, the Company adopted the revised standard Section 1506 “AccountingChanges” issued by the Canadian Institute of Chartered Accountants (“CICA”) which establishescriteria for changing accounting policies, together with the accounting treatment and disclosure ofchanges in accounting policies, estimates and correction of errors. The revised standard now requiresthat: a) voluntary changes in accounting policies can only be made if, and only if, the change isrequired by a primary source of GAAP (“Generally Accepted Accounting Principles”) or, the changeresults in more reliable and relevant information, b) changes in accounting policies are disclosed with prior period amounts and justification for the change, and c) for changes in estimates the natureand the amount of change should be disclosed. The Company has not made any voluntary change in accounting policies and estimates since the adoption of the revised standard.

Financial Instruments

Effective January 1, 2007, the Company adopted the following new accounting standards issued by theCICA relating to financial instruments. As prescribed by these standards, prior periods have not beenrestated.

i. Financial Instruments - Section 3855 - Recognition and MeasurementThis standard prescribes when a financial asset, financial liability, or non-financial derivative is to be recognized on the balance sheet and whether fair value or cost-based methods are used to measure the recorded amounts. It also specifies how financial instrument gains and losses are to be presented.

In accordance with this new standard, the Company has classified its financial instruments as follows:

Cash and cash equivalents and deposit certificates are classified as “Assets Held for Trading”.

Amounts receivable are classified as “Loans and Receivables”.

Accounts payable and accrued liabilities, deposits on exploration costs payable andpromissory note are classified as “Other Financial Liabilities”.

All derivatives are classified as “Assets Held for Trading” and are recorded on the balancesheet at fair value. Mark-to-market adjustments on these instruments are included in netincome, unless the instruments are designated as part of a cash flow hedge relationship.

ii. Hedges - Section 3865This standard is applicable when a company chooses to designate a hedging relationship foraccounting purposes. The Company currently does not have any financial instruments whichqualify for hedge accounting.

iii. Comprehensive Income - Section 1530This standard requires the new presentation of a statement of comprehensive income and its components. Comprehensive income includes both net earnings and other comprehensive income. Other comprehensive income includes unrealized gains and losses on available-for-saleinvestments, and gains and losses related to self-sustaining operations, all of which are notincluded in the calculation of net earnings until realized.

These changes had no effect on the financial statements in 2007.


New Accounting PronouncementsEffective January 1, 2008, the Company is required to adopt the following new Canadian accountingpronouncements:

i. Assessing going concern - Section 1400The Accounting Standards Board (AcSB) amended the Section 1400, to include requirements formanagement to assess an entity’s ability to continue as a going concern and to disclose materialuncertainties related to events or conditions that may cast doubt upon the entity’s ability tocontinue as a going concern.

ii. Capital disclosures - Section 1535This new pronouncement establishes standards for disclosing information about an entity’s capitaland how it is managed. Section 1535 also requires the disclosure of any externally-imposedcapital requirements, whether the entity has complied with them, and if not, the consequences.

iii. InventoriesThe AcSB issued Section 3031 (superseding Section 3030) establishing new standards for the measurement and disclosure of inventories.

iv. Financial Instruments - Section 3862 & 3863 - Disclosures & PresentationThese new sections 3862 (on disclosures) and 3863 (on presentation) replace Section 3861,revising and enhancing its disclosure requirements, and carrying forward unchanged itspresentation requirements. Section 3862 complements the principles for recognizing, measuringand presenting financial assets and financial liabilities in Financial Instruments. Section 3863deals with the classification of financial instruments, from the perspective of the issuer, betweenliabilities and equity, the classification of related interest, dividends, losses and gains, and the circumstances in which financial assets and financial liabilities are offset.

v. Goodwill and intangible assets - Section 3064In February 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, replacingSection 3062, Goodwill and Other Intangible Assets and Section 3450, Research andDevelopment Costs. Section 3064 establishes standards for the recognition, measurement,presentation and disclosure of goodwill subsequent to its initial recognition and of intangibleassets by profit-oriented enterprises.

vi. Determining whether a contract is routinely denominated in a single currency (EIC 169)This new standard considers 1) how the term “routinely denominated” in Section 3855.A34d)should be interpreted, and 2) what factors can be used to determine whether a contract for the purchase or sale of the nonfinancial items such as commodity is routinely denominated in a particular currency in commercial transactions around the world.

The Company is evaluating the impact of these new accounting standards on its consolidatedfinancial statements.

Critical Accounting Estimates Critical accounting estimates used in the preparation of the Annual Statements include the Company’sestimate of the recoverable value of its mining properties as well as the value of stock-basedcompensation and derivatives. Both of these estimates could be significantly affected by factors that are out of the Company’s control.

Mining properties are recorded at cost. All acquisition, exploration and related overhead expendituresare recorded as an asset on the balance sheet under the heading “Mining properties”. Theseexpenditures will be depleted over the estimated life of the properties if and when they reachproduction or will be written down by management when it is determined that the net carrying amount will not be recovered.


The amount expensed for stock-based compensation was based on the application of a recognizedoption valuation formula, which is highly dependent on the expected volatility of the Company’sshares. The Company uses an expected volatility rate for its shares of 60%. This is an estimate onlybased on past stock trading data and actual volatility may be significantly different. While the estimateof stock-based compensation can have a material impact on the operating results reported by theCompany, they are a non-cash charge and as such have no impact on the Company’s financialcondition.

Financial Instruments During the second quarter ended June 30, 2007, the Company entered into a combination of forwardand call option contracts for gold and silver, for quantities based on 90% of the estimated productionof these metals from the Cerro de Maimón Project during the initial three years, to economically hedgeagainst the risk of declining commodity prices. The hedging program in place provides a forward pricefor gold of US$650 per ounce for a total of 57,900 ounces and a forward price for silver of US$11.50per ounce for a total of 1,440,000 ounces. As discussed above, the program includes long call optionsat an average strike price of US$800 per ounce for gold and US$17.25 per ounce for silver, thuspermitting the Company to participate in price increases in the event that gold or silver prices exceed the strike prices of the options.

During the third quarter ended September 30, 2007, the Company entered into a combination offorward and call option contracts for copper at approximately 10% of the estimated copper productionof the Cerro de Maimón Project during the initial 3 years of operations. The hedging program in place provides a forward price for copper of US$2.52 per pound for a total of 9,497,503 pounds. The program includes long call options at an average strike price of US$4.04 per pound of copper, thus permitting the Company to participate in price increases in the event that copper prices exceed the strike prices of the options.

These hedging programs were required as part of the terms of the project debt facility withNEDBANK. No further hedging is required. The program requires no cash margins, collateral or other security from the Company.

Fair value of derivative instruments are based on quoted market prices. The Company recorded a mark-to-market loss of US$9.6 million on these hedging contracts during the year.

The Company has not entered into any other specialized financial agreements to minimize itsinvestment or currency risks. There are no off-balance sheet arrangements. The principal financialinstruments used by the Company are short-term deposits or debt obligations, which are acquired toenhance the returns on the Company’s cash position. The Company considers these instruments to bevery low risk in nature. The fair value of these instruments approximates their carrying costs, unlessotherwise noted in the financial statements.

Risk and Uncertainties The mining industry is competitive and, in addition, the Company is exposed to other risks, includingthe following:

- Exploration risks that commercially viable minerals be discovered;- Commodity risks of mineral prices in the world;- Financing risks of future capital generation that may be required; - Political and currency risks in doing business outside of Canada and in the Dominican Republic; and,- Shortage of critical equipment, supplies and qualified professionals.


Mineral exploration involves a high degree of risk. Few properties that are explored are ultimatelydeveloped into producing properties. Other than Cerro de Maimón, none of the Company’s propertiescurrently has a known body of potentially commercial ore. Other risks facing the Company include:political stability in the Dominican Republic; changes in legislation in the Dominican Republic thatcould affect exploration and mining rights as well as taxation and royalties; fluctuations in mineralprices; ability to attract and retain qualified personnel; availability of additional capital; costs andavailability of materials and services relevant to the mining industry; title risks; and integrity ofexploration results.

