TRIVALENCE MINING CORP /FI - Annual and Transition Report (foreign private issuer) (20-F) PART I

The following selected consolidated financial data (in Canadian dollars) for the years ended June 30, 2004, 2003, 2002, 2001, and 2000, are derived from the audited consolidated financial statements for the periods indicated and should be read in conjunction therewith.

	Selected Financial Data
	Selected Financial Data
	For the Fiscal Year Ended June 30th
Canadian GAAP:	2004	2003	2002	2001	2000

Cash	$ -	$125,303	$949,636	$894,185	$7,592,015
Total Assets	23,722,853	23,727,865	27,430,357	28,680,564	32,655,376
Current Liabilites	11,407,868	4,817,457	13,385,294	3,754,269	2,413,954
Long Term Debt	15,069,710	13,250,784	187,279	7,197,079	7,790,809
Asset Retirement Obligation	-	-	-	-	0
Future Income Tax	-	154,000	2,006,000	2,988,000	2,350,000
Non-controlling Interest	-	874,665	931,224	385,022	495,358
Share Capital	20,267,973	17,911,673	17,911,673	17,760,994	17,811,681
Equity Components of
Convertible Instruments	970,376	2,222,771	1,630,395	1,252,395	1,591,666
Additional paid in capital	2,089,183	484,330	484,330	484,330
Deficit	(26,082,257)	(15,987,815)	(9,105,838)	(5,141,525)	201,908
Revenue	9,182,133	11,614,789	14,365,155	16,171,148	22,606,384
Administrative Expenses	3,060,270	3,417,767	3,439,432	3,770,023	3,615,688
Loss (Income) For the Period	(10,094,442)	(6,881,977)	(3,813,634)	(5,343,433)	2,500,449
Basic Earnings (Loss) Per Share	($0.48)	($0.40)	($0.22)	($0.31)	$0.16
Fully Diluted Earnings (Loss)
Per Share	($0.48)	($0.40)	($0.22)	($0.31)	$0.16

United States GAAP:

Total Assets	$19,463,195	$17,123,294	$22,149,658	$22,672,949	$27,785,938
Future Income Tax	-	85,000	2,058,000	2,934,000	2,478,000
Long Term Debt	14,752,374	13,546,972	189,588	7,353,365	8,616,119
Asset Retirement Obligation	2,351,488	-	-	-
Share Capital	20,682,764	18,326,464	18,326,464	18,175,785	18,226,472
Additional Paid In Capital	1,156,254	803,796	803,796	803,796	803,796
Other comprehensive income	(216,404)	(730,332)	359,113	(436,387)	62,762
Deficit	(30,988,485)	(19,726,063)	(12,976,084)	(9,911,879)	(4,815,165)
Revenue	9,182,133	11,614,789	14,365,155	16,171,148	22,606,384
Administrative Expenses	3,060,270	3,417,767	3,439,432	3,770,023	3,615,688
Loss (Income) For the Period	(11,262,422)	(6,749,979)	(2,913,526)	(5,096,714)	2,450,579
Basic Earnings (Loss) Per Share	($0.54)	($0.39)	($0.17)	($0.30)	$0.15
Fully Diluted Earnings (Loss) Per Share	($0.54)	($0.39)	($0.17)	($0.30)	$0.14

Neither Trivalence nor its predecessors have declared or paid dividends on its common shares during the last five fiscal periods. Any future decision to declare dividends on Trivalence common shares will be made by the Board of Directors depending upon the financial requirements of Trivalence to finance growth, the financial condition of Trivalence and other factors, which the Board of Directors of Trivalence may consider appropriate in the circumstances. Trivalence anticipates that future earnings will be retained for the

development of its business and does not anticipate the payment of dividends to shareholders for the foreseeable future.

The Company's accounts are maintained in Canadian dollars. In this Annual Report all dollar amounts are expressed in Canadian dollars except where otherwise indicated. The Company's business activities are carried out in Guinea and South Africa and are conducted in United States dollars.

The rate of exchange means the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposed by the Federal Reserve Bank of New York. The average rate means the average of the exchange rates on the last date of each month during a year.

The Aredor Alluvial diamond mine in Guinea does not possess any proven or probable reserves. Present and future alluvial mining activities are based on indicated and inferred resources. The Company’s Palmietgat mine in South Africa is exploiting resources from three diamondiferous kimberlite pipes.

Mineral exploration and development involves a high degree of risk and few properties, which are explored, are ultimately developed into producing mines. There is no assurance that the Company's mineral exploration and development activities will result in any discoveries of commercial bodies of ore. The long-term profitability of the Company's operations will be in part directly related to the cost and success of its exploration and development programs, which may be affected by a number of factors.

Mineral exploration involves operating hazards and risks; even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which the Company has a direct or indirect

interest will be subject to all the hazards and risks normally incidental to exploration, development and production of mineral resources including, but not limited to, unusual or unexpected formations, cave-ins, pollution, equipment breakdown, rugged terrain, wildlife hazards and harsh weather conditions, all of which could result in work stoppages, damage to property, and possible environmental damage. The Company has insurance covering its operations however, the nature of the risks associated with the Company's activities is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable against, or the Company might not elect to insure itself against such liabilities due to high premium costs or other reasons, in which event the Company could incur significant costs that could have a materially adverse effect upon its financial condition. Of the above operating hazards and risks, the Company has from time to time experienced work stoppages due to equipment break-down and periodic flooding at Aredor, Guinea during the rainy season which generally occurs between June and October.

The Company may be required to raise further funds in the future for working capital purposes and for capital requirements. There is no assurance that the Company will be able to obtain the funds required to continue operations on the Aredor Concession and to continue its exploration and development of the Concession. Working capital deficiencies for the years ended June 30, 2004, 2003 and 2002 were $6,925,362, $310,932 and $6,560,380 respectively. Even if the results of exploration are encouraging, the Company may not have sufficient funds to conduct the further exploration that may be necessary to determine whether or not a commercially mineable deposit exists on any property and may not realize a return on its investment. The Company may generate additional working capital through equity offerings, borrowings, sale or the joint venture development of its properties and/or a combination thereof; there is no assurance that any such funds will be available for operations. Failure to obtain such additional capital, if needed, would have a material adverse effect on the Company's operations.

The Company’s financial statements have been prepared in accordance with Canadian generally accepted accounting principles applicable to a going concern which assume that the Company will realize its assets and discharge its liabilities in the normal course of business. Realization values may be substantially different from carrying values as shown in the financial statements should the Company be unable to continue as a going concern.

Negative cash flow from operating activities is likely to continue until the Company is able to finance the purchase of additional heavy equipment in order to operate its plants at rated capacities. Negative cash flow from operations excluding changes in operating assets and liabilities was CAN $6,365,147 for the year ended June 30, 2004. The Company has not paid interest due under the terms of debentures securing convertible notes payable. The non-payment of interest would constitute an event of default; however, the Company has obtained a waiver until August 15, 2005. Principal and interest due under the convertible notes payable at June 30, 2004 is in the amount of $14,752,374. The Company’s ability to continue as a going concern is dependent upon obtaining debt or equity financing for capital expenditures and general working capital. The Company’s consolidated financial statements do not reflect adjustments in the carrying value of the assets and liabilities, income statement items, and balance sheet classifications that would be necessary if the going concern assumption were not appropriate.

The Aredor Concession derives from a Presidential Decree dated May 8, 1996 granting the “La Convention D’Exploitation Miniere“ (the “Mining Agreement”); however, there is no guarantee that title to the Concession will not be challenged or impugned. In Guinea, all land belongs to the state. No other entity, aboriginal or otherwise has the right to contest a mining agreement granted by the state. Subsequent to June 30, 2004 and in accordance with Article 26 of Aredor Mining Agreement dated March 28, 1996, the Company applied for and received confirmation from the Minister of Mines and Geology, Government of

Guinea, of a 15-year extension of the Agreement from March 27, 2006 to March 27, 2021.

In South Africa the mineral rights are to the farm Palmietgat 34 JR, Northern Province. During the past year, there have been numerous reforms to the mineral legislation in South Africa. In October 2002, the South African Government enacted its Mineral and Petroleum Resources Development Act (the “Act”) that deals with the State’s policy towards the future of ownership of mineral rights and the procedures for conducting mining transactions in South Africa. The Act emphasizes that the Government does not accept the existing ownership of mineral rights in South Africa, and the long-term objective is for all mineral rights to vest in the State. The Act will come into operation on a date still to be finalized by the President of South Africa.

A further, primary objective of the Act is the pursuance of the Government’s policy on furthering Black Economic Empowerment (“BEE”) within South Africa’s mineral industry, by encouraging mineral exploration and mining companies to enter into partnerships with BEE companies. The Act also provides for the implementation of social responsibility objectives by mining and exploration companies. Applicants for prospective permits and mining licenses are required to provide details of these criteria.

In addition to the Act, the South African Government’s recently approved Broad Based Socio-Economic Empowerment Charter within the mining sector embodies the Government’s policy of facilitating the transfer of ownership in the South African mining industry to Historically Disadvantaged South Africans (“HDSA’s”) within the next 10 years. It also aspires to achieve employment equity of at least 40% participation by HDSA’s in management within five years, and 10% participation by women.

It has also been agreed between the Government and the mining industry that mining companies will achieve the desired 26% BEE status (15% in five years and the full 26% in ten years) in a transparent manner, at fair market value and at no risk to the mining companies. Stakeholders will meet after five years to review the progress made towards achieving the transition of ownership of mining assets to HDSA’s. Measurement of success in achieving BEE status could be based upon market share of South African mining production owned and controlled by HDSA’s.

In March 2003, the Government released its proposed Mineral and Petroleum Royalty Bill (the “Bill”) outlining the State’s policies with regard to the payment of royalties by mining companies. The Bill proposes that diamond producers pay a Royalty of 8% from the sale of diamonds. The Bill has yet to be implemented. The impact of these policy changes on the Company and its operations in South Africa are indeterminate at this time.

The Company’s mining permit expired in October, 2004. Management is currently in the process of reviewing the Company’s mining permit and applying for the conversion of its existing mining rights under the new Act. There is currently no indication that the mining permit will not be renewed and the mining rights will not be converted.

The mineral resources industry is intensely competitive and the Company competes with many companies that have greater financial resources and technical facilities. Significant competition exists for the limited number of mineral acquisition opportunities. As a result of this competition, the Company may be unable to acquire additional diamond properties and/or other mineral resource projects on terms it considers acceptable.

