Golden Cycle Gold Corporation

– CC&V Gold Mining Company
– SAR Philippine Prospect
– Table Top Gold Prospect
– Illipah Gold Prospect
– Colorado Exploration
Colorado Cresson Mine–
Cripple Creek & Victor Gold Mining Company (CC&V) Colorado

Over the past three years, cost pressures have raised CC&V’s cost of production at the mine in spite of superb cost containment efforts. During the past year, CC&V mining costs have been relatively stable while the volatility in gold bullion prices increased significantly. The result for 2006 was net income for CC&V of approximately $38.4 million (vs. $9.5 million for 2005) and a decrease in the amount of initial loans payable to AngloGold Ashanti of approximately $19.7 million. It is important to note that the inventory of gold ounces expected to be recovered from the valley leach facility (“VLF”) continued to rise in 2006, and we expect it will continue to rise until the VLF reaches capacity. As of December 31, 2006, CC&V estimates the VLF gold inventory was 551,340 troy ounces of recoverable gold, representing an increase of 96,553 recoverable troy ounces, and a significant asset of CC&V. During 2006 the net profit margin at CC&V was about $135 per troy ounce of gold produced. We anticipate an increase in the profit margin, assuming additional cost inflation accompanied by an even more rapid increase in the price of gold for the remainder of 2007.

Before I present CC&V’s 2006 operational highlights, I need to briefly review the development of the mine for new shareholders: the Joint Venture completed construction of the required infrastructure for the Cresson Mine and began mining operations in 1995, with the first Cresson Mine gold pour occurring on February 14, 1995. In 1996 the Joint Venture completed its first full year of Cresson Mine operations. The development of the East and North Cresson mines began during the second quarter of 1999. The Joint Venture began construction of expanded facilities during early 2002, completing the new truck shop, crushing facilities, expanded process facility, and the first phase of the valley leach facility in September 2002. Construction of the final phase of the valley leach facility was completed in the fall of 2004. The Joint Venture expects to achieve another milestone during August 2007: 3 million troy ounces of gold produced. For additional details, including a description of the business terms of the Joint Venture, please read our report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 2006.

Production
The 2006 Joint Venture gold production was 283,486 troy ounces compared to 329,625 troy ounces of gold produced during 2005. CC&V experienced a prolonged drought over the fourteen months leading into June 2006. The drought caused reduced pregnant pond levels within the Valley Leach Facility (“VLF”), which caused CC&V to reduce the flow rates through the gold recovery circuit, which in turn resulted in reduced fluid movement through the leach facility, and ultimately reduced daily gold recoveries. In recent months the leach facility has received precipitation at more normal rates. The precipitation has worked its way into the leach facility and recovery systems, which combined with CC&V’s addition of significant quantities of water to the barren solution, raised pond levels to normal and permitted CC&V to restore solution flow levels to planned flows of 14,000 gallons per minute. The increased flows through the leach facility increased daily gold recoveries from a June 2006 low of 580 troy ounces per day to approximately 900 troy ounces per day during December 2006.
CC&V appears to have overcome its truck capacity problems, chiefly through improved maintenance. CC&V mined 59.2 million tons of material during the year, including 22.4 million tons of ore, one million tons of run-of-mine ore (ore which was sufficiently fine after blasting and mining and therefore not sent through the crusher circuit) and 35.8 million tons of waste. CC&V also moved one million tons of stockpiled ore to the crusher for a total of 53.9 million tons moved.

The crushing facility operated at above plant design capacity (20 million tons/year) during the year, crushing 23.0 million tons during the year. Ore placed on the valley leach facility averaged 0.024 contained troy ounces per ton, containing an estimated 570,792 troy ounces of gold (an estimated 383,697 recoverable ounces of gold).

Revenue and Costs
During 2006, the Joint Venture sold 286,637 troy ounces of gold at an average price of $603 per ounce producing total gold sale revenues of approximately $172.8 million. The Joint Venture cash production costs for 2006 were approximately $246 per troy ounce compared to $232 per troy ounce during 2005 and a budget of $240 per troy ounce. The main reason for the higher cost per ounce in 2006 compared to the budgeted cost per ounce was the decrease in troy ounces of gold produced in 2006. The Joint Venture had total operating costs of $98.3 million, including depreciation, depletion and amortization (DD&A) expenses of $26.5 million and accretion expense of $1.4 million for the year. These costs compare to $106.9 million, $30.1 million and $1.1 million for the year ended 2005.