Agreements, commitments and contingenciesIn addition to the agreements with Everton Resources Inc. and Energold Drilling Corporationdescribed above and others referred to above, the Company has the following agreements, commitmentand contingencies:

a) On November 20, 2006, the Company announced that it has signed a letter of intent for theengagement of Met-Chem Canada Inc. (“Met-Chem”) as the lead engineer for the Cerro deMaimón Project in the Dominican Republic. In this role Met-Chem would be assisted by RSWInternational Consulting Engineers (“RSW”) and Micon International Ltd. (“Micon”) to performthe “EPCM” service contract for basic and detailed engineering, procurement and constructionmanagement of the construction of a processing plant and related facilities for the project. OnJune 11, 2007 the Company signed an agreement with Met-Chem of $4,439,624. As of December31, 2007, the remaining commitment under this agreement amounts to $985,455 and will beincurred during 2008. On March 25, 2007, the Company entered into a separate contract withRSW Inc. whereby RSW would provide construction management services directly to theCompany. As of December 31, 2007, the remaining commitment under this agreement amounts to $661,021 and will be incurred during 2008.

b) Golder and Associates have been retained to complete the geotechnical and environmentalstudies, including designing the waste and tailings facilities, the water management plan and to prepare the environmental management plan for the Cerro de Maimón Project, complementingthe Met-Chem arrangement referred to above.

c) On April 1, 2007, the Company signed an agreement with Ocean Partners USA Inc. to provideservices for selling concentrates expected to be produced from the Cerro de Maimón Project andother marketing services on behalf of the Company. The agreement will be in effect through thefirst three year of production from the Cerro de Maimón Mine and will be at a cost ofapproximately US$225,000 per year.

d) On May 3, 2007, the Board of Directors adopted a Shareholder Protection Rights Plan Agreement(the “Plan”). The Plan was confirmed by the shareholders at the Company’s annual general andspecial meeting in June 2007. The Plan is similar to existing shareholder rights plans adopted by other Canadian public companies and is to ensure, to the extent possible, that all shareholdersof the Company are treated equally and equitably in connection with any takeover bid for theCompany.

e) On July 15, 2007, the Company signed an agreement with Transera International Logistics Ltd forUS$2.3 million covering the transport of equipment and supplies to the Cerro de Maimón Projectsite on behalf of the Company. As of December 31, 2007, the remaining obligation under thisagreement is US$640,000 and will be incurred during 2008.

f) On July 15, 2007, the Company signed a US $5.5 million agreement with Sococo de Costa Ricafor contract mining services for the Cerro de Maimón Project. As of December 31, 2007, theremaining obligation under this agreement is US$4.2 million and will be incurred during 2008.

g) On August 6, 2007, the Company signed a US $1.7 million agreement with Hermanos Yarull & Co. for the structural concrete for the Cerro de Maimón Project. As of December 31, 2007, theremaining obligation under this agreement is US$1.0 million and will be incurred during 2008.


h) On August 29, 2007, the Company signed a 75 million Domincan pesos (approximately US$2.5million) agreement with Distribuidores Internacionales de Petroleo S.A. for the purchase of dieselfuel for the Cerro de Maimón Project. As of December 31, 2007, the remaining obligation underthis agreement is 58 million Dominican pesos (approximately US$1.8 million) and will be incurred during 2008.

i) On October 1, 2007, the Company signed a US$5.8 million agreement with Energia Quisqueya S.A to perform all design, engineering, procurement, construction, commissioning, and start-upnecessary to construct a 6.8 megawatt generation facility for the Cerro de Maimón Project. As of December 31, 2007, the remaining obligation under this agreement is US$5.2 million and will be incurred during 2008.

Management’s Responsibility for Financial StatementsThe information in this MD&A and the Company’s annual financial status is the responsibility of management. This MD&A and the Company’s consolidated financial statements have been prepared by management in accordance with GAAP and in accordance with the accounting policies set out in notes to the consolidated financial statements.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that reasonable care and judgment are applied in making such estimates and assumptions.

Management maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded and that transactions are authorized, recorded and reported properly,principally by submission of the financial statements, before and after their consolidation, to the Board of Directors for approval.

The Board of Directors carries out its responsibility for the consolidated financial statementsprincipally through ongoing discussions with management.

The Company’s external auditors, PricewaterhouseCoopers LLP, have audited the financial statementsfor the year ended December 31, 2007 and have expressed an opinion thereon.

Evaluation of Disclosure Control and Procedures Management is responsible for establishing and maintaining a system of controls and procedures overthe public disclosure of financial and non-financial information regarding the Company. Managementis also responsible for establishing and maintaining adequate internal controls over financial reportingto provide reasonable assurance regarding the integrity and reliability of the Company’s financialinformation and the preparation of its financial statements in accordance with Canadian generallyaccepted accounting principles. Management maintains appropriate information systems, proceduresand controls to ensure integrity of the financial statements and maintains appropriate informationsystems, procedures and controls to ensure that information used internally and disclosed externally is complete and reliable. The Company has a Disclosure Policy and Disclosure Committee in place to mitigate risks associated with the disclosure of inaccurate or incomplete information.

As required by Multilateral Instrument 52-109, an evaluation of the design and effectiveness of theCompany’s disclosure controls and procedures and design of internal control over financial reportingwas conducted as of December 31, 2007 and reviewed at least on a quarterly basis and under thesupervision of management, including the Chief Executive Officer (“CEO”) and Chief FinancialOfficer (“CFO”). Based on that evaluation and due to the changing nature of the Company and the current staff level, management has identified certain weaknesses relating to the timing of the recording of certain data and related occurrences and is in the process of taking corrective action to mitigate these weaknesses.


There have been no changes in internal controls over financial reporting during the year endedDecember 31, 2007 that have materially affected, or are reasonable likely to materially affect, theCompany’s internal controls over financial reporting.

By virtue of the size of the Company and its related staff complement, there are inherent limitations on the ability of management to implement internal controls. Management believes that it has designedsufficient internal controls to mitigate these limitations comprised primarily of management review andoversight.

Due to its inherent limitations, internal controls over financial reporting may not prevent or detectmisstatements on a timely basis. A system of internal controls over financial reporting, no matter howwell conceived or operated can provide only reasonable, not absolute, assurance that the objectives of the internal controls over financial reporting are met. Also, projections of any evaluation of theeffectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions.

Forward-Looking Statements The above contains forward-looking statements that are subject to a number of known and unknownrisks, uncertainties and other factors that may cause actual results to differ materially from thoseanticipated in our forward-looking statements. Shareholders and prospective investors should not placeundue reliance on forward-looking information and should bear in mind the risks and uncertaintiesoutlined above under “Risks and Uncertainties”.

Additional Information As at March 31, 2008, the number of outstanding shares in the Company is 105,081,489. Total optionsoutstanding are 4,918,000 and there are no warrants outstanding.

Additional information relating to GlobeStar can be found elsewhere in the Interim Statements, theAnnual Statements and other public filings, all of which are available for viewing on SEDAR atwww.sedar.com, including the Annual Information Form.

March 31, 2008

Larry Ciccarelli David W. MassolaChief Executive Officer Chief Financial Officer


To the Shareholders of GlobeStar Mining Corporation

We have audited the consolidated balance sheets of GlobeStar Mining Corporation (an exploration and development company) as at December 31, 2007 and 2006 and the consolidated statements ofearnings and comprehensive loss, deficit, and cash flows for the years then ended. These consolidatedfinancial statements are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Thosestandards require that we plan and perform an audit to obtain reasonable assurance whether thefinancial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, thefinancial position of the Company as at December 31, 2007 and 2006 and the results of its operationsand its cash flows for the years then ended in accordance with Canadian generally acceptedaccounting principles.

Chartered Accountants

Québec City, Québec, CanadaMarch 31, 2008

Auditors’ Report


GlobeStar Mining Corporation(An Exploration and Development Company)

Consolidated Balance Sheets

As at December 31,

2007 2006$ $

AssetsCurrent assetsCash and cash equivalents 18,206,364 21,300,021Deposit certificate, 4.5% and 6.75% (10% in 2006) 3,748,753 179,886Amounts receivable 748,275 140,611Prepaid expenses 57,368 105,183

22,760,760 21,725,701

Deferred charges – 309,962Property, plant and equipment (note 5) 1,207,656 363,160Intangible assets (note 6) 75,383 47,073Mining properties (note 7) 52,664,133 18,793,038

76,707,932 41,238,934

LiabilitiesCurrent liabilitiesAccounts payable and accrued liabilities 4,283,727 1,626,478Part XII.6 tax 30,500 30,500Deposits on exploration costs payable, non-interest

bearing (US$372,440 in 2006) – 434,414Promissory note, bearing interest at 4%, matured

on March 30, 2007 (US$500,000 in 2006) – 601,492

4,314,227 2,692,884

Derivative related liabilities (note 15) 9,546,967 –Future income tax liabilities (note 11) 224,000 –

14,085,194 2,692,884

Shareholders’ EquityShare capital (notes 8 and 9) 80,066,137 43,887,497Warrants (note 8) 328,632 1,500,367Stock options (note 9) 3,229,644 1,468,501Contributed surplus 836,158 836,158Deficit (21,837,833) (9,146,473)