The diamond mining industry in general is intensely competitive and there is no assurance that, even if commercial quantities of mineral resources are developed, a profitable market will exist for the sale of minerals. Factors beyond the control of the Company may affect the marketability of any minerals discovered; significant price movements over short periods of time may be affected by numerous factors

beyond the control of the Company, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the U.S. dollar relative to other currencies), interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods. The effect of these factors on the price of diamonds and therefore the economic viability of any of the Company's exploration projects cannot accurately be predicted.

The Company had reserved as of June 30, 2004 29,191,442 Common Shares for issuance upon the exercise of warrants, options and conversion of debt. Such Common Shares, if exercised, would represent a potential equity dilution of approximately 124% based upon the number of outstanding Issued Shares at June 30, 2004 of 23,375,984. The issuance of these shares has already received Exchange approval. Furthermore, the Company may enter into commitments in the future, which would require the issuance of additional Common Shares and may grant additional stock options and/or issue additional warrants. At June 30 2004, the Company had 47,432,574 authorized but unissued and unreserved Common Shares. Issuance of such additional shares may be subject to Exchange regulatory approvals and compliance with applicable securities legislation.

Unless a prospectus is filed and receipted by the British Columbia Securities Commission pertaining to an issuance of shares, the Company must rely upon an exemption to the prospectus filing requirements under the Securities Act (British Columbia) prior to issuing shares, or any securities for that matter.

Until recently diamond marketing throughout the world was largely controlled by the Central Selling Organization ("CSO"), which acted as a producer selling co-operative. The Diamond Trading Company (DTC) has replaced the CSO and the Company expects the result will be a greater variability of diamond prices. The Company markets its own production independently of the CSO.

Repatriation of funds (including the remittance of payments in respect of capital) from the Company's or its subsidiaries' foreign operations may be curtailed or restricted pursuant to foreign exchange controls, export controls and other government laws or regulations in countries in which the Company and its subsidiaries conduct operations, which may be imposed in the future. The Mining Agreement specifically permits the export of the Company’s rough diamond production upon the payment of a 10% mining tax on the fair market value of the stones as determined by the Guinea Bureau of National Expertise. The mining tax on cut diamonds is 2% and the mining tax on gold is 5%. There are no export controls currently in place in Guinea except for the mining taxes noted above.

The Company is in compliance with all applicable environmental rules and regulations. However, amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent interpretation, implementation or enforcement thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or production costs, or decreases in levels of production at producing properties, or require abandonment or delay in development of new mining properties.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those

suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violation of applicable laws or regulations.

Environmental regulations in Guinea and South Africa require mining companies to take necessary measures to prevent pollution to the environment, to treat waste, emissions, and effluents, and to preserve the national heritage of forests and water resources. To date, the Company has not been subject to any fines or penalties for violations of relevant government regulations.

Illicit mining on the Aredor Concession, Guinea has been an ongoing problem. Mining equipment and diamonds are openly traded on local markets. The mining operation and the plant were temporarily shut down in 1991 because of political unrest and hostilities during attempts by the previous owner to oust the illicit miners prior to the acquisition of the Concession by the Company. Presently, there is some illegal mining activity on the Concession.

Guinea was granted independence from France in 1958. It was a republic until 1984 when a military coup overthrew the government. Elections were held in 1993 at which time the current President of the country was elected President for a five-year term. The President is the same general who ruled the country from 1984 until the elections in 1993. In December 1998, the current President was reelected for a second term of seven years in a general multi-party election. The political stability of Guinea is not certain and any disturbance in the present political climate could affect the Concession in ways not predictable by the Company. The risks, include, but are not limited to, terrorism, military repression, and extreme fluctuations in currency exchange rates and high rates of inflation. Changes in resource development or investment policies or shifts in political attitude in Guinea may adversely affect the Company's business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, exchange controls, export controls, income taxes, expropriation of property, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. The effect of these factors cannot be accurately predicted. During the previous political regime, the Guinean State carried out several expropriations in the industrial sector of which only that of Mobil Oil Corporation was significant. The Guinean State for the expropriation indemnified Mobil Oil Corporation. Currently, the Guinean government encourages free enterprise and foreign investment. Under the present government, there have been no expropriations in the industrial sector.

The Company uses, in part, mobile prospecting rotary pan plants to ensure that gravel-tramming distances are not excessive. Rotary pan plant operators have stated that the kimberlite material could create clay problems and the alluvial terrace material could have concentration problems caused by the laterite. A magnetic separator could be used to remove some of the magnetic component in the terrance concentrates. Flat alluvial material could have sedimentary screening problems. There is also concern on the part of Aredor geologists about water problems in the actual mining of the alluvial flat material. Processing of the alluvial material is subject to clay problems in the rotary pan plant. There may be concentration problems caused by laterite in the alluvial terrace material. There may be screening problems in the flat alluvial material. There is, accordingly, a risk of poor recovery with respect to utilizing pan plant technology.

The Company is dependent on a relatively small number of key employees, the loss of any of who could have an adverse effect on the Company.

The Trivalence Directors serve as Directors of other public companies and to the extent that such other companies may participate in ventures in which the Company may participate, the Directors of the Company will have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. From time to time several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, permitting involvement in a greater number of programs and reducing financial exposure in respect of any program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment. In accordance with the laws of the Province of British Columbia, the Directors of the Company are required to act honestly, in good faith and in the best interests of the Company.

Trivalence commenced operations in 1987; and, until 1991 it acquired and abandoned a series of natural resource properties. In 1991 it changed its business focus from natural resource exploration and development to the production and marketing of recorded music; in connection therewith, its name changed to Maximusic North American Corporation. During the period from September 1991 to December 1993 Trivalence was unsuccessful in developing product or revenue from the production of recorded music and thereafter ceased operations. Trivalence was designated an "inactive company" by the Vancouver Stock Exchange (the "Exchange") according to Exchange Policy 11 on December 7, 1993. In 1994, Trivalence effected a change in management and completed a reorganization under the Exchange Policy 11. On September 30, 1996, the Exchange removed the designation of "Inactive" status.

The Company is presently engaged in the location, acquisition, exploration and, if warranted, development, of natural resource properties. The Company has an interest in three properties located in Africa.

Aredor Alluvial Mine - Guinea, West Africa The Company commenced production at Aredor for reporting purposes on October 1, 1997. From May 1996 until September 30, 1997, the Company was primarily occupied with the development of the Aredor alluvial diamond mine. The Company, through Aredor FCMC S.A., owns 85% of the Aredor alluvial diamond mine. The government of the Republic of Guinea owns the remaining 15%. In 2001 the Company signed a joint venture with Rio Tinto Mining Exploration & Ltd. of England to explore for economic kimberlite at the Aredor mine. After working for over two years and spending US $6.0 million Rio Tinto concluded that the economic potential of the kimberlite’s identified reserves did not meet their internal targets and as a consequence Rio Tinto withdrew from the joint venture in March 2003. The Company plans to continue exploring the most prospective Aredor kimberlites.

Palmietgat –Kimberlite Mine South Africa In 1999, the Company acquired a 50% interest in the Palmietgat Kimberlite Project. In 2001, the Company exercised its option to purchase the remaining 50% from the joint venture partner. Over 3 million tonnes of kimberlite has been identified and the mine commenced commercial production in April 1, 2001.

Kokong – Botswana In 1999, the Company acquired five (5) prospecting licenses covering an area of 3,745 square kilometres in Botswana; the licence area is referred to as the Kokong

Project. The licensed area hosted known kimberlites, 14 of which have yielded diamonds but not in sufficient quantities or of sufficient quality to be economical. In 2002, the Company signed a joint venture agreement with a subsidiary of Rio Tinto Mining to explore for economic kimberlites on the Kokong property. Rio Tinto is the operator.

The Company presently employs approximately 459 Guineans, in addition to approximately 38 expatriate employees at Aredor and about 20 employees at the Palmietgat project. The Vancouver head office has 14 employees. Contract work is minimal.

Until December 2001, the Company sold most of its diamonds by international tender in Conakry, the capital of the Republic of Guinea. The sales were supervised by the Bureau of National Expertise and took place approximately every two months. Buyers included representatives from firms in Europe, North America, and the Middle East, among others. Sales are denominated in US dollars. Terms of sale were cash before delivery of the diamond parcel purchased. Since January, 2003 the Company has sold its diamonds in Antwerp, Belgium, on the same terms. Diamonds produced from the Palmietgat Mine, South Africa are sold through the Johannesburg Diamond Exchange through which both domestic and foreign buyers bid. De Beers has a first right of refusal.

There have not been any bankruptcy, receivership or similar proceedings, trading suspensions or cease trade orders made against the Company by any regulatory authority.

The Company's no par value common shares, (the "Common Shares") are listed for trading on the TSX Venture Exchange under the symbol TMI and under the symbol TMIGF on the OTC Bulletin Board in the United States.

The Company's activities for the fiscal year ending June 30, 2004 are set forth in MINERAL PROPERTIES .

Trivalence Mining Corporation, a British Columbia, Canada corporation was incorporated on September 18, 1984 under the Company Act by registration of its Memorandum and Articles under the name "Pink Jade Ventures Inc."

On January 28, 1987 the Company changed its name to "Bullion Range Exploration Corp." On August 9, 1991 the name was changed to "Maximusic North America Corporation." On September 18, 1991 the name was changed to "Maximusic North American Corporation." On March 1, 1995 the name was changed to "Trivalence Mining Corporation."

The executive office and records office is located at #502 - 815 Hornby Street, Vancouver, British Columbia V6Z 2E6.

Trivalence carries on its business through wholly-owned and indirectly owned subsidiaries as follows.

Trivalence wholly owns First City Mining Company Limited, ("First City") a private Alberta company incorporated on December 14, 1995 pursuant to the laws of the Province of Alberta under which it is presently governed. First City was granted the Aredor Diamond Mine Concession (the “Concession”) by the Republic of Guinea ("Guinea") on March 28, 1996.

First City wholly owns Pioneer Mining Company N.V. ("Pioneer"), which was incorporated on May 2, 1996 pursuant to the laws of the Dutch Antilles under which it is presently governed. Pioneer owns 84.98% of the issued shares of Aredor FCMC S.A. ("Aredor") and 100% of the Kokong Kimberlite Licenses in Botswana.

Aredor was incorporated on May 28, 1996, pursuant to the laws of Guinea under which it is presently governed to hold the Concession which it received by assignment from First City and to be the operating company to develop the Concession. To comply with the laws of Guinea, a director of Aredor, Lutfur Rahman Khan owns one share of Aredor, which represents .02% of the shares, which is held in trust for the Company. Lutfur Rahman Khan is also a director of Trivalence Mining Corporation.