Interest expense on the Initial Loans was approximately $34.4 million ($29.2 and $23.8 million in the years 2005 and 2004 respectively). The Company received the Minimum Annual Distribution of $250,000 which will be recouped from future shares of Net Proceeds to the Company.

Ore Reserves
The Joint Venture focused on development, exploration and engineering feasibility work concerning future operations. The main objective of CC&V’s continuing exploration program for 2006 was to expand information on the gold mineralization in two areas of the Wild Horse Extension, area with particular emphasis on metallurgical data, and to further increase the drill information available within areas which have previously indicated existing mineralization.
CC&V currently controls over 85% of the patented claims within the district and 100% of the land within the year-end 2006 Total Mineral Resource. All gold ore reserves and mineral resources are stated at 100% ownership basis, although portions of the ore reserves are subject to third party royalties which vary according to individual agreements with the underlying property owner.

Each year CC&V models its gold ore reserves to incorporate the results of its exploration program, new geologic information, revised metallurgical recoveries, revised gold prices, new geotechnical data, new pit designs, new operating costs and/or allowances for 2006 depletion. All ore reserves for 2006 were modeled using a $550 gold price, an increase from the $400 gold price used to model the reserves shown for 2005. The cutoff grade for reserves remained unchanged from 2005 at a recoverable cutoff of 0.007 ounces per ton.
The year end district wide central drill hole database contains 8,496 drill holes (6% core and 94% reverse circulation rotary) with a total footage of 4,757,499 feet. Samples are collected from the reverse circulation drills at five foot intervals and split with a rotary, wet splitter. Coarse exploration drill samples are collected as two splits. One split (analytical sample) is sent for analysis, and the second split is kept as a coarse replicate (metallurgical sample). Individual samples are dried, split into one 300 gram sample, pulverized to 95% minus 150 mesh, blended and fire assayed (FA) using a one assay-ton charge. Prior to 1996, all samples greater than 0.010 opt FA were also analyzed for cyanide soluble gold using a shake leach method (SL). Commencing in 1996, all samples are analyzed using both FA and SL assay methods. The procedure for collecting drill samples within and adjacent to the existing reserve pits was modified in 2003 to collecting samples on ten foot intervals to minimize costs without losing any critical data. In 2005, the central drill database was audited by Barnes Engineering Services, Inc. Any material errors or other issues identified were corrected prior to the start of 2005 ore reserve modeling.

Resource shells were changed to a $650 Lerchs-Grossman envelope around the reserve pits for 2006 resource estimates from the $475 price of gold used in 2005 ore resource estimates. The geostatistical modeling procedures used by the Manager in computing the ore reserves have been reviewed by independent consultants (Independent Mining Consultants, Inc., Mine Reserve Associates, Inc., Mineral Resource Development Associates, Inc., and Mine Development Associates, Inc.) over previous years, and conform to industry standards.

As of December 31, 2006, CC&V estimated the ore reserve at 142,232,000 ore tons containing 3,842,475 troy ounces of gold at an average of 0.027 troy ounces of gold per ton. CC&V estimates that approximately 2,329,843 troy ounces of gold will be recovered from the ore using present mining and processing techniques. The total addition reflected in the December 31, 2006 Ore Reserve Report was 1,111,768 contained troy ounces of gold. The mining depletion during the year 2006 was 572,728 contained troy ounces of gold. The net increase reported in the Ore Reserve Report is 539,040 net contained troy ounces of gold. During 2006, the increase in the ore reserves is primarily a result of both higher gold bullion prices used in the models and good exploration results reduced by mining depletion. The ore reserve figures set forth above are estimates and no assurance can be given that any particular level of recovery of gold from ore reserves will in fact be realized.

The focus of the Joint Venture’s 2007 exploration program is to drill the west high wall of the East Cresson with the objective of developing significant drill indicated ore reserves which will push the high wall design back several hundred feet and to develop additional metallurgical information in known mineral resource areas to enable it to change the classification of a portion of its non-reserve mineral resources to mineral reserve ounces of gold. It expects to achieve this goal through exploration drilling, geotech and metallurgical drilling and studies and mining studies. Further, the Joint Venture continues to conduct exploration drilling in additional areas on a widely-spaced drill hole basis with the objective of defining a mineral resource in the area.