62,622,738 38,546,050

76,707,932 41,238,934

Nature of activities and going concern (note 1)Agreements, commitments and contingencies (note 12)Subsequent event (note 17)

See accompanying notes to the consolidated financial statements

Approved on behalf of the Board of Directors

Stuart Feiner Larry CiccarelliDirector Director


As at December 31,

2007 2006$ $

Balance - Beginning of year 9,146,473 6,865,402

Loss for the year 12,691,360 2,281,071

Balance - End of year 21,837,833 9,146,473See accompanying notes to the consolidated financial statements


Consolidated Statements of Deficit


Consolidated Statements of Earnings and Comprehensive loss

As at December 31,

2007 2006$ $

Administrative expensesCompensation and fringe benefits (note 9) 2,698,636 898,962Office expenses 550,358 469,124Professional and maintenance fees (note 9) 1,727,546 1,614,307Travel 307,274 233,497Repairs and maintenance 15,400 –Interest income (1,254,312) (379,934)Depreciation of property, plant and equipment 66,790 64,738Amortization of intangible assets 25,509 2,406Amortization of deferred charges – 951,624Exchange loss (gain) (1,250,182) (195,929)Interest and bank charges 33,374 32,524Interest on long-term debt – 169,942Unrealized loss on derivative related liabilities (note 15) 9,546,967 –Gain on the sale of investments in public companies – (1,580,190)

Loss before income tax expenses 12,467,360 2,281,071

Future income tax expenses (note 11) 224,000 –

Loss and comprehensive loss for the year 12,691,360 2,281,071

Basic and diluted loss per share (note 14) 0.136 0.039

See accompanying notes to the consolidated financial statements



Consolidated Statements of Cash Flows

As at December 31,

2007 2006$ $

Cash flows from operating activitiesLoss for the year (12,691,360) (2,281,071)Items not affecting cash and cash equivalents

Depreciation of property, plant and equipment 66,790 64,738Amortization of intangible assets 25,509 2,406Amortization of deferred charges – 951,624Stock-based compensation (note 9) 1,919,256 734,141Capitalized interest – 18,293Gain on the sale of investments in public companies – (1,580,190)Unrealized loss on derivative related liabilities 9,546,967 –Future income tax expenses 224,000 –

(908,838) (2,090,059)

Change in non-cash working capital itemsAmounts receivable (607,664) (111,712)Prepaid expenses 47,815 (80,805)Accounts payable and accrued liabilities 2,657,249 1,438,275

2,097,400 1,245,758

1,188,562 (844,301)

Cash flows from financing activitiesVariation in deferred charges – (703,640)Repayment of advances from a shareholder – (233,200)Repayment of promissory note (601,492) –Issuance of a promissory note – 583,199Issuance of share capital and warrants, net of issue expenses 34,848,792 28,194,779

34,247,300 27,841,138

Cash flows from investing activitiesPurchase of a deposit certificate (3,568,867) (133,829)Additions to property, plant and equipment (911,286) (269,946)Acquisition of intangible assets (53,819) (40,608)Proceeds from the sale of shares of public companies – 2,706,590Acquisition of mining properties (33,561,133) (8,418,060)Deposits on exploration costs payable (434,414) 212,459

(38,529,519) (5,943,394)

Net change in cash and cash equivalents (3,093,657) 21,053,443

Cash and cash equivalents - Beginning of year 21,300,021 246,578

Cash and cash equivalents - End of year 18,206,364 21,300,021

Additional information (note 10)



Notes to Consolidated Financial Statements December 31, 2007 and 2006

1 Nature of operations and going concernGlobeStar Mining Corporation (the “Company”) is a Canadian company which is engaged in theacquisition, exploration and development of resources properties. The Company owns a portfolioof mining property assets in the Dominican Republic and Canada (Quebec), either directly orthrough its subsidiaries. Construction of the Company’s wholly-owned Cerro de Maimón Project,located in the Dominican Republic, started in early 2007 and is expected to be in productionduring the summer of 2008. The Company, through its subsidiaries, is in the business of acquiringand exploring mining properties. Outside of the Cerro de Maimón Project, the Company has notyet determined whether its exploration properties contain ore reserves that are economicallyrecoverable. The recoverability of the amounts shown for exploration mining properties isdependent upon the existence of economically recoverable reserves, the ability of the Company to fund costs to complete the exploration and development of its properties, and upon futureprofitable production or proceeds from the disposal of properties.

For the year ended December 31, 2007, the Company recorded a loss of $12,691,360 and hasaccumulated a significant deficit. In addition to ongoing working capital requirements, theCompany believes, through its previous equity financing and bank debt facility, that it hassecured sufficient funding to meet its existing commitments for exploration and developmentprograms and general and administration costs.

Management has obtained financing through the issuance of new equity instruments and debtsfrom third parties to continue its operations until the anticipated commodity sales from the Cerrode Maimón Project, and while it has been successful in raising funds in the past, there can be noassurance it will be able to do so in the future should funding be needed. Without such fundingbeing available and a delay in sales from the Cerro de Maimón Project, the Company may beunable to continue its operations, and amounts realized for assets may be less than amountsreflected in these financial statements.

Although management has taken steps to verify title to mining properties in which the Companyhas an interest, in accordance with industry standards for the current stage of exploration of suchproperties, these procedures do not guarantee the Company’s title. Property title may be subject to unregistered prior agreements and non-compliance with regulatory requirements.

These financial statements have been prepared using Canadian generally accepted accountingprinciples applicable to a going concern, and do not reflect the adjustments to the carrying valuesof assets and liabilities, the reported revenue and expenses and balance sheet classifications thatwould be necessary were the going concern assumption inappropriate. These adjustments couldbe material.

2 Summary of significant accounting policies

Basis of consolidation

These consolidated financial statements include the accounts of the Company and those of itswholly-owned subsidiaries, TGW Corp. Inc. (“TGW”), Sarmin Exploration Corp. (“Sarmin”) and Corporación Minera Dominicana S.A. (“CMD”).


Use of estimates

The preparation of financial statements in conformity with Canadian generally acceptedaccounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported in the financial statements. Those estimates andassumptions also affect the disclosure of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differfrom those estimates.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks and all highly liquidshort-term investments with original maturities of three months or less at the acquisition date.

Foreign currency translation

Foreign currency transactionsTransactions denominated in currencies other than the functional currency are translated into the functional currency as follows: monetary assets and liabilities are translated at the exchangerate in effect at the balance sheet date and revenues and expenses are translated at the monthlyaverage rate. Non-monetary assets and liabilities are translated at historical rates. Exchange gains and losses arising from such translation are reflected in the statements of earnings.

Foreign subsidiaryCMD is considered to be an integrated foreign operation. As a result, the foreign subsidiary’saccounts are remeasured into Canadian dollars using the temporal method. Under this method,monetary assets and liabilities are remeasured at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical rates. Revenues and expenses are remeasured at the average rate for the year. Gains and losses resulting from remeasurement are reflected in the statements of earnings.

Property, plant and equipment and depreciation

Property, plant and equipment are recorded at cost and are depreciated using the straight-linemethod over the periods mentioned in note 5.

Intangible assets

Web site development costs are recorded at cost and are amortized using the declining balancemethod at an annual rate of 30%.

Software is recorded at cost and is amortized using the straight-line method over the periodmentioned in note 6.

Mining properties

The Company records its interests in mining properties and areas of geological interest at cost less option payments received and other recoveries. Exploration and development costs relating to these interests and projects are capitalized on the basis of specific claim blocks or areas ofgeological interest until the properties to which they relate are placed into production, sold orallowed to lapse. Management reviews the carrying values of mining properties on a regular basis to determine whether any writedowns are necessary. These costs will be amortized over theestimated useful life of the mining properties following commencement of production or written offif the mining properties or projects are sold or allowed to lapse. General exploration expendituresnot related to specific mining properties are expensed as incurred.

Assets under construction within mining properties consist of expenditures on the construction of future mines and include pre-production revenues and expenses prior to achieving commercialproduction, including borrowing costs directly attributable to the Cerro de Maimón Project.Commercial production is a convention for determining the point at which time a mine isproducing at a sustainable commercial level, after which production costs are no longercapitalized and are reported as operating costs.


Derivatives

The Company may enter into commodity contracts including forward contracts and derivatives to manage exposure to fluctuations in metal prices. In the case of forward contracts, thesecontracts are intended to reduce the risk of declining prices on future sales. Purchased optionsare intended to allow the Company to benefit from higher market metal prices. In instances wherethe call option purchases offset the committed ounces of the corresponding forward, derivativeliabilities are presented net of amounts due to/from counterparties. The Company has entered intonon-hedge derivatives that include forward and option contracts intended to manage the risk ofdeclining commodity prices. The Company recognizes the fair value of the financial instrumentson the balance sheet and records changes in the fair value in current period earnings.