Trivalence Mining’s Palmietgat Project of South Africa is held through its wholly-owned subsidiaries Anglo-Canadian Mining Corporation and Fraser Mining Corporation which holds a 100% interest in North American Mining Corporation (PTY) Ltd. which hold 100% of Palmietgat Project. Anglo-Canadian Mining Corporation was incorporated on May 12, 1999, pursuant to the laws of British Virgin Islands under which it is presently governed. Fraser Mining Corporation was incorporated on May 12, 1999, pursuant to the laws of British Virgin Islands under which it presently governed.

The Concession is located 700 km. east of the capital city of Conakry, Guinea. Access is by road or by aircraft.

Air: There is a gravel (laterite) airstrip called Gbenko Airfield (1200 metres long) at Aredor. It was previously serviced by three different carriers but, now that radio communications are not available, it is serviced occasionally by Guinea Inter Air. The Gbenko airstrip has fuel tanks (not in use) and a small hanger. It would be suitable for air resupply directly to the camp and for the transport of product. The capital of Guinea, Conakry, has an international airport, serviced by Air France, Brussels Air (Belgium), Air Afrique and other carriers.

Road: The distance from Conakry to Aredor by road is approximately 725 km and takes about 14 hours by 4 X 4 vehicle. The first 525-km from Conakry is paved, but the last 200 km has a laterite surface and is subject to damage during the Guinea rainy season. The road is passable for light dry season use without major work. For sustained use, the road requires grade, ditching, crowning and culverts. The northern route, which is the 200 km road from Aredor to Kankan would be impassable by heavy transport because of the very rough road conditions.

Alluvial flat and terrace deposits are the primary focus for mining and exploration plus exploration on the prospective diamondiferous kimberlites.

First City negotiated and signed the Aredor Concession Agreement with the Ministry of Mines of Guinea on March 28, 1996, which included the Aredor alluvial diamond mine covering the 1,212 square km - Aredor Concession. The Mining Agreement defines and grants an exploitation permit for a term of ten years, which will be automatically renewed if requested for three successive five-year terms. Subsequently the Company applied for and received confirmation from the Minister of Mines and Geology, Government of Guinea, for the 15 year mining extension from March 26, 2006 to March 27, 2021.

In May 1996 First City relinquished 100 square kilometres located at the perimeter of the Concession to allow mining to local residents in an effort to control illegal mining on the Concession. An additional 100 square kilometres was to have been relinquished by March 28, 1997. Because of ongoing negotiations between local authorities and the Company, the retrocession of the second 100 square kilometers was finalized in April 1999. The illicit mining is one of the reasons the previous owner shut down operations.

The rights granted are limited to gold and diamonds. The terms of the Mining Agreement provide for Guinea to retain a 15% interest at no cost and, without further payment and in addition, by law, residents of Guinea have an option to acquire a 10% interest at the fair market value of the share as determined by the directors of Aredor. The option to acquire 10% of Aredor is exercisable for a 30-day period after the outset of Phase III development of the mine. The Mining Agreement therefore grants the company an 85% interest in the Concession, which may be reduced to a 75% in the event the 10% option is exercised.

A severance fee of US$1,500,000 payable to Guinea before revenue can be received by Aredor from production. One half, US$750,000, was paid at the formal signing of the Concession Agreement on March 28, 1996. The balance of US$750,000 was paid after the first sale of production in Phase I.

US$6,000,000 according to an engineering and economic appraisal report dated February 1996 to achieve commencement of commercial production upon completion of a Test Phase which was estimated to be about 7 months after start up. US$1,000,000 was to be spent during the Test Phase and US$5,000,000 was to be spent during Phases I, II and III. There are no requirements as to how the US$6,000,000 is to be spent.

During the first four years of the Mining Agreement, Aredor must invest US$1,600,000 in an initial regional geological exploration program in addition to the $6,000,000 budget for the mining program.

Taxes: Fixed fees and surface royalties of a nominal amount not expected to exceed US$5,000, a 10% Mining Tax on the sales value of rough diamonds and 2% of cut diamonds and 5% for gold. Commencing January 1999 a 35% tax on business profits is payable. There is also an extraordinary profit tax of 50% payable when the net taxable income/investment ratio exceeds normal break-even point generally accepted by the international mining industry for minerals recognized in the mining industry. To determine the break-even point all costs and expenses shall be multiplied by a factor of 15. The portion of such amount not reinvested is taxed at a rate of 50% after deduction of the business tax of 35%.

Other fees and taxes payable during the test period were: a sum equal to 6% of the salaries paid within and outside Guinea, a contribution for employee training equal to 1.5% of salaries, the effective tax rate on vehicles (except field vehicles and machinery), employee source deductions, a withholding deduction at source as a discharge of all other income taxes at a rate of 10% of fees and benefits to non residents of Guinea.

Lease costs of US$100,000 per month to be paid from the date of the sale of the first commercial production corresponding to the processing of 1,600 m ³ /day by a fourteen-foot moving pan. The lease costs were funded from production revenues. However the equipment rental amount has been renegotiated. Effective June 1, 1998 to May 31, 2001, the Company was obligated under the terms of the Aredor concession agreement to pay US$30,000 per month for the rental of equipment and other assets situated on the concession at the date of the acquisition by the Company. Thereafter the Company was obligated to pay US$40,000 per month during the tenancy of the concession. At June 30, 2004 the Company had withheld 40 months rent (US $1,600,000 which amount is included in the Company’s June 30, 2004 Accounts Payable pending resolution of the terms of a subsequent agreement with the Guinea Ministry of Mines which the Company believes will offset this liability).

First Phase (“Phase I”): The Company must put into operation a first mobile pan plant for production and the auxiliary equipment with a maximum processing capacity of 1,600m ³ /day within 6 months of the commissioning of the prospecting mobile wash plant.

Second Phase (“Phase II”): This phase commences at the end of the Phase I during which the Company shall have processed approximately 330,000m ³ of ore (corresponding to a period of approximately 6 to 8 months) with the first mobile pan plant for production. The Company shall commission during this phase a second mobile pan plant for production and auxiliary equipment with a maximum processing capacity of at least 1,600m ³ /day.

Third Phase (“Phase III”): This phase commences at the end of the second phase during which the Company shall have processed approximately 990,000m ³ of ore (corresponding to a period of approximately 14 to 16 months from the beginning of Phase I) with the first and second mobile pan plants for production. The Company must commission during this phase a third mobile pan plant and auxiliary equipment with a processing capacity of at least 1,600m ³ /day.

A minimum investment during the term of the Mining Agreement of US$8,000,000 which except for the initial capitalization of Aredor in the amount of US$50,000 may be in the form of debt or equity. This will include the severance fee of US$1,500,000, a budget for geological exploration of US$1,600,000, the budget for the mining operations of US $6,000,000 and incorporation expenses of Aredor. The Company has expended sufficient sums to satisfy this obligation.

First City is required to submit to the Guinean Ministry of Mines and Geology for approval the annual plans and budgets, any material amendments to the plans and budgets, any supplementary work to the annual plans, and monthly reports.

Analysis of core samples must be done in Guinea unless, if justified, analysis is necessary at facilities outside Guinea including large samples intended for metallurgical studies. The analysis results must be communicated to the Ministry of Mines and Geology.

The sale of diamonds exceeding US$500,000 must be done through a tender process with not less than 3 parties.

The Company's interest in the Concession is held indirectly through its ownership of First City. First City wholly owns Pioneer. Pioneer owns effectively 85% of the shares of Aredor the operating Guinea company. Pursuant to Guinea law a director must be a shareholder. Mr. Lutfur Khan is a director of Aredor and Trivalence has been issued one share, which represents .02% of the issued shares of Aredor. Mr. Khan holds the one share in trust for the Company.

Pursuant to resolutions of the first shareholders’ meeting of Aredor, it was resolved that during the term of the Mining Agreement, Trivalence would bring the capitalization of Aredor up to US$8,000,000.

Diamond production by the French company, Soquinex, started in 1934 and continued in conjunction with another company, Beyla, until 1960. A national company, EGED was then formed by the Ghanian government to exploit the diamonds in the Soquinex and Beyla concession, but experienced difficulties during the 1960's. A Soquinex washing facility is located on the Aredor lease near the town of Soniferea. The Russians were then allowed to mine diamonds and they reopened the Soquinex plant, which ran until 1973.

Only July 7, 1981, Aredor Guinea S.A. was established to develop diamond deposits explored for and defined by Simonius Vischer (I.D.C.) Ltd. in eastern Guinea.

From 1983 to March 1994 Aredor Guinea S.A. produced 1,253,754 carats of diamonds for a total value of US$377,831,300 (US$ 301.36/ct). The average grade mined during this time period was 7.58 carats per hundred tonne (cpht). Large high quality diamonds were also recovered with three of the largest diamonds worth a total of US$26,759,000. The Aredor mine closed in 1994 for the following economic reasons:

The dense media (DMS) diamond recovery plant was very expensive to operate and maintain.

Once most of the diamondiferous deposits within 10 kms of the plant had been processed, the remaining diamondiferous deposits were uneconomical to truck to the stationary diamond recovery plant.

In addition, there were significant social responsibilities for the workforce and municipalities in the lease area. Efforts to control illicit mining consumed significant security resources, were unsuccessful and prompted an uprising.

Trivalence's subsidiary in Guinea started its operations (the "Test Phase") in May 1996. The objective of the Test Phase, which lasted until September 30 ^th 1997, was to verify that pan plants could be used efficiently at the Aredor site, and that the diamonds recovered corresponded to the grade reported by the previous operator.

The test was able to demonstrate that gravel from the flats and from the terraces could be processed with the pan plants, and that the clay content of the gravel is the main stumbling block in this type of processing. Other materials (kimberlite and old tailings) were processed satisfactorily, but had relatively low grades. It also showed that the diamondiferous deposit grade was relatively reliable and that the overall mining costs were such that deposit blocks classified as marginal by the then previous operator could be considered as mineable using the present methodology.

Starting in September 1997, a 14' pan plant was dedicated to the processing of tailings from the previous operation. The objective was to process this material for a period of 6 to 8 months to assess the economics of this processing. Between September 1997 and September 1998, the 14-foot tailings plant processed 192,000 tonnes of tailings and produced 1,522 carats for an average grade of .003 carats/tonne which was not economic except for the fact that included in the diamonds recovered was a 70.1 carat diamond that sold for US$2,765,000 in November 1997. In addition, a 32.25-carat boart was recovered that had no economic value.