Asset retirement obligations

The Company recognizes the fair value of a liability for an asset retirement obligation in the year in which it is incurred and when a reasonable estimate of the fair value can be made. Thecarrying amount of the related long-lived asset is increased by the same amount as the liability.Changes in the liability for an asset retirement obligation due to the passage of time will bemeasured by applying an interest method of allocation. The amount will be recognized as an increase in the liability and an accretion expense in the statement of operations. Changesresulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as an increase or a decrease in the carrying amount of the assetretirement obligation and the related long-lived asset.

Deposits on exploration costs payable

Deposits on exploration costs payable represent the excess of cash received by the Company from a third party over the exploration costs incurred by the Company.

Share capital

Share capital issued for non-monetary consideration is generally recorded at the quoted marketprice of the shares over a reasonable period of time before and after the agreement to issue theshares was announced.

The shares issued pursuant to flow-through share financing agreements are recorded at their fair value. Upon the acquisition of mining properties, the carrying value may exceed the tax basissince the Company renounces the deductions in favour of the investors concerned. The Companyalso issues flow-through shares without any premium or discount regarding the renunciation of the tax benefits in favour of investors.

Share issue expenses have been applied against share capital.

Credit on duties refundable for loss and refundable tax credit for resources

The Company is entitled to a credit on duties refundable for loss on mining exploration expensesincurred in the Province of Quebec. This tax credit has been applied against the costs incurred(note 7).

Furthermore, the Company is entitled to the refundable tax credit for resources on qualifiedexpenditures incurred after March 29, 2001. The refundable tax credit may reach 38.75% of qualified expenditures incurred. This tax credit has been applied against the costs incurred (note 7).

Government grants

Government grants are accounted for when the Company has reasonable assurance that it hascomplied and will continue to comply with all the conditions related to the grant. Grants related to working capital are included in earnings when the related expenses are incurred. Grants related to exploration costs are deducted from the related mining properties.


Income taxes

The Company provides for income taxes using the liability method of tax allocation. Under thismethod, future income tax assets and liabilities are determined based on deductible or taxabletemporary differences between financial statement values and tax values of assets and liabilitiesusing enacted or substantively enacted income tax rates expected to be in effect for the year inwhich the differences are expected to reverse.

The Company establishes a valuation allowance against future income tax assets if, based onavailable information, it is more likely than not that some or all of the future income tax assetswill not be realized.

Basic and diluted earnings per share

Basic earnings per share are determined using the weighted average number of participatingshares outstanding during the year.

Diluted earnings per share are determined using the weighted average number of participatingshares outstanding during the year, plus the effects of dilutive potential participating sharesoutstanding during the year. The calculation of diluted earnings per share is made using thetreasury stock method, as if all dilutive potential shares had been exercised at the later of thebeginning of the year or the date of issuance, as the case may be, and that the funds obtainedthereby be used to purchase participating shares of the Company at the average market value of the participating shares during the year.

Stock-based compensation plan

The Company maintains a stock option plan, which is described in note 9. In accordance withCanadian generally accepted accounting principles, the Company uses the fair value method toaccount for options granted to employees. Accordingly, all stock-based compensation awards areexpensed in the financial statements. Any consideration received from plan participants upon the exercise of stock options is credited to share capital.

3 Changes in accounting policy and new accounting pronouncements

Accounting Changes

Effective January 1, 2007, the Company adopted the revised standard Section 1506 “AccountingChanges” issued by the Canadian Institute of Chartered Accountants (“CICA”) which establishescriteria for changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, estimates and correction of errors. The revised standard nowrequires that: (a) voluntary changes in accounting policies can only be made if, and only if, thechange is required by a primary source of GAAP (“Generally Accepted Accounting Principles”)or, the change results in more reliable and relevant information, (b) changes in accountingpolicies are disclosed with prior period amounts and justification for the change, and (c) forchanges in estimates the nature and the amount of change should be disclosed. The Company has not made any voluntary change in accounting policies and estimates since the adoption of the revised standard.

Financial Instruments

Effective January 1, 2007, the Company adopted the following new accounting standards issuedby the CICA relating to financial instruments. As prescribed by these standards, prior periodshave not been restated.

i. Financial Instruments - Section 3855 - Recognition and Measurement

This standard prescribes when a financial asset, financial liability, or non-financial derivativeis to be recognized on the balance sheet and whether fair value or cost-based methods areused to measure the recorded amounts. It also specifies how financial instrument gains andlosses are to be presented.


In accordance with this new standard, the Company has classified its financial instruments as follows:

• Cash and cash equivalents and deposit certificates are classified as “Assets Held forTrading”.

• Amounts receivable are classified as “Loans and Receivables”.

• Accounts payable and accrued liabilities, deposits on exploration costs payable andpromissory note are classified as “Other Financial Liabilities”.

• All derivatives are classified as “Assets Held for Trading” and are recorded on the balancesheet at fair value. Mark-to-market adjustments on these instruments are included in netincome, unless the instruments are designated as part of a cash flow hedge relationship.

ii. Hedges - Section 3865

This standard is applicable when a company chooses to designate a hedging relationship foraccounting purposes. The Company currently does not have any financial instruments whichqualify for hedge accounting.

iii. Comprehensive Income - Section 1530

This standard requires the new presentation of a statement of comprehensive income and its components. Comprehensive income includes both net earnings and other comprehensiveincome. Other comprehensive income includes unrealized gains and losses on available-for-sale investments, and gains and losses related to self-sustaining operations, all of which arenot included in the calculation of net earnings until realized.

These changes had no effect on the financial statements in 2007.

New Accounting Pronouncements

Effective January 1, 2008 the Company is required to adopt the following new Canadianaccounting pronouncements:

i. Assessing going concern - Section 1400

The Accounting Standards Board (AcSB) amended the Section 1400, to include requirementsfor management to assess an entity’s ability to continue as a going concern and to disclosematerial uncertainties related to events or conditions that may cast doubt upon the entity’sability to continue as a going concern.

ii. Capital disclosures - Section 1535

This new pronouncement establishes standards for disclosing information about an entity’scapital and how it is managed. Section 1535 also requires the disclosure of any externally-imposed capital requirements, whether the entity has complied with them, and if not, theconsequences.

iii. Inventories

The AcSB issued Section 3031 (superseding Section 3030) establishing new standards for the measurement and disclosure of inventories.

iv. Financial Instruments - Section 3862 & 3863 - Disclosures & Presentation

These new sections 3862 (on disclosures) and 3863 (on presentation) replace Section 3861,revising and enhancing its disclosure requirements, and carrying forward unchanged itspresentation requirements. Section 3862 complements the principles for recognizing,measuring and presenting financial assets and financial liabilities in Financial Instruments.Section 3863 deals with the classification of financial instruments, from the perspective of theissuer, between liabilities and equity, the classification of related interest, dividends, lossesand gains, and the circumstances in which financial assets and financial liabilities are offset.


v. Goodwill and Intangible Assets - Section 3064

In February 2008, the CICA issued Section 3064, Goodwill and Intangible Assets, replacingSection 3062, Goodwill and Other Intangible Assets and Section 3450, Research andDevelopment Costs. Section 3064 establishes standards for the recognition, measurement,presentation and disclosure of goodwill subsequent to its initial recognition and of intangibleassets by profit-oriented enterprises.

vi. Determining whether a contract is routinely denominated in a single currency (EIC 169)

This new standard considers 1) how the term “Routinely Denominated” in Section3855.A34d) should be interpreted, and 2) what factors can be used to determine whether a contract for the purchase or sale of the nonfinancial items such as commodity is routinelydenominated in a particular currency in commercial transactions around the world.

The Company is evaluating the impact of these new accounting standards on its consolidatedfinancial statements.

4 Grants and tax credit receivableFor the year ended December 31, 2007, the Company recorded an amount of $141,741 (nil in2006) as a refundable tax credit for resources, which are recorded against mining properties.

5 Property, plant and equipment2007 2006

Depreciation Accumulated Accumulatedperiod Cost depreciation Cost depreciation(years) $ $ $ $

Computer equipment 3 210,596 54,474 64,885 24,506Office equipment 5 39,347 38,111 35,922 17,479Automotive equipment 5 1,193,223 336,646 472,811 241,556Equipment 4 248,056 54,335 101,375 28,524Leasehold improvements 5 2,532 2,532 2,532 2,300

1,693,754 486,098 677,525 314,365

Less:Accumulated depreciation 486,098 314,365

Net amount 1,207,656 363,160

6 Intangible assets2007 2006

Amortization Accumulated Accumulatedrate and Cost amortization Cost amortization

period $ $ $ $

Web site development costs 30% 3,098 2,792 3,098 2,144

Software 4 years 105,090 30,013 51,272 5,153

108,188 32,805 54,370 7,297

Less:Accumulated amortization 32,805 7,297

Net amount 75,383 47,073


7 Mining properties(a) December 31, 2007

For the year ended December 31, 2007, all mining properties are 100% owned by the Companythrough claims.

OptionBalance payments, Loss on Balance as at

as at January 1, Costs grants and write off and December 31,2007 incurred tax credits disposal 2007

$ $ $ $ $

Canada

Moblan (note 12e)Mining property 10,347 – – – 10,347Exploration costs 139,704 289,836 (141,741) – 287,799

150,051 289,836 (141,741) – 298,146

Dominican Republic

Maimón and Cerro de Maimón

(note 12a and c) Mining properties 7,975,148 – – – 7,975,148

Exploration costs, development expenses

and assets under construction 6,355,531 32,474,223 – – 38,829,754

14,330,679 32,474,223 – – 46,804,902

Managua(note 12a and f)

Exploration costs 3,112,885 13,932 – – 3,126,817

Trinidad (note 12a, b and f)

Exploration costs 661,478 33,434 – – 694,912

Rincón Abajo (note 12a and f)


Cuance (note 12f)Mining property – – – – –Exploration costs – 131,680 (131,680) – –

– 131,680 (131,680) – –

(forward) 18,364,797 32,716,378 (131,680) – 50,949,495




$ $ $ $ $

Dominican Republic(brought forward) 18,364,797 32,716,378 (131,680) – 50,949,495

Loma de Payabo (note 12f)

Mining property – – – – –Exploration costs – – – – –

– – – – –

Los Hojanchos (note 12f)Exploration costs 74,363 71,433 (145,796) – –

El AnónMining property 32 – – – 32Exploration costs 7,881 – – – 7,881

7,913 – – – 7,913

Jatubey (note 12a)Exploration costs 1,486 – – – 1,486

BarbuitoExploration costs 6,411 – – – 6,411

Laterita Cerro de Maimón


Other LateritesExploration costs 10,648 235,331 – – 245,979

Maimón concessionsExploration costs 2,922 227,378 – – 230,300

OtherExploration costs 22,226 62,257 – – 84,483

18,642,987 34,000,476 (277,476) – 52,365,987

Total mining properties 18,793,038 34,290,312 (419,217) – 52,664,133


(b) December 31, 2006For the year ended December 31, 2006, all mining properties are 100% owned by theCompany through claims.



$ $ $ $ $

Canada

Moblan (note 12e)Mining property 10,347 – – – 10,347Exploration costs 118,523 21,181 – – 139,704

128,870 21,181 – – 150,051

Dominican Republic

Maimón and Cerro de Maimón (notes 12a

and c and 17a and b)Mining properties 1,882,038 6,093,110 – – 7,975,148Exploration costs 3,684,859 2,670,672 – – 6,355,531

5,566,897 8,763,782 – – 14,330,679

Managua(note 12a and f)

Exploration costs 3,112,885 – – – 3,112,885

Trinidad (note 12a, b and f)


Rincón Abajo (note 12a and f)


Cuance (note 12i)Mining property 36 – (36) – –Exploration costs 90,767 33,474 (124,241) – –

90,803 33,474 (124,277) – –

(forward) 9,687,458 8,801,616 (124,277) – 18,364,797




$ $ $ $ $

Dominican Republic

(brought forward) 9,687,458 8,801,616 (124,277) – 18,364,797

Loma de Payabo (note 12i)

Mining property – – – – –Exploration costs – – – – –

– – – – –

Los Hojanchos (note 12i)Exploration costs 61,224 19,257 (6,118) – 74,363

El AnónMining property 32 – – – 32Exploration costs 7,496 385 – – 7,881

7,528 385 – – 7,913

Jatubey (note 12a)Exploration costs 1,486 – – – 1,486

BarbuitoExploration costs 6,411 – – – 6,411

Laterita Cerro de Maimón


OtherExploration costs 7,162 38,197 (9,563) – 35,796

9,789,103 8,993,842 (139,958) – 18,642,987

Total mining properties 9,917,973 9,015,023 (139,958) – 18,793,038

8 Share capitalAuthorized

Unlimited number of common shares, without par value, voting and participating

IssuedAs at December 31,

2007 2006$ $

102,354,397 shares (77,734,050 in 2006) 80,066,137 43,887,497

(a) Variation of issued share capital:

Years Ended December 31,

2007 2006

Number $ Number $

Balance - Beginning of year 77,734,050 43,887,497 50,365,900 16,009,517Private placement (i) 15,905,000 29,482,333 – –Options and warrants

exercised (ii) (iii) 8,715,347 6,696,307 1,281,250 812,237New shares issued (iv) – – 26,086,900 27,065,743

Balance - End of year 102,354,397 80,066,137 77,734,050 43,887,497


(i) On May 29, 2007, the Company issued 15,905,000 common shares at a price of $2.00 per share as part of a private placement. Issue expenses of $2,327,667 have been appliedagainst the gross proceeds of this financing.

(ii) During 2007, 6,587,660 warrants were exercised for a total exercise price of $4,407,372 (note 8b). The fair value of these warrants, in the amount of $1,171,735, has been credited to share capital. During 2006, 1,031,250 warrants were exercised for a total exercise price of $445,623 (note 8b). The fair value of these warrants, in the amount of $124,847, has been credited to share capital.

(iii) During 2007, 2,127,687 options were exercised for a total exercise price of $959,087 (note 9). The fair value of options, in the amount of $158,113, has been credited to sharecapital. During 2006, 250,000 options were exercised for a total exercise price of $167,500(note 9). The fair value of these options, in the amount of $74,267, has been credited to share capital.

(iv) On September 22, 2006, the Company issued 26,086,900 new common shares at a price of $1.15 per share. Issue expenses of $2,418,279 have been applied against issue grossproceeds. An amount of $515,913 has been recorded as an increase of the warrants included in shareholders’ equity.

(b) The following table presents the warrant activity and summarizes information aboutoutstanding warrants as at December 31:

2007 2006

Number Weighted average Number Weighted averageexercise price exercise price

$ $

Outstanding - Beginning of year 7,764,752 0.65 5,075,000 0.49Granted – – 3,721,002 0.86Exercised (6,587,660) 0.67 (1,031,250) 0.41Matured – – – –

Outstanding and exercisable - End of year 1,177,092 0.68 7,764,752 0.65

The following table summarizes the maturity date of outstanding warrants:

• 151,739 warrants at $1.15 mature in January 2008;

• 1,025,353 warrants at $0.61 mature in March 2009. The exercise price will be $0.67 for the period from March 2008 to March 2009.

Warrants are recorded at their fair value, which was determined using the Black-Scholes model.

9 Stock option plansThe Company established a stock option plan under which key employees, officers, directors andservice suppliers of the Company and its subsidiaries may be granted stock options for shares ofthe Company. A maximum of 10% of the shares issued and outstanding may be granted (maximumof 5% in favour of one person).

Options granted under the plan expire after a maximum period of ten years following the date of grant and vest over variable periods determined by the Board of Directors upon granting.