During the year ended June 30, 2004, the Company refurbished and redesigned a 120-150 TPH DMS plant at the Aredor mine. This plant was brought into production in March, 2004 at 60-70 tonnes per hour, and has since been processing at some 100 plus tonnes per hour.

A central component of the Aredor mine plan in 2004 was the moving of the 14’/120 TPH pan plant from an area known as Wouloro where the alluvial beds providing pay gravels were depleted in Quarter 1, 2004 to a new area known as Bougban approximately 10 km. away. The civil engineering work at the new Bougban site commenced in October 2003 and was completed in April 2004. The removal, transportation and re-installation of the plant’s components, including various upgrades and design modifications geared to improving efficiency, were all successfully executed on schedule from March to mid May, 2004, and the plant began phase-in production during the week of May 17, 2004. However, the plant was temporarily shut down in mid July 2004, as gravel from the initial block being processed was not generating the anticipated diamond output. Due to the rainy season it was not practical or economic to process gravel from the adjacent blocks. Management plans to re-commission this plant during quarter one, 2005 after pad preparation is complete on the adjacent blocks along with the completion of a block infill-sampling program to be undertaken during quarter 1, 2005.

The Company’s bid to the Guinean Receiver to purchase certain used mining equipment, from a company in Guinea that went into liquidation, on an ‘as is where is basis’ was accepted for consideration of US$750,000 before Guinea transfer taxes, transportation costs and other incidental costs. The equipment acquired includes two Manitowoc 4600 draglines, excavators, front-end loaders, bulldozers, dump trucks, generators, light vehicles, parts and ancillary equipment. The two 4600 draglines will add to and complement the Company’s four existing draglines and the additional equipment will further round out and strengthen the mining/transport equipment sets required to support the planned increase in plant production in accordance with the future mining/production plan.

Revenues decreased due to lower diamond production (23,105 carats) as the 14ft plant was being moved for the better part of five months and the DMS plant was not in commercial production until March 2004. In addition, the grade was low, the quality was average and the overall size of the diamonds produced was small, resulting in overall lower diamond prices for the diamonds sold in the fiscal year. During the fiscal year, the Company had 468.74 carats cut & polished on an experimental basis and the Company sold them for $1.161 million. The amount is included in the revenue from the Aredor mine.

Revenue from diamond sales generated by the Aredor mine for the fiscal year ended June 30, 2004 was $7.222 million compared with $7.352 million in 2003. The Company sold 22,846 carats (US$236 per carat) in 2004 compared with 23,358 carats (US$213 per carat) in 2003. Reduction in revenue and carats sold was due to lower diamond production. The lower production was caused by the move of the Company’s 14ft plant to a different location causing a loss of production for five months. The refurbished DMS plant did not reach the maximum processing capacity during the fiscal period. The overall quality and size of the diamonds produced was also lower compared to the previous years. The overall price per carat impact was offset by the fact that the Company had 468.74 carats cut and polished, which increased revenue by $1.161 million. Without the cut and polished diamonds revenue, the per carat price for diamonds sold from Aredor mine averaged US$197 compared to the US$236 mentioned above.

The production cost of diamonds produced for the year ended June 30, 2004 was CAN $10.020 million compared to CAN $10.937 million for the year ending June 30, 2003. The decrease in production cost in 2004 compared to 2003 was due to lower fuel consumption and parts expenses.

Review of Mining and Exploration Assets in Guinea, South Africa and Botswana (by SRK Consulting of UK)

In August 2003, the Company hired SRK Consulting to produce a report covering its exploration and mining assets. These comprise the Company’s two operating diamond mines namely; the Aredor alluvial diamond mine in Guinea and the Palmietgat kimberlite mine in South Africa; and the exploration potential within the Aredor and the Kokong kimberlite licences in Botswana.

SRK is an international group comprised of over 500 professional staff offering expertise in a wide range of engineering and scientific disciplines. The SRK Group’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. SRK has offices in the UK, Canada, North and South America, South Africa and Australia.

The Aredor Mining Agreement provides that proceeding from one phase to the next will occur only if the technical and financial results are satisfactory to Aredor. If they are not, Aredor can at its option surrender the Mining Agreement.

The following information is summarized from the SRK Consulting Report titled Review of the Aredor Alluvial Diamond Mine, Guinea at November 2003.

As per SRK “In addition, the potential exists to promote lower grade and higher cost blocks into the Mineral Resource following the predicted reduction in unit operating costs once the rebuilt DMS is in operation.”

There is also the potential for the discovery of further gravel resources on untested tributary banks in the vicinity of known mineralisation and also further away to the north of the concession. Finally, TMC plans to continue exploring the weathered kimberlite occurrences which have been found and delineated during the Rio Tinto exploration program.”

The Company has a 100% interest in a kimberlite project in South Africa. The property is located 70 kilometers North of Pretoria in proximity to roads and power lines. The property hosts six kimberlite pipes and several kimberlite dikes, all of which are known to be diamondiferous. At present, three of the pipes (K14 East, K14 West and the K15) with an aggregate surface area of 1.6 hectares may have an economic grade. The resource down to 110 meters is approx. 3.5 million tonnes at an estimated 44 CPHT. De Beers who carried out three drill programs explored the property in detail. In 1979, 501 percussion holes (7,175 meters) delineated the surface extent and outlines of the different kimberlite bodies. In 1980, 16 diamond drill holes (2,249 meters) determined the morphology and vertical extent of the pipes at depth. In 1994, thirteen large diameter percussion holes (1,149 meters) were drilled down to 110 meters and sampled the 3 best pipes. A total of 4,131 tonnes of samples were recovered from shafts and tunnels. The size of the parcels of diamonds recovered were considered too small to provide valuation figures, but are indicative of the diamond values of these pipes.

South Africa is currently the world’s fifth largest producer of natural diamonds. The largest Pipe in South Africa is the Premier Pipe, which covers an area of 54 hectares. South Africa also has an established diamond cutting industry.

The Company signed an agreement dated May 8, 1999 with a South African diamond miner (the “partner”) to form a joint venture (“JV”) as to 50% each, to acquire from De Beers Consolidated Mines Ltd., the mineral rights to two contiguous areas, (the “property”), construct a mine and commercially operate the property located in the Northern province of South Africa. In 2001, Company exercised its option to acquire the remaining 50% from the joint venture partner for $US150, 000 cash and 728,571 shares of the Company for a deemed value of US$947,142 and the settlement of $335,452 due from the former joint venture partner.

The mineral rights are defined as: (1) diamonds, rubies and sapphires from area 1 consisting of 1041 hectares and (2) precious stones from area 2 consisting of 1041 hectares.

Production of diamonds produced in 2004 at the Palmietgat mine were significantly lower (17,863 carats) than in 2003 (45,516 carats). The decrease was due to the following factors: i) removal of overburden material from the two kimberlite pipes resulting in a four-month loss of fresh kimberlite material to process; ii) installation of two new crushers for crushing the oversize material, which took two months during which time there was no production; iii) of the material processed during the year, more than 50% was from the oversize stockpiles which had a lower grade compared to the fresh kimberlite. However, this material needed to be processed as it was becoming difficult for the heavy equipment to move around the plant; iv) the overall grade from the fresh kimberlite material was lower compared to previous years.

Recent changes in South African legislation with respect to mineral rights may impact the Company’s ability to continue to operate the property. The new legislation states that all mineral rights will revert to the government and entities will have to apply for the conversion of their old mining rights to new prospective and new mining rights. Furthermore, the Company’s two-year mining permit expired in October 2004. The directors are currently in the process of renewing the mining permit and applying for the conversion of the

existing mining rights under the new Act. There is no indication that the mining permit will not be renewed and the mining rights will not be converted.

Diamond sales from the Palmietgat Mine for the year ended June 30, 2004 was $ 1.988 million compared to $4.291 Million in 2003. The Company sold 17,863 carats (US$76.80) in 2004, compared with 45,516 carats (US$54.37 per carat) in 2003. The significant decrease was caused by the following factors: i) removal of the overburden material from the two kimberlite pipes resulting in a four-month loss of fresh kimberlite material to process; ii) installation of two new crushers to crush the oversize material, which took two months during which time there was no production; iii) of the material processed during the year, more than 50% was from the oversized stockpiles which had a lower grade compared to the fresh kimberlite. However, this material needed to be processed as it was becoming difficult for the heavy equipment to move around the plant and iv) the overall grade from the fresh kimberlites material was lower compared to the previous years

The Company is currently conducting feasibility to mine beyond the thirty meters depth. Early indications are that the Company will continue to mine beyond thirty meters depth. Company ‘s management feels that recent increase in average price/carat is due to mining in better kimberlite at deeper pit levels.

In the fiscal year eight holes were drilled on kimberlite pipe K14 at an average depth of 11m for a total of 88m. Only three holes intersected kimberlite. The conclusion was that K14 does not extend more than a few meters at surface further than the boundaries drawn by RTZ in 2002. Six trenches were excavated and three composite bulk samples were sent to the DMS plant for treatment. Samples of 182m ³ , 96m ³ and 112m ³ were treated. The first two produced grades around 0.02cts/m ³ but the third produced a grade of 0.5cts/m ³ . Taken together with RTZ's results, the Company’s exploration staff thinks that there may be a high-grade zone that is contained within an area that extends from the main K14 pipe. Since year-end, the Company has drilled 31 auger holes at an average depth of 22.5m for a total depth of 697.5m within this extension area. Drilling shows that the southern end of the kimberlite does extends westward for another 100m.

A 1,500m ³ bulk sample has subsequently been taken from this higher-grade extension zone in K14 to test for diamond size and and results are pending. A further 12 auger holes are planned to see if the pipe extends to the west.

The Company’s five prospecting licenses initially totaling 3,745 square kilometers are in the Kokong area, Kgalagadi district, Botswana. The Kokong kimberlite fields are located 300 kilometers west of the city of Gaborone and 75 kilometers south of the city of Kang. Achaean Rocks of the Kaapvaal Craton underlie the area covered by the prospecting licenses, which is home to the Jwaneng Diamond Mine. The property hosts 34 known kimberlite occurrences, 14 of which are known to be diamondiferous. The Company acquired the ground based on these known kimberlites and high indicator mineral counts occurring within the licensed boundaries.

The Company received a report from MPH Consulting Botswana (Pty) Limited (MPH) detailing the results of a 22,000 kilometer line airborne magnetic survey covering the Kokong licenses. The airborne survey was successful in identifying 29 of the known 34 kimberlites occurring on the property. In addition to the known kimberlites, MPH reported that “the processing of the survey data has allowed us to establish the magnetic character of the diamond bearing kimberlites and to compare these signatures with all other known kimberlites and targets and thereby arrive at concise exploration recommendations targeted only on the

anomalies of this magnetic caliber. Over 150 met this threshold. The viable targets have been screened according to several criteria, including geophysical signature, quality, proximity to known diamondiferous kimberlites, surface geochemical results of past explorers, inferred depth of the Kalahari coverage and structural setting to arrive at a breakdown as follows; first priority targets of 109 and second priority targets numbering 52”.