The following tables present the stock option activity:

2007 2006

Number Weighted average Number Weighted averageexercise price exercise price

$ $

Outstanding - Beginning of year 6,273,131 0.78 4,153,131 0.61Granted 1,975,000 1.66 2,605,000 1.03Exercised (2,127,687) 0.45 (250,000) 0.67Cancelled (2,444) 3.77 (235,000) 0.47

Outstanding - End of year 6,118,000 1.18 6,273,131 0.78

Exercisable - End of year 3,863,000 1.12 4,355,965 0.69

Options outstanding and exercisable Remaining Exercise

as at December 31, contractual priceHolders 2007 life (years) $

Key employees 225,000 4.97 1.78Key employees 200,000 4.18 1.58Key employees 150,000 3.97 1.17Key employees 125,000 3.78 1.07Key employees 400,000 3.59 1.07Key employees 175,000 3.33 0.70Service suppliers 125,000 3.78 1.07Service suppliers 133,000 3.59 1.07Directors and officers 400,000 4.97 1.78Directors and officers 500,000 4.85 1.78Directors and officers 500,000 4.18 1.58Directors and officers 350,000 3.78 1.07Directors and officers 200,000 3.59 1.07Directors and officers 530,000 3.49 1.25Directors and officers 300,000 3.33 0.70Directors and officers 155,000 2.81 0.55Directors and officers 200,000 2.13 0.70Directors and officers 1,450,000 0.19 0.90

Outstanding - End of year 6,118,000 3.03 1.18

Exercisable - End of year 3,863,000 2.47 1.12

Accounting for the stock-based compensation plan

The fair value of options granted for the years ended December 31, 2007 and 2006 was estimatedusing the Black-Scholes option valuation model with the following weighted average assumptions:

2007 2006

Number of options 1,975,000 2,605,000Risk-free interest rate 4.25% 4.25%Expected volatility 60% 60%Dividend yield zero zeroWeighted average expected life 5 years 5 yearsWeighted average fair value of options granted $ 0.91044 $ 0.6328

The Black-Scholes option valuation model was developed for use in estimating the fair value oftraded options which have no vesting restrictions and are fully transferable. In addition, optionvaluation models require the input of highly subjective assumptions including the expected stockprice volatility. Because the stock options granted to key employees, officers and directors havecharacteristics significantly different from those of traded options, and because changes in the


subjective input assumptions can materially affect the fair value estimate, in management’sopinion, the existing models do not necessarily provide an accurate single measure of the fairvalue of stock options granted to key employees, officers and directors.

The Company recognizes, as compensation costs arising from awards to key employees, officersand directors, the fair value of stock options at the date of grant. The fair value of stock optionsvesting during the year ended December 31, 2007 is $1,919,256 ($734,141 in 2006) of which an amount of $114,986 ($164,250 in 2006) has been included in the statement of earnings under the item “Professional and maintenance fees” and $1,804,270 ($569,891 in 2006) under the item“Compensation and fringe benefits”.

10 Statements of cash flowsAdditional information

Years Ended December 31, 2007 2006$ $

Items not affecting cash and cash equivalents related to operating, financing and investing activities

Acquisition of mining properties applied against:Deposit on the purchase of a mining property – 585,560

Deposits on exploration costs payable applied against mining properties – 128,645Interest paid – 183,804Warrants exercised and transferred to share capital 1,171,735 124,847Warrants issued as financing expenses – 557,946Options exercised and transferred to share capital 158,113 74,267

11 Income taxesAs at December 31, 2007, the Company and certain Canadian subsidiaries have accumulatedlosses for income tax purposes totalling approximately $8,904,000 ($5,071,000 in 2006) at thefederal level and $7,321,000 ($4,513,000 in 2006) at the provincial level. The Company and itssubsidiaries consider that it is more likely than not that the future income tax asset resulting fromthese tax losses will be realized and have therefore recorded a valuation allowance correspondingto the full amount of this future income tax asset. These losses can be carried forward againstfuture years’ taxable income and will expire during the following years:

Federal Provincial$ $

2008 317,000 317,0002009 455,000 455,0002010 923,000 923,0002014 866,000 808,0002015 338,000 228,0002026 1,875,000 1,476,0002027 4,130,000 3,114,000

CMD has available loss carry forwards in the Dominican Republic totaling approximately$13,258,000, which will expire between 2008 and 2012.


The reconciliation of the income tax provision, calculated using the statutory income tax rates ofthe federal government and provinces concerned (Canada), to the income tax provision per thefinancial statements is as follows:

Years Ended December 31,

2007 2006$ $

Loss before income tax (12,467,360) (2,281,071)

Income taxes at the combined statutory tax rate of the Canadian federal government and the provinces concerned

(36.12% in 2007 and 38.12% in 2006) (4,503,000) (870,000)Non-deductible resource loss 142,000 138,000Change in valuation allowance 3,778,000 104,000Expiry of tax losses 61,000 178,000Non-deductible expenses 686,000 99,000Share issue expenses not affecting earnings (841,000) (923,000)Adjustment of the foreign subsidiary’s tax losses for inflation purposes – 832,000Exchange rate variation on the foreign subsidiary’s

future income tax assets 69,000 (12,000)Effect of translation of the foreign subsidiary’s accounts

into Canadian dollars (1,765,000) 140,000Difference of rate applicable to foreign subsidiary 1,353,000 4,000Change in tax rate 976,000 355,000Harmonization of Ontario Corporate income tax with Federal 224,000 –Other 44,000 (45,000)

224,000 –

Significant components of the Company’s future income tax assets and liabilities are as follows:

2007 2006$ $

Mining properties 1,365,000 1,547,000Property, plant and equipment 53,000 33,000Non-capital and capital losses 3,407,000 2,153,000Derivative related liabilities 2,437,000 –Share issue expenses 1,025,000 775,000Other items 6,000 7,000Valuation allowance (8,293,000) (4,515,000)

Future income tax assets – –

Harmonization of Ontario Corporate income tax with Federal (224,000) –

Future income tax liabilities (224,000) –


12 Agreements, commitments and contingencies(a) Pursuant to the acquisition of CMD by Sarmin, which occurred in 2000, CMD granted Falcon

a net smelter royalty (“NSR”) upon the first three properties among the following: Maimón,Managua, Rincón Abajo, Trinidad and Jatubey, which are located either within theconcessions held by CMD, or within a prescribed area surrounding such concessions (the“Area of Influence”) which are the subject of a production decision whereby CMD elects to develop one or more mines in such Area of Influence. In such case, Falcon retains a NSR of 2% on the first property to go into production, 1.5% on the second property to go into production and 1% on the third property to go into production. Sarmin has the right torepurchase 50% of any NSR at a mutually agreed price between the parties, and has a firstright of refusal upon the remaining 50% NSR held by Falcon.

As part of the acquisition of CMD by Sarmin in 2000, TGW granted FalconbridgeInternational (Investissement) Limitée (“Falcon”), under a private stock option plan, theoption to acquire 750,026 shares at a unit exercise price equal to the average quoted marketvalue of shares of TGW between December 19, 2000 and December 19, 2001.

This option is exercisable within 90 days of receipt of a feasibility study with respect to anyproperty to be brought into production.

Sarmin has committed to making the following future cash payments to Falcon:

• US$200,000 upon the decision to proceed with a feasibility study upon the first propertywithin the Area of Influence; and

• US$500,000 upon Falcon being advised that CMD intends to develop one or more mineson the concessions.

If Sarmin fails to pay the US$200,000 upon the decision to proceed with a feasibility study or pay the US$500,000 upon a production decision to proceed in the Area of Influence beingmade, then Falcon has the right to rescind the agreement and have the common shares ofCMD reconveyed back to Falcon.

(b) On January 21, 2002, TGW and CMD granted Karr Securities, a major shareholder, theoption to acquire a 100% interest in the Trinidad property in consideration of $10,000 in cash at the signing of the agreement (already paid) and $190,000 in cash no later than December 31, 2006. This option has not been exercised.

(c) Pursuant to an agreement entered into on March 1, 2002 between Falcon and CMD, the latterwill have the right to acquire the 50% interest held by Falcon in the Maimón property.


As part of this agreement, CMD has committed to making the following payments:

(i) US$350,000 payable at the signing of the agreement (this amount has already beenpaid);

(ii) US$250,000 payable after the twelve-month period following the receipt of a favourablefeasibility study by CMD (received in 2005), including an environmental impactassessment approved in due and proper form by the government of the DominicanRepublic (approved in 2004) (this amount has already been paid);

(iii) US$250,000 payable after the twelve-month period following the day when CMD has advised Falcon of its intention to bring the Maimón property into production.

Upon the payment of the amounts mentioned in (i) and (ii) above, these amounts will beadded to the cost of the Maimón property. Falcon will also retain a 2% net smelter returnroyalty interest which can be reduced by 50% upon payment of US$1,000,000 at anytime.

(d) In October 2005, the Company signed an agreement with Virginia Gold Mines Inc.(“Virginia”) whereby Virginia acquired the Company’s 50% interest in the Poste LemoyneExtension property in consideration of the issuance of 160,000 shares of Virginia to theCompany. The Company will retain a 1% royalty for which Virginia will have a buyback right of 0.5% for a total payment of $500,000. Upon conclusion of the agreement, the quoted market price of Virginia shares amounted to $6.43. These shares were sold in 2006.

(e) In November 2005, SOQUEM Inc. (“SOQUEM”) granted the Company the option to acquire a 60% interest in the West Moblan Property in consideration of $150,000 in exploration workon the property to be carried out over a thirty-three month period beginning 90 days from thesigning of the agreement. Once the interest will have been acquired, a joint venture will becreated. A reduction of a party interest under 10% will automatically involve for this party a withdrawal from the joint venture, and the party concerned shall assign its entire interest to the other party in consideration of a 2% Gross Overriding Royalty. The non-diluted partyshall have the right, at any time, to repurchase half of the royalty in consideration of$500,000.

(f) Further to the completion of a financing by Everton, the Company granted Everton the optionto acquire a 50% interest in the Cuance, Los Hojanchos and Loma de Payabo properties inconsideration of a payment of US$1,170,000 exploration work over a three-year period, withthis amount shall be allocated among these three properties for fiscal 2004, 2005 and 2006.Once Everton will have acquired a 50% interest, a joint venture will be created.

(g) The Company entered into operating leases totalling $54,026 for its premises and officeequipment. The minimum instalments payable under these leases in each of the next twoyears amount to $47,888 in 2008 and $6,138 in 2009.

(h) In February 2006, the Company entered into an agreement, which represents an amendmentto the August 2005 agreement, for the acquisition of the 50% Net Profit Interest of Cerro de Maimón owned by 4Star Group, giving to the Company a 100% outright ownership. As at December 31, 2006, the acquisition was fully completed and therefore has beenrecognized as an acquisition during that year. In exchange, the Company made a payment of US$4,200,000 on the closing date, being March 30, 2006, and issued a promissory note of US$500,000 maturing on March 31, 2007 and bearing interest at 4%. A deposit of US$500,000 ($585,650) has been applied against that acquisition during 2006.


(i) A secured medium-term note of US$4,250,000, contracted during the quarter ended June 30,2006, was repaid during the quarter ended September 30, 2006. This note bore interest atLondon Interbank Offered Rate (“LIBOR”) rate plus 4% and was maturing on December 31,2008; interest was capitalizable or payable quarterly. The capitalized interest was convertibleinto common shares at the lender’s option. Some 2,025,353 warrants were issued to the lenderon the date of the loan as financing expenses in addition to an amount of $266,685 paid incash. This debt was secured by a general security agreement.

(j) In May 2006, the Company received the approval for a senior debt facility of up toUS$35,000,000 for the development of the Cerro de Maimón Project. The amount of the facility with NEDBANK of South Africa as finalized and closed in August 2007 wasincreased to US$45,000,000 to provide the Company with additional flexibility to covercertain unanticipated increases in capital cost of the Cerro de Maimón Project. This debtfacility has a five-year term and carries an interest rate based on LIBOR plus 300 basispoints during operations and LIBOR plus 350 basis points during the construction phase of the project. Mandatory prepayments are required at 25% of the project’s excess availablecash flow, as defined under the facility. Principal and interest payments will begin at theearlier of three months after the completion of the project or March 31, 2009. Voluntaryprincipal payments may be payable earlier if the Company is able to pay. As of December 31, 2007, this credit facility is unused and no balance is outstanding (note 17).

(k) In May 2006, the Company entered into an agreement with Everton Resources Inc.(“Everton”) to acquire the 50% beneficial interest in the Corozal and Cercadillo concessionsowned by Everton, giving the Company an undivided 100% beneficial interest in bothconcessions in consideration of its 100% interest and property title in the Mireya concession.Concurrently, Everton transferred its property title in the Cercadillo concession to theCompany, which already owns the property title in the Corozal concession. Everton retained a 1% net smelter return interest in both Corozal and Cercadillo concessions and the Companyretained a 2% net smelter return interest in the Mireya concession, which can be halvedanytime upon payment of US$500,000.

(l) In May 2006, the Company signed an agreement with Energold Drilling Corporation(“Energold”) to earn up to a 100% interest in any nickel laterite deposits within the Elsa 1, Loma Cambronal, La Parcela and Loma Bambara concessions. The Company may earn an initial 75% interest by completing a US$900,000 work program and makingpayments of US$50,000 per year for three years. The Company has the right to purchaseEnergold’s remaining 25% interest for a cash consideration of US$500,000, thus convertingits interest into a 2% smelter return which can be halved anytime upon payment ofUS$1,000,000. These payments may be made in cash or in shares.

(m) On November 20, 2006, the Company announced that it has signed a letter of intent for theengagement of Met-Chem Canada Inc. (“Met-Chem”) as the lead engineer for the Cerro deMaimón Project in the Dominican Republic. In this role Met-Chem would be assisted byRSW International Consulting Engineers (“RSW”) and Micon International Ltd. (“Micon”) to perform the “EPCM” service contract for basic and detailed engineering, procurement and construction management of the construction of a processing plant and related facilitiesfor the project. On June 11, 2007, the Company signed an agreement with Met-Chem of$4,439,624. As of December 31, 2007, the remaining commitment under this agreementamounts to $985,455 and will be incurred during 2008. On March 25, 2007, the Companyentered into a separate contract with RSW Inc. whereby RSW would provide constructionmanagement services directly to the Company. As of December 31, 2007, the remainingcommitment under this agreement amounts to $661,021 and will be incurred during 2008.


(n) Golder and Associates have been retained to complete the geotechnical and environmentalstudies, including designing the waste and tailings facilities, the water management plan and to prepare the environmental management plan for the Cerro de Maimón Project,complementing the Met-Chem arrangement referred to above.

(o) On April 1, 2007, the Company signed an agreement with Ocean Partners USA Inc. toprovide services for selling concentrates expected to be produced from the Cerro de MaimónProject and other marketing services on behalf of the Company. The agreement will be ineffect through the first three years of production from the Cerro de Maimón Mine and will be at a cost of approximately US$225,000 per year.

(p) On May 3, 2007, the Board of Directors adopted a Shareholder Protection Rights PlanAgreement (the “Plan”). The Plan was confirmed by the shareholders at the Company’sannual general and special meeting in June 2007. The Plan is similar to existing shareholderrights plans adopted by other Canadian public companies and is to ensure, to the extentpossible, that all shareholders of the Company are treated equally and equitably inconnection with any takeover bid for the Company.

(q) On July 15, 2007, the Company signed an agreement with Transera International LogisticsLtd for US$2.3 million covering the transport of equipment and supplies to the Cerro deMaimón Project site on behalf of the Company. As of December 31, 2007, the remainingobligation under this agreement is US$640,000 and will be incurred during 2008.

(r) On July 15, 2007, the Company signed a US $5.5 million agreement with Sococo de CostaRica for contract mining services for the Cerro de Maimón Project. As of December 31, 2007,the remaining obligation under this agreement is US$4.2 million and will be incurred during2008.

(s) On August 6, 2007, the Company signed a US $1.7 million agreement with Hermanos Yarull& Co. for the structural concrete for the Cerro de Maimón Project. As of December 31, 2007,the remaining obligation under this agreement is US$1.0 million and will be incurred during2008.

(t) On August 29, 2007, the Company signed a 75 million Domincan pesos (approximatelyUS$2.5 million) agreement with Distribuidores Internacionales de Petroleo S.A. for thepurchase of diesel fuel for the Cerro de Maimón Project. As of December 31, 2007, theremaining obligation under this agreement is 58 million Dominican pesos (approximatelyUS$1.8 million) and will be incurred during 2008.

(u) On October 1, 2007, the Company signed a US$5.8 million agreement with EnergiaQuisqueya S.A to perform all design, engineering, procurement, construction, commissioning,and start-up necessary to construct a 6.8 megawatt generation facility for the Cerro deMaimón Project. As of December 31, 2007, the remaining obligation under this agreement is US$5.2 million and will be incurred during 2008.


13 Related party transactionsThe Company entered into the following transactions with related parties:

2007 2006$ $

Companies owned by a shareholderManagement fees 45,000 60,000Professional fees – 40,000Rent – 40,000Office expenses – 35,000

DirectorsManagement fees – 390,000Compensation 144,000 214,000

Furthermore, the agreement described in note 12(b) was entered into with a related party.

These transactions are in the normal course of operations and are measured at the exchangeamount, which is the amount of consideration established and agreed to by the related parties.

14 Earnings per shareThe following table summarizes the reconciliation of the basic weighted average number of sharesoutstanding and the diluted weighted average number of shares outstanding used in the dilutedearnings per share calculations:

2007 2006

Basic weighted average number of shares outstanding 93,023,427 58,066,349Stock options 2,141,335 1,537,707Warrants 743,371 2,571,279

Diluted weighted average number of shares outstanding 95,908,133 62,175,335

Items excluded from the calculation of diluted loss per share because the exercise price was greater than the average market

price of the common sharesStock options – 2,032,443Warrants – 1,695,649

For the years ended December 31, 2007 and 2006, the diluted loss per share was the same as thebasic loss per share since the dilutive effect of stock options and warrants was not included in thecalculation; otherwise, the effect would have been anti-dilutive. Accordingly, the diluted loss pershare for those years was calculated using the basic weighted average number of sharesoutstanding.