In February, 2002 the Company signed an earn-in Joint Venture (‘JV’) agreement with Tinto Botswana Exploration PTY Limited (‘Rio Tinto’) a subsidiary of Rio Tinto Mining and Exploration, London, UK. Under the terms of the JV Agreement, Rio Tinto could earn an initial 65% participating interest by making a total of US$3.5 million in work expenditures before September 21, 2005. Rio Tinto can then earn an additional 10% interest by completing a pre-feasibility study, initiating a feasibility study and incurring a further US$ 5.0 million in work expenditures by September 21, 2008. Having met the expenditure obligations necessary to earn the initial 65% participating interest, Rio Tinto formally notified the Company by letter dated March 30, 2004 that they have elected to earn the additional 10% participating interest (which will bring Rio Tinto’s total participating interest to 75%) by incurring the additional expenditure of US $ 5.0 million by September 21, 2008. Rio Tinto is the project operator.

Rio Tinto is continuing with an aggressive exploration program involving airborne and ground geophysics, sampling and drilling. Rio Tinto recently flew a VTEM survey and they report that preliminary data highlights some promising anomalies. The expected advantage of the VTEM survey (aside from the ability to locate completely non-mag kimberlites) is that it is a blanket survey rather than a limited grid. Rio Tinto reported in October 2004 that two of the VTEM anomalies in the preliminary data were drilled and one hole intersected a new kimberlite of which results are pending.

Rio Tinto has reported that its work program has been focused on sterilizing areas as some 50% of the license area were due for relinquishment in September, 2004. In this regard, Rio Tinto reported that 19 of the best magnetic anomalies in the portion of the license area considered marginal were surveyed with TEM; only one target was generated and was proved negative after drill testing. All the data for the marginal areas was re-assessed and, as there was no encouragement to carry out any further work, 1,473 km ² of the license area has been dropped.

The areas retained have been prioritized by Rio Tinto based on kimberlite frequency and diamond potential as suggested by indicator chemistry. Rio Tinto advise that the work plan for Quarter Four, 2004 (October/December) will consist of a further seven scout drill holes to test the VTEM/magnetic targets. Rio Tinto also advised, in their Third Quarter, 2004 report, that to date, 31 confirmed kimberlite occurrences have been discovered by Rio Tinto since the inception of the Kokong Joint Venture, bringing the total number of known kimberlite occurrences at Kokong to 68, although none are, as yet, sufficiently diamondiferous. Rio Tinto’s total expenditures on the Kokong project as at June 30, 2004 is over US$4.0 million.

The following discussion and analysis of the results of operations and the Company’s financial position should be read in conjunction with the June 30, 2004 consolidated financial statements and accompanying notes.

For the year ended June 30, 2004, diamond production was from the Aredor, Guinea and Palmietgat, South Africa diamond mines. The Company recorded a net loss of $ 10.094 million or $0.48 per share basic and diluted.

The production cost of diamonds produced for the year ended June 30, 2004 was $10.020 million compared to $10.937 million for the year ending June 30, 2003. The decrease in production cost in 2004 compared to 2003 was due to lower fuel consumption and parts expenses.

Diamond sales from the Palmietgat Mine for the year ended June 30, 2004 was $ 1.988 million compared to $4.291 million in 2003. The Company sold 17,863 carats (US$76.80) in 2004, compared with 45,516 carats (US$54.37 per carat) in 2003. The significant decrease was caused by the following factors: i) removal of the overburden material from the two kimberlite pipes resulting in a four-month loss of fresh kimberlite material to process; ii) installation of two new crushers to crush the oversize material, which took two months during which time there was no production; iii) of the material processed during the year, more than 50% was from

the oversized stockpiles which had a lower grade compared to the fresh kimberlite. However, this material needed to be processed as it was becoming difficult for the heavy equipment to move around the plant and iv) the overall grade from the fresh kimberlites material was lower compared to the previous years

The production cost of diamonds sold in the fiscal year ended June 30, 2004 was $2.040 million compared to $2.261 million in June 30, 2003. The decrease in production was caused by the lower consumption of fuel and parts due to the shutdown of the plant during the installation of the two new crushers.

Selling, general and administrative expenses for fiscal year 2004 were slightly lower at CAN $3.060 illion compared to fiscal year 2003 at $3.418 million. The decline is due to reduction in salaries and wages ($0.790 million in 2004 compared with $1.079 million in 2003), and slight decreases in investor’s relation fees, management fees and office and other expenses.

Interest costs aggregated $1.749 million during fiscal year 2004, a 13% increase over $1.549 million in 2003. The increase was due to the accrual on the outstanding convertible notes as well as new short-term borrowings during the year. Under the terms of the debentures, interest is payable monthly in arrears. On March 1, 2003, the interest rate for all outstanding debentures, except for the 2003 Series debentures A1 and A2, was reduced from 11% to 8% per annum. Interest for the 2003 Series debentures, A1 and A2, is 11% per annum. The Company has obtained a waiver of non-payment of interest from the Lender through August 15, 2005 for all debentures. Because the terms of the debentures have been extended for a period of more than 12 months from June 30, 2004, all debt secured by the debentures has been classified as a long-term obligation. At June 30, 2004 accrued interest amounting to $3.377 million was included in the convertible notes payable.

Depletion and depreciation expense for fiscal year 2004 was $3.035 million compared to $2.481 million in 2003.

The effective tax rate was 1% in 2004 compared to a statutory tax rate of 36.6%. The effective tax rate was 19% in 2003 compared to statutory tax rate of 40%. In 2004 the Company took a valuation allowance of $7.565 million compared to $4.114 million in 2003 to reduce income tax assets to the amount that the management considers is likely to be recoverable in the future years. The Company recorded a net tax recovery of $0.107 million on pre-operating tax loss of $11.076 million compared to $1.840 million on pre-operating tax loss of $9.689 million in 2003. The future income tax provision for the year ended June 30, 2004 was nil compared to $0.154 million in 2003 due to future taxes on income earned in Guinea.

At November 15, 2004, the Company had a total of 23,375,984 common shares outstanding and 6,680,000 warrants outstanding, each warrant entitling the holder to acquire one common share. Also, the Company had 1,067,000 stock options outstanding with a weighted average exercise price per share of $0.73.

For the year ended June 30, 2004, the net cash flow from operations was negative $4.631 million compared to last fiscal year 2003 of negative $2.376 million. For the past three fiscal years, the decline in cash flows is mainly due to the reduced levels of diamond sales revenue from the Aredor mine because of lower diamond production and the lower price of diamonds sold due to quality and size. Cash on hand is not sufficient to pay the current outstanding liabilities and to meet general working capital requirements.

During the year, the Company successfully closed a private placement of 6,080,000 units at a price of $0.50 per unit for gross proceeds of $3,040,000. Each unit consisted of one common share and one share purchase warrant. Each whole warrant entitles the holder to purchase one common share until November 28, 2005 at a price of $0.75 per share. Additional funds of $5.026 million were acquired through bridge loans from companies with a common director. The net proceeds from the private placement and the bridge loans were used to purchase additional heavy equipment at the Aredor mine and for general working capital purposes. Subsequent to June 30, 2004 the Company borrowed CAN $2,847,112 from companies with a common director. The loans are due on demand, are unsecured, and bear interest at rates varying from 4.5% to 8%.

The Company has several outstanding debentures, with a total outstanding amount on June 30, 2004 of $14.752 million including accrued interest of $3.377 million. The debentures are secured by a fixed and floating charge on the Company’s assets. Because the terms of the debentures have been extended for a period of more than 12 months from June 30, 2004, the debentures have been classified a long-term obligation. The Company arranged for the extension of the maturity of all outstanding debentures from August 31, 2004 or January 1, 2004 to August 15, 2005.

No new debentures were issued during the year ended June 30, 2004, compared to June 30, 2003 when the Company issued the Series 2003-A1& A2 debentures with the principal amounts of $850,000 and 1,450,000, respectively. The original maturity date was January 1, 2004, bearing an interest rate of 11% per annum. The loan amount from the company with a common director is convertible into units of the Company at a conversion price of $0.30 per unit until January 1, 2004, $0.35 per unit until January 1, 2006, $0.40 per unit until January 1, 2007, and $0.45 per unit until January 1, 2008. Each unit consists of a common share and a warrant exercisable until the earlier of the expiry date of the loan or two years from the date of issue of the warrants and exercisable at the conversion price in the first year and 115% of the conversion price in the second year. These debentures are secured by a fixed and floating charge on the Company’s assets and rank equally with the Series 1999-A3 debentures. At June 30, 2003, $0.592 million of the face value of the debentures was classified as an equity component. As at June 30, 2004, accrued interest is included in the outstanding balance for $0.382 million (2003: $0.104 million). Interest is also payable on August 15, 2005.

As at June 30, 2004, the Company’s bridge loan balance was $5.026 million. The loans bear interest at rates varying from 4.5% to 11% per annum, are unsecured, and are repayable on demand. Bridge loans borrowed and repaid during the year were $2.913 million (2003 - $0.310 million).

At June 30, 2004, obligations under capital lease, including the current portion, were $0.678 million compared to $0.147 Million a year ago.

Sales of fixed assets during the current fiscal year amounted to $0.122 million. Expenditures in the purchasing of capital assets in the current fiscal year totalled to $3.687 million ($0.524 million in 2003) to achieve targeted production of the plants operating at the Aredor mine. The Company purchased three trucks and two loaders from Bell South Africa under a two-year and a three-year lease contract. The Company also purchased certain used mining equipment, from a company in Guinea that went into liquidation, for US$750,000 before transportation costs and taxes. In 2003, the Company purchased major components for its four draglines at the Aredor mine to improve the availability of the machines. There were no cash investments in mineral properties in fiscal years 2004, 2003 and 2002.

At the end of fiscal year 2004, the cash and cash equivalents was negative $0.138 million compared to positive $0.125 million a year ago. Negative cash flows will likely continue until the Company is able to run its plant operations at or near maximum rated capacity. The Company has not paid interest due under the terms of convertible debentures securing notes payable and has obtained waivers until August 15, 2005.

The company has the following contractual obligations and Commercial commitments.

Related party transactions included management fees paid to directors or shareholders of the Company (as agreed between the parties and approved by the Board of Directors) in the amount of $0.406 million in fiscal year 2004 compared to $0.433 million in fiscal year 2003. Compensation excluded in the management fees paid to directors and officers’ amounted to $0.162 million in fiscal year ended June 30, 2004 and $0.450 million in 2003. The Company borrowed and repaid from companies with common directors a total of $2.913 million in fiscal year 2004 compared to $0.310 million in 2003.

The Company’s accounting policies are set out in Note 2 of the accompanying Consolidated Financial Statements. There are two policies that, due to the mining business, are more significant to the financial results of the Company. These policies relate to the capitalizing of mineral exploration expenditures and the use of estimates.

Under Canadian GAAP, the Company deferred all costs relating to the acquisition and exploration of its mineral properties. Any revenues received from such properties are credited against the costs of the property. When commercial production commences on any of the Company’s properties, any previously capitalized costs would be charged to operations using a unit-of-production method. The Company regularly reviews differed exploration costs to assess their recoverability and when the carrying value of a property exceeds the estimated net recoverable amount, provision is made for impairment in value.

Under U.S. GAAP, the Company expensed all costs relating to the exploration of its mineral properties prior to the establishment of proven and probable reserves. After that point, these costs are capitalized as development costs. When commercial production commences on any of the Company’s properties, any previously capitalized costs would be amortized to operations using a unit-of-production method.

The Company’s Financial Statements are based on the selection and application of significant accounting policies, some of which require management to make estimates and assumptions. Estimates are based on historical experience and on our future expectations that are believed to be reasonable; the combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results are likely to differ from our current estimates and those differences may be material. We believe that the following are some of the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operations.

At the Aredor alluvial mine, the Company plans, subject to funding to have the DMS plant and 14ft plant producing at their maximum capacities by spring of 2005. Management’s view is that with the recent acquisition of additional equipment the Company now has enough heavy equipment to carry out its plans to process material from the two main plants. However, management estimates US$0.7 million will be required to further repair and upgrade some of its existing equipment and some of the newly acquired equipment in order to achieve maximum production from these two plants. Management feels once it has achieved its target of maximizing production from the two plants it will achieve positive cash flows. The Company plans to carry out an alluvial exploration program to ensure that it is processing gravel from the best possible blocks. The Company will also continue its kimberlite exploration program. The Company needs to raise approximately US$4.0 million through equity or debt financing to pay the existing liabilities, to carry out the planned capital expenditures, and for general working capital. The Company’s ability to raise these funds will determine if the mining and exploration plans for the next year can be completed.

At the Palmietgat mine, the Company will continue to operate two shifts a day. It is estimated that by early 2005 all pipes at the property will reach depths of 30 meters. In order to process fresh kimberlite the Company will need to spend approx. US$0.5 million to increase the pit size of the pipes, especially K15, the best pipe in quality, grade, and size which has already reached the depth of 30 meters.

The Company’s kimberlite exploration program will be continued under the financial and technical control of Tinto Botswana Exploration Pty Limited, a subsidiary of Rio Tinto Mining & Exploration Ltd. of the U.K.

The following table sets forth the name, business experience, functions and areas of experience in Trivalence and principal business activities performed outside of Trivalence (including, in the case of directors of Trivalence, other principal directorships) of each director, member of senior management and employees upon whose work Trivalence is dependent:

Of which 3,045,902 shares are beneficially owned by Pacwest Resources Ltd., 1,106,978 shares are beneficially owned by Larnite Corporation (Pvt) Ltd., Larnite Capital Corporation beneficially owns 1,629,132 shares and Mr. Khan beneficially owns 1,449,365 shares. Mr. Khan also holds options to purchase 180,000 shares of the Company at $0.40 per share expiring April 24, 2007.

Dr. Rahman also holds options to purchase 40,000 shares of the Company at $0.40 per share expiring April 24, 2007 and 70,000 shares at $0.70, expiring on November 18, 2008.

Mahmood holds options to purchase 30,000 shares of the Company at $1.30 per share expiring February 8, 2006 and 15,000 shares at $0.70, expiring on November 18, 2008.

Mr Timothy Hoar holds options to purchase 35,000 shares of the Company at $0.70 per share expiring on November 18, 2008.

Directors are elected annually at Trivalence’s annual meeting of shareholders and hold office until the earlier of their resignation or removal from office at a subsequent annual meeting of shareholders. The Board of Directors may fill vacancies created by departing directors between annual shareholders meetings. Directors representing in number up to one-third the size of the board elected at the most recent shareholders meeting may be appointed by the Board of Directors between shareholders meetings.

The Audit Committee of Trivalence consists of Mahmood Arshad, Timothy Hoar and Dr. Waseem Rahman. There have been no changes to the membership of this committee since the most recently completed year-end. The general function of the audit committee is to review the overall audit plan and to review the results of the external audit with Trivalence’s auditors.

The Compensation Committee of the Company consists of Lutfur Rahman Khan, Waseem Rahman, and Timothy Hoar.

The following table sets forth the amount of compensation that was paid and benefits that were granted in the financial year ended June 30, 2004 to each of the individuals listed in Item 6(A) above.

The Company has in place a stock option plan (the “Plan”), under which non-transferable options to purchase common shares (the “Option”) may be granted to directors, officers, employees and consultants of the Company or an affiliate of the Company. The Plan contains early termination provisions for certain situations. In addition, the Plan contains provisions stating that the option period may not extend past five years and the number of common shares issuable on exercise of outstanding stock options may not exceed 10% of the issued and outstanding common shares.

The following table sets forth the number of options to purchase common shares of Trivalence granted as at November 30, 2004, the purchase price and the expiration date of options granted to each of the individuals listed in Item 6(A) above.

The Compensation Committee of the Company consists of Lutfur Rahman Khan, Waseem Rahman, and Timothy Hoar.

The following table sets out the number of employees and consultants with contracts at the end of each of the past three financial years, including their main category of activity and geographic location. Trivalence’s employees are employed in Canada, Guinea and South Africa.

See Item 6(A)-Directors and Senior Management above for disclosure regarding share ownership of Trivalence's directors and executive officers.

To the knowledge of Trivalence there are no persons or entities who beneficially hold, directly or indirectly or exercise control or direction over, more than 5% of the voting rights attached to the issued and outstanding common shares of Trivalence except as set forth below as of October 28, 2003:

The major shareholders of Trivalence do not have different voting rights than other shareholders.

As of October 28, 2004, 10 holders having an address of record within the United States of America owned 513,647 common shares, representing 2.197% of Trivalence's 23,375,984 outstanding common shares.

On November 26, 2003 the Company closed a private placement of 6,080,000 units at a price of 50 cents (Canadian) per unit for gross proceeds of $3,040,000. Each unit consists of one common share and one share purchase warrant. Each whole warrant entitles the holder to purchase one common share until November 28, 2005 at a price of 75 cents (Canadian) per share.

As at October 28, 2004, Pacwest was the beneficial owner of 13.03% of the Company’s issued shares. Larnite Corporation (Pvt) Ltd owns Pacwest as to 30.25%, which was the beneficial owner of 4.74% issued shares of the Company as at October 28, 2004. Larnite Capital Corporation beneficial owner of 6.97% issued shares of the Company as at October 28, 2004 is controlled by Lutfur Rahman Khan, the President and Chief Executive Officer and a director of the Company. Lutfur Rahman Khan and Timothy Hoar, a director and shareholder of the Company, are also directors of Pacwest.

Lutfur Rahman Khan and Dr. Waseem Rahman are directors of Larnite Capital Corporation and Lutfur Rahman Khan is also a director of Larnite Corporation (Pvt) Ltd.

Pacwest requested that the Company place before the Annual general Meeting in November 2001 a resolution authorising and approving the conversion of any convertible debentures by Pacwest and the exercise of share purchase warrants issuable on such conversion notwithstanding that such conversion would result in Pacwest together with Larnite Corporation and Lutfur Rahman Khan then holding fifty percent (50%) or more of the Company’s issued shares. The resolution was passed in the shareholders meeting. The Company has issued convertible debentures from time to time to Pacwest Resources Ltd. (“Pacwest”) to secure loans made to the Company by Pacwest. These debentures may be converted at the option of Pacwest into shares and, in all cases but one, share purchase warrants of the Company.

The following table provides information as to the currently outstanding convertible debentures issued to Pacwest, the amount convertible into securities of the Company, the conversion price in effect as at the date hereof and the number of securities issuable to Pacwest based on the conversion prices currently in effect:

The aforecited table exclude 4 series of debentures where the conversion into shares of the Company expired as at April 1, 2003, namely:

1999 Series A no. 3 with convertible securities of $4,225,000/$2.15 per share with 1,965,116 issuable shares and 1,965,116 issuable warrants,

1999 Series B with convertible securities of $1,250,000/$2.15 per share with 581,395 issuable shares,

2000 Series A no. 1 with convertible securities of $1,100,000/$2.15 per share with 511,628 issuable shares.

2000 Series A no. 2 with $300,000/$2.20 per share with issuable 136,364 shares and issuable 136,364 warrants.

The following table provides information as to the currently outstanding convertible debentures issued to Larnite Capital Corporation, the amount convertible into securities of the Company, the conversion price in effect as at the date hereof and the number of securities issuable to Larnite Capital Corporation based on the conversion prices currently in effect:

The following table provides information as to the currently outstanding convertible debentures issued to Larnite Corporation (Pvt.) Ltd, the amount convertible into securities of the Company, the conversion price in effect as at the date hereof and the number of securities issuable to Larnite Corporation (Pvt.) Ltd based on the conversion prices currently in effect:

If the repayment date of any debenture is extended beyond an anniversary date of the debenture, the conversion price under such debenture increases. As the conversion price increases, the number of securities issuable to Pacwest on conversion decreases.

Each warrant issued upon conversion would entitle Pacwest, Larnite Capital Corporation and Larnite Corporation (Pvt.) Ltd to purchase one share of the Company at an exercise price at least equal to and in some cases greater than the conversion price.

At June 30, 2004, accounts receivable of $ 797 was due from companies with common directors.

During the year ended June 30, 2004 $2,913,396 was borrowed from and repaid to companies with a common director.

Incorporated herein are the audited consolidated balance sheets as at June 30, 2004, and 2003 and the consolidated statements of operations and deficit and the consolidated statements of cash flows for the years ended June 30, 2004 and 2003.

Other than as described herein, Trivalence is not involved in any legal or arbitration proceedings, which may have, or have had in the recent past, significant effects on Trivalence's financial position or profitability. The Company is defending two claims with respect to its operations in South Africa. The total amount of the claims is approximately $150,000. Management believes there is no merit to these claims and no provision for this amount has been made in the financial statements.

Trivalence is not aware of any material proceeding in which any director, any member of senior management or any of Trivalence's affiliates is a party adverse to Trivalence or has a material interest adverse to Trivalence.

No dividends have been paid on any common shares of Trivalence. Trivalence intends to retain its earnings for use in the business and does not expect to pay dividends on its common shares in the foreseeable future.

During the year ended June 20, 2004, the Company adopted two significant accounting changes, as disclosed in the Consolidated Financial Report attached to this report, those being with respect to Asset Retirement Obligations [see Note 21(f) ], and Stock-based Compensation [see Notes 3 and 21(d) ].

The Company's Common Stock is listed on the TSX Venture Exchange under the symbol TMI, and on the OTCBB under the symbol TMIGF in the United States. The following table sets forth the high and low market prices of the common shares on the TSXV, (its predecessor, The CDNX Venture Exchange) and OTCBB for the periods indicated.

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Trivalence Mining Corporation, a British Columbia, Canada corporation (the "Registrant" or "Trivalence") was incorporated on September 18, 1984 under the British Columbia “Company Act” (the "Company Act") by registration of its Memorandum and Articles under the name "Pink Jade Ventures Inc." On January 28, 1987 the Registrant changed its name to "Bullion Range Exploration Corp." On August 9, 1991 the name was changed to "Maximusic North America Corporation." On September 18, 1991 the name was changed to "Maximusic North American Corporation." On March 1, 1995 the name was changed to "Trivalence Mining Corporation." The Registrant’s Memorandum and Articles do not provide for any specific objects or purposes or place any limitations on the Registrant’s objects or purposes or place any limitations on the Registrant's objects or purposes.

Set forth below is a summary of provisions contained in the Registrant’s Articles with respect to:

Director’s power to vote on a proposal, arrangement or contract in which the director is materially interested:

A director who is in any way directly or indirectly interested in an existing or proposed contract or transaction. Subject to the provisions of the company Act, this prohibition does not apply to (1) any contract or transaction or transaction relating to a loan to the Registrant which has been guaranteed by the director or a corporation or firm in which the director has an interest; (ii) any contract or transaction made or to be made which or for the benefit of a holding corporation or a subsidiary corporation of which the director is a director; (iii) any contract by the director to subscribe for or underwrite shares or debentures to be issued by the Registrant or a subsidiary of the Registrant; (iv) any contract, arrangement or transaction in which the director is interested if all the other directors are also interested; (v) determining the remuneration of the directors; (vi) purchasing and maintaining insurance to cover directors against liability incurred by them as directors; or (vii) the indemnification of any director by the Registrant.

Directors’ power, in the absence of an independent quorum, to vote compensation to themselves or any members of their body:

There is no restriction in the Registrant's articles with respect to the power of the directors to vote compensation to themselves or any members of their body.

Borrowing powers exercisable by the directors and how much such borrowing can be varied:

The directors have the power from time to time on behalf of the Registrant to (i) borrow money in such manner and amount, on such security, from such sources and upon such terms and conditions as they think fit; (ii) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation or the Registrant or any other person; and (iii) mortgage, charge and give other security over the property and assets of the Registrant, both present and future. The directors from time to time upon such terms and conditions may vary any borrowing approved by the directors, as they think fit.

All Common Shares of the Registrant rank equally as to dividends, voting rights, rights to share in profits, participation in any surplus in the event of liquidation and in all other respects. Each share carries one vote at meetings of the shareholders of the Registrant. There are no indentures or agreements limiting the payment of dividends and there are no conversion rights, redemption rights, special liquidation rights, pre-emptive rights or subscription rights attached to the Common Shares. The shares presently issued are not subject to any calls or assessments.

The rights of the Common Shares may not be modified other than by special resolution, being a resolution approved by ¾ of the Common Shares voting on such modification. Because a quorum for a general meeting of shareholders can exist with two persons present holding or representing not less than 5% of the Common Shares entitled to be voted, the rights of the holders of Common Shares may be modified by the votes of less than a majority of the Issued Common shares of the Registrant.

Under the Company Act, where a special resolution to modify the rights of the holders of Common Shares has been passed, the holders of not less than 10% of the Common Shares who are entitled to vote and did vote against the special resolution (in person or by proxy), may apply to the Supreme Court of British Columbia to set aside the resolution.

Shareholders may apply to the Supreme Court of British Columbia for various remedies on the grounds that the affairs of the Registrant are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the shareholders or that some act of the Registrant has been done or is threatened or that some resolution of shareholders has been passed or is proposed that is unfairly prejudicial to one or more shareholders. That Court may, with a view to bringing it to an end or to remedying the matters complained of, make an interim of final order if it considers appropriate, including the following:

provide for the purchase of the Common Shares of any member of the Registrant by another member of the Registrant, or by the Registrant;

in the case of a purchase by the Registrant, reduce the Registrant’s capital or otherwise;

authorize or direct that proceedings be commenced in the name of the Registrant against any party on the terms the Court directs;

There are no restrictions on the purchase or redemption of Common Shares by the Registrant while there are any arrears in the payment of dividends or sinking fund installments.

Subject to any extensions permitted pursuant to the company Act, an annual general meeting is to be held once in every calendar year at such time (not being more than 13 months after the holding of the last annual general meeting) and place as may be determined by the directors. The directors may convene an extraordinary general meeting whenever they think fit. Under the Company Act, any one or more shareholders holding 10% or more of the Registrant’s shares can requisition a general meeting. In certain circumstances, shareholders’ meeting can be called by the Supreme Court of British Columbia.

There are no provisions in the Registrant’s Articles, which would have an effect for delaying, deferring or preventing a change of control of the Registrant.

There are no by-law provisions governing the ownership threshold above which shareholder ownership must be disclosed.

The law of British Columbia relating to Items 2-8 is not significantly different from the law of the United States.

There are no conditions in the Memorandum and Articles governing changes in capital which are more stringent that is required by law.

Other than contracts entered into the ordinary course of business, the Company has not entered into any contracts this year, which can reasonably be regarded as presently material to the Company.

There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-residents. Dividends paid to U.S. residents, however, are subject to a 15% withholding tax or a 5% withholding tax for dividends paid in 1997 and thereafter, if the shareholder is a corporation owning at least 10% of the outstanding voting shares of the corporation pursuant to Article X of the reciprocal tax treaty between Canada and the U.S. (See "Additional Information - Taxation").

Except as provided in the Investment Canada Act (the "Act"), which has provisions that restrict the holding of voting shares by non-Canadians, there are no limitations specific to the rights of non-Canadians to hold or vote the common shares under the laws of Canada or the Province of Alberta, or in the charter documents of Trivalence or its subsidiaries.

Management of the Company believes that the following summary fairly describes those provisions of the Act pertinent to an investment in the Company by a person who is not a Canadian resident (a "non-Canadian").

The Act requires a non-Canadian making an investment which would result in the acquisition of control of a Canadian business, the gross value of the assets of which exceed certain threshold identified, to either notify, or file an application for review with Investment Canada, the federal agency created by the Act. The notification procedure involves a brief statement of information about the investment on a prescribed form that is required to be filed with Investment Canada by the investor at any time up to 30 days following implementation of the investment. It is intended that investments requiring only notification will proceed without government intervention unless the investment is in a specific type of business activity related to Canada's cultural heritage and national identity.

If an investment is reviewable under the Act, an application for review in the form prescribed is normally required to be filed with Investment Canada prior to the investment taking place and the investment may not be implemented until the review has been completed and the Minister responsible for Investment Canada is satisfied that the investment is likely to be of net benefit to Canada. If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian must not implement the investment or, if the investment has been implemented, may be required to divest himself of control of the business that is the subject of the investment.

The following investments by non-Canadians are subject to notification under the Act:

The following investments by a non-Canadian are subject to review under the Act:

Generally speaking, an acquisition is direct if it involves the acquisition of control of the Canadian business or of its direct or indirect Canadian parent and an acquisition is indirect if it involves the acquisition of control of a non-Canadian direct or indirect parent of an entity carrying on the Canadian business. Control may be acquired through the acquisition of substantially all of the assets of the Canadian business. No change of voting control will be deemed to have occurred if an investor acquires less than one-third of the voting control of a Canadian corporation.

A WTO investor, as defined in the Act, includes an individual who is a national or a member country of the WTO or who has the right of permanent residence in relation to that WTO member, a government or government agency of a WTO investor-controlled corporation, limited partnership, trust or joint venture that is neither WTO-investor controlled or Canadian controlled of which two-thirds of its board of directors, general partners or trustees, as the case may be, are any combination of Canadians and WTO investors. The higher thresholds for WTO investors do not apply if the Canadian business engages in activities in certain sectors such as uranium, financial services (except insurance), transportation services or media activities.

The Act specifically exempts certain transactions from either notification or review. Included among this category of transactions is the acquisition of voting shares or other voting interests by any person in the ordinary course of that person's business as a trader or dealer in securities.

The following is a discussion of material United States Federal income tax consequences, under the law, generally applicable to a U.S. Holder (as defined below) of common shares of the Company. This discussion does not cover any state, local or foreign tax consequences.

The following discussion is based upon the sections of the Internal Revenue Code of 1986, as amended (“the Code”), Treasury Regulations, published Internal Revenue Service (“IRS) rulings, published administrative positions of the IRS and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possible on a retroactive basis, at any time. In addition, the discussion does not consider the potential effects, both adverse and beneficial, or recently proposed legislation which, if enacted, could be applied, possibly on a retroactive basis, at any time. The discussion is for general information only and it is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of the Company and no opinion or representation with respect to the U.S. federal income tax consequences to any such holder or prospective holder is made. Holders and prospective holders of common shares of the Company should consult their own tax advisors about the federal, state, local, and foreign tax consequences of purchasing, owning and disposing of common shares of the Company.

As used herein, a (“U.S. Holder”) includes a holder of common shares of the Company who is a citizen or resident of the United States, a corporation created or organized in or under the laws of the United States or of any political subdivision thereof, an estate whose income is taxable in the United States irrespective of source or a trust subject to the primary supervision of a court within the United States and control of a United States fiduciary as described in Section 7701(a)(30) of the Code. This summary does not address the tax consequences to, and U.S. Holder does not include, persons subject to special provisions of Federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, non-resident alien individuals, persons or entities that have a “functional currency” other than the U.S. dollar, shareholders who hold common shares as part of a straddle, hedging or conversion transaction, and shareholders who acquired their common shares through the exercise of employee stock options or otherwise as compensation for services. This summary is limited to U.S. Holders who own common shares as capital assets. This summary does not address the consequences to a person or entity holding an interest in a shareholder or the consequences to a person of the ownership exercise or disposition of any options, warrants or other rights to acquire common shares.

U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of the Company are required to include in gross income for United States Federal income tax purposes the gross amount of such distributions equal to the U.S. dollar value of such distributions on the date of receipt (based on the exchange rate on such date), to the extent that the Company has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States Federal Income tax liability or, alternatively, may be deducted in computing the U.S. Holder’s United States Federal taxable income by those who itemize their deductions. (See more detailed discussion at “Foreign Tax Credit” below). To the extent that distributions exceed current or accumulated earnings and profits of the Company, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares and thereafter as gain from the sale or exchange of the common shares. Dividend income will be taxed at marginal tax rates applicable to ordinary income while preferential tax rates for long-term capital gains are applicable to a U.S. Holder which is an individual, estate or trust. There are currently no preferential tax rates for long-term capital gains for a U.S. Holder, which is a corporation.

In the case of foreign currency received as a dividend that is not converted by the recipient into U.S. dollars on the date of receipt, a U.S. Holder will have a tax basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Generally any gain or loss recognized upon a subsequent sale of other disposition of the foreign currency, including the exchange for U.S. dollars, will be ordinary income or loss.

Dividends paid on the common shares of the Company will not generally be eligible for the dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S.

Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the U.S.-source portion of dividends received from the Company (unless the Company qualifies as a “foreign personal holding company” or a “passive foreign investment company”, as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of the Company. The availability of this deduction is subject to several complex limitations, which are beyond the scope of this discussion.

Under current Treasury Regulations, dividends paid on the Company’s common shares, if any, generally will not be subject to information reporting and generally will not be subject to U.S. backup withholding tax. However, dividends and the proceeds from a sale of the Company’s common shares paid in the U.S. through a U.S. or U.S.-related paying agent (including a broker) will be subject to U.S. information reporting requirements and may also be subject to the 28% U.S. backup withholding tax, unless the paying agent is furnished with a duly completed and signed Form W-9. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a refund or a credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the IRS.

The limitation on credit does not apply for individuals whose entire income from sources outside the United States consists of qualified passive income, the total amount of creditable foreign taxes paid or accrued during the taxable year does not exceed $300 ($600 in the case of a joint return), and who elect to have Code section 904(j) to apply for the taxable year.

A U.S. Holder who pays (or has withheld from distributions) Canadian income tax with respect to the ownership of common shares of the Company may be entitled, at the option of the U.S. Holder, to either a deduction or a tax credit for such foreign tax paid or withheld. Generally, it will be more advantageous to claim a credit because a credit reduces United States Federal income taxes on a dollar-for-dollar basis, while a deduction merely reduces the taxpayer’s income subject to tax. This election is made on a year-by-year basis and applies to all foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from) the U.S. Holder during the year. There are significant and complex limitations which apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his/her or its worldwide taxable income in the determination of the application of this limitation. The various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern this classification process. In addition, this limitation is calculated separately with respect to specific categories of income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income”, and certain other categories of income. Dividends distributed by the Company will generally constitute “passive income” or, in the case of certain U.S. Holders, “financial services income” for these purposes. The availability of the foreign tax credit and the application of the limitations on the credit are specific and holders and prospective holders of common shares of the Company should consult their own tax advisors regarding their individual circumstances.

A U.S. Holder will recognize gain or loss upon the sale of common shares of the Company equal to the difference, if any, between (i) the amount of cash plus the fair market value of any property received, and (ii) the shareholder’s tax basis in the common shares of the Company. Preferential tax rates apply to long-term capital gains of U.S. Holders, which are individuals, estates or trusts. This gain or loss will be capital gain or loss if the common shares are capital assets in the hands of the U.S. Holder, which will be a short-term or long-term capital gain or loss depending upon the holding period of the U.S. Holder. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. Any capital losses are deductible only to the extent of any capital gains plus, in the case of noncorporate U.S. Holders, ordinary income of up to US$3,000. For U.S. Holders who are not corporations, any unused portion of such net capital loss may be carried over to be used in later tax years until such net capital loss is thereby exhausted. For U.S. Holders which are corporations (other than corporations subject to Subchapter S of the Code), an unused net capital

loss may be carried back three years from the loss year and carried forward five years from the loss year to be offset against capital gains until such net capital loss is thereby exhausted.

In the following circumstances, the above sections of the discussion may not describe the United States Federal income tax consequences resulting from the holding and disposition of common shares of the Company.

If at any time during a taxable year more than 50% of the total combined voting power or the total value of the Company’s outstanding shares is owned, actually or constructively, by five or fewer individuals who are citizens or residents of the United States and 60% (50% after the first tax year) or more of the Company’s gross income for such year was derived from certain passive sources (e.g. from dividends received from its subsidiaries), the Company would be treated as a FPHC.

In that event, U.S. Holders that hold common shares of the Company would be required to include in gross income for such year their allocable portions of such passive income to the extent the Company does not actually distribute such income.

The Company does not believe that it currently has the status of a FPHC. However, there can be no assurance that the Company will not be considered a FPHC for the current or any future taxable year.

If 50% or more of the combined voting power or total value of the Company’s outstanding shares are held, actually or constructively, by citizens or residents of the United States, United States domestic partnerships or corporations, or estates or trusts other than foreign estates or trusts (as defined by the Code Section 7701(a)(31), and the Company is found to be engaged primarily in the business of investing, reinvesting, or trading in securities, commodities, or any interest, it is possible that the Company might be treated as a “foreign investment company” as defined in Section 1246 of the Code, causing all or part of any gain realized by a U.S. Holder selling or exchanging common shares of the Company to be treated as ordinary income rather than capital gains.

As a foreign corporation with U.S. Holders, the Company would potentially be treated as a passive foreign investment company (“PFIC”), as defined in Section 1297 of the Code, depending upon the percentage of the Company’s income which is passive, or the percentage of the Company’s assets which produce or are held for the production of passive income. U.S. Holders owning common shares of a PFIC are subject to the highest rate of tax on ordinary income in effect for the applicable taxable year and to an interest charge based on the value of deferral of tax for the period during which the common shares of the PFIC are owned, in addition to the treatment of gain realized on the disposition of common shares of the PFIC as ordinary income rather than capital gain. However, if the U.S. Holder makes a timely election to treat a PFIC as a qualified electing fund (“QEF”) with respect to such shareholder’s interests therein, the above-described rules generally will not apply. Instead, the electing U.S. Holder would include annually in his gross income his pro rata share of the PFIC’s ordinary earnings and net capital gain regardless of whether such income or gain was actually distributed. A U.S. Holder of a QEF can, however, elect to defer the payment of United States federal income tax on such income inclusions subject to an interest charge. Special rules apply to U.S. Holders who own their interests in a PFIC through intermediate entities or persons. In addition, subject to certain limitation, U.S. Holders owning (actually or constructively) marketable stock in a PFIC will be permitted to elect to mark that stock to market annually, rather than being subject to the excess distribution regime of section 1291 described above. Amounts included in or deducted from income under this alternative (and actual gains and losses realized upon disposition, subject to certain limitations) will be treated as ordinary gains or losses. This

alternative will apply to taxable years of U.S. Holders beginning after 1997 and taxable years of foreign corporations ending with or within such taxable years of U.S. Holders.

The management of the Registrant believes that the Company is not a PFIC. However, there can be no assurance that the Company’s determination concerning its PFIC the IRS, or that will not challenge status it will be able to satisfy record-keeping requirements which will be imposed on QEFs.

If more than 50% of the voting power of all classes of stock entitled to vote is owned, actually or constructively, by citizens or residents of the United States, United States domestic partnerships and corporations or estates or trusts other than foreign estates or trusts, each of whom own actually or constructively 10% or more of the total combined voting power of all classes of stock of the Company, the Company could be treated as a controlled foreign corporation (“CFC”) under Subpart F of the Code. This classification would affect many complex results, one of which is the inclusion of certain income of a CFC, which is subject to current U.S. tax. The United States generally taxes United States Shareholders of a CFC currently on their pro rata shares of the Subpart F income of the CFC. Such United States Shareholders are generally treated as having received a current distribution out of the CFC’s Subpart F income and are also subject to current U.S. tax on their pro rata shares of the CFC’s earnings invested in U.S. property. The foreign tax credit described above may reduce the U.S. tax on these amounts. In addition, under Section 1248 of the Code, gain from the sale or exchange of shares by a U.S. Holder of common shares of the Corporation which is or was a United States Shareholder at any time during the five-year period ending with the sale or exchange is treated as ordinary income to the extent of earnings and profits of the Company (accumulated in corporate tax years beginning after 1962, but only while the shares were held and while the Company was “controlled”) attributable to the shares sold or exchanged. If a foreign corporation is both a PFIC and a CFC, the foreign corporation generally will not be treated as a PFIC with respect to the United States Shareholders of the CFC. This rule generally will be effective for taxable years of United States Shareholders beginning after 1997 and for taxable years of foreign corporations ending with or within such taxable years of United States Shareholders. The PFIC provisions continue to apply in the case of PFIC that is also a CFC with respect to the U.S. Holders that are less than 10% shareholders. Because of the complexity of Subpart F, a more detailed review of these rules is outside of the scope of this discussion.

The amount of any backup withholding will not constitute additional tax and will be allowed as a credit against the U.S. Holder’s federal income tax liability.

Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply, and United States Investors should consult their own tax advisors concerning these requirements.

Trivalence is subject to the informational requirements of the Security Exchange Act of 1934, as amended, and the requirement to file reports and other information with the SEC. You may read and copy any of Trivalence's report and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain of the SEC's regional officers at 7 World Trade Center, Suite 1300, New York, N.Y. 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. In addition, the SEC maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Trivalence is required to file reports and other information with the British Columbia Securities Commission in British Columbia, Canada. You are invited to read and copy any reports, statements or other information, other than confidential filings, that Centurion files with the provincial securities commissions. These filings are also electronically available from the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) (http://www.sedar.com), the Canadian equivalent of the SEC's Electronic Document Gathering Retrieval System (EDGAR).

As a foreign private issuer, Trivalence is exempt from the rules under the Exchange Act, as amended, prescribing the furnishing and content of proxy statements to shareholders. We have included in this report certain information disclosed in the Corporation's proxy circular prepared under Canadian securities rules.

The Company is exposed to currency risk as some of its transactions are denominated in currencies other than the Canadian dollar. The Company earns revenue and