15 Financial instruments

Fair value

Cash and cash equivalents, deposit certificates, amounts receivable, accounts payable andaccrued liabilities, deposits on exploration costs payable and promissory note are financialinstruments whose fair value approximates their carrying value due to their short-term maturity,current market rates and the fact that certain financial instruments are recognized at fair value.

Fair value of derivative instruments are based on quoted market prices for similar instruments and on market prices at the end of the year. The Company recorded a mark-to-market unrealizedloss of US$9,630,754 ($9,546,967) on the derivative contracts as of December 31, 2007.

During the second quarter ended June 30, 2007, the Company entered into a combination offorward and call option contracts for gold and silver, for quantities based on 90% of the estimatedproduction of these metals from the Cerro de Maimón Project during the initial 3 years, toeconomically hedge against the risk of declining commodity prices. The hedging program in placeprovides a forward price for gold of US$650 per ounce for a total of 57,900 ounces and a forwardprice for silver of US$11.50 per ounce for a total of 1,440,000 ounces. The program includes longcall options at an average strike price of US$800 per ounce for gold and US$17.25 per ounce forsilver, thus permitting the Company to participate in price increases in the event that gold orsilver prices exceed the strike prices of the options.

During the third quarter ended September 30, 2007, the Company entered into a combination of forward and call option contracts for copper for approximately 10% of the estimated copperproduction for the Cerro de Maimón Project during the initial 3 years of operations. The hedgingprogram in place provides a forward price for copper of US$2.52 per pound for a total of9,497,503 pounds. The program includes long call options at an average strike price of US$4.04per pound of copper, thus permitting the Company to participate in price increases in the eventthat copper prices exceed the strike prices of the options.

The above hedging programs were mandatory as part of the requirements of the project debtfinancing facility with NEDBANK obtained by the Company as noted in note 12(j) above. Nofurther hedging is required. The program requires no cash margins, collateral or other securityfrom the Company.

The Company has not entered into any other specialized financial agreements to minimize itsinvestments or currency risks. There are no off-balance sheet arrangements. The principalfinancial instruments used by the Company are short-term deposits or other interest bearinginstruments, which are acquired to enhance the terms on the Company’s cash position. TheCompany considers these instruments to be very low risk in nature. The fair value of theseinstruments approximates their carrying cost, unless otherwise noted in the financial statements.

Interest rate riskAs at December 31, 2007, the Company’s exposure to interest rate risk is as follows:

Cash and cash equivalents Variable interest rate and 3.88%Deposit certificates 4.5% and 6.75%Amounts receivable Non-interest bearingAccounts payable and accrued liabilities Non-interest bearingDeposits on exploration costs payable Non-interest bearing

Foreign exchange riskThe Company is subject to a variety of currency risks, including the risks that currencies will not be convertible at satisfactory rates, that the official conversion rates between the differentcurrencies in which the Company operates may not accurately reflect the relative value of goodsand services available or required in the foreign jurisdictions in which the Company operates andthat inflation will lead to the devaluation of the currencies in the foreign countries in which theCompany has operations.


16 Consolidated segment information by geographic regionThe Company is organized under two geographic regions, which are Canada and the DominicanRepublic. The accounting policies used for these reportable segments are consistent with thosedescribed in the summary of significant accounting policies. The principal financial informationfor each of these segments is detailed as follows:

DominicanRepublic Canada Total

For the year ended December 31, 2007 $ $ $

Compensation and fringe benefits 110,052 2,588,584 2,698,636Office expenses 135,870 414,488 550,358Professional and maintenance fees 180,365 1,547,181 1,727,546Travel 11,730 295,544 307,274Repairs and Maintenance 15,400 – 15,400Interest income (15,268) (1,239,044) (1,254,312)Depreciation of property, plant and equipment 7,935 58,855 66,790Amortization of intangible assets – 25,509 25,509Amortization of deferred charges – – –Exchange gain (2,536,504) 1,286,322 (1,250,182)Interest and bank charges 11,148 22,226 33,374Interest on long-term debt – – –Unrealized loss on derivative related liabilities 9,546,967 – 9,546,967Gain on the sale of investments in public companies – – –

Loss before income tax 7,467,695 4,999,665 12,467,360Future income tax expenses – 224,000 224,000

Loss and comprehensive loss for the year 7,467,695 5,223,665 12,691,360

Segment assets 52,327,398 24,380,534 76,707,932

Additions to property, plant and equipment 839,804 71,482 911,286

Acquisition of intangible assets – 53,819 53,819

Additions to mining properties 34,000,476 289,836 34,290,312

DominicanRepublic Canada Total

For the year ended December 31, 2006 $ $ $

Compensation and fringe benefits 13,228 885,734 898,962Office expenses 57,400 411,724 469,124Professional and maintenance fees 26,981 1,587,326 1,614,307Travelling 5,520 227,977 233,497Financial revenues (4,743) (375,191) (379,934)Loss on the sale of a mining property 22,196 42,542 64,738Depreciation of property, plant and equipment – 2,406 2,406Amortization of intangible assets – 951,624 951,624Exchange loss (gain) 324,826 (520,755) (195,929)Interest and bank charges 1,712 30,812 32,524Expenses related to the abandonment of a mining

property and to the write off of mining properties – 169,942 169,942Gain on the sale of investments in public companies (6,926) (1,573,264) (1,580,190)

Loss and comprehensive loss for the year 440,194 1,840,877 2,281,071

Segment assets 18,642,989 22,595,945 41,238,934

Additions to property, plant and equipment 224,505 45,441 269,946

Acquisition of intangible assets – 40,608 40,608

Additions to mining properties 8,993,842 21,181 9,015,023

17 Subsequent eventOn January 30, 2008, the Company borrowed an initial amount of US$12 million under theUS$45 million NEDBANK Capital of South Africa credit facility (note 12j).


Directors

Larry Ciccarelli2, 4

Chairman of the Board

Richard Faucher1, 2, 3

Stuart Feiner1, 4

John Iannozzi1, 3, 4

Terry Ortslan1, 2, 3, 4

Committees:1 Audit Committee 2 Technical Committee 3 Compensation4 Governance

Officers

Larry CiccarelliChairman of the Board and Interim Chief Executive Officer

Jean-Pierre ChauvinPresident and Chief Operating Officer

David W. MassolaVice President Finance and Chief Financial Officer

A. Eric OlsonVice President Projects

Julio Espaillat (CMD),Country Manager

Jose Ruiz (CMD),Mine Manager

Corporate Information

Offices

GlobeStar Mining Corporation

Head and Registered Office:Suite 300, 6 Adelaide Street EastToronto, Ontario, Canada M5C 1H6

Phone: 416-868-6678Fax: 416-868-6467

Web: www.globestarmining.comE-mail: [email protected]

Corporación Minera Dominicana S.A. (CMD)(100% controlled subsidiary)

Head and Registered office:29B Avenue Maximo Gomez, Suite 401Santo Domingo, Dominican Republic

Phone: 809-685-4684Fax: 809-689-7717

SolicitorsBurnet, Duckworth and PalmerCalgary, Alberta

AuditorsPricewaterhouseCoopers LLPQuébec City, Québec

BankersRoyal Bank of CanadaToronto, Ontario

Registrar & Transfer AgentCIBC MellonMontreal, Québec

Listing and SymbolSymbol: TSX:GMI

(far left)Pit operations at theCompany’s Cerro de

Maimón Mine.

(left)Construction at the

Cerro de MaimónMine mill.

FORWARD-LOOKING INFORMATIONThis Annual Report contains forward-looking statements about the Corporation’s operations,exploration activities and financial condition. These statements are found in the Letter to Shareholdersfrom the Chairman and Interim CEO, Letter from the President and COO, the Management’sDiscussion and Analysis and elsewhere and are based on the Corporation’s best estimates andinformation at the time of writing. They are nonetheless subject to significant uncertainties andcontingencies, many of which are beyond the control of the Corporation. Unanticipated events willoccur and actual future events may differ materially from current expectations due to explorationresults, new business opportunities, changes in priorities by the Corporation as well as other factors.Any of these factors may materially affect the Corporation’s future business activities and its ongoingfinancial results.

Printed in Canada.

Concept and Design:Goodhoofd Inc.

Project Manager and Production:Walter J. Mishko & Co. Inc.

www.globestarmining.com

GlobeStar Mining Corporation - sedar push GlobeStar Mining Corporation Advancing towardsProduction 1 “Cerro de Maimón is on track to achieve production in the summer of 2008.”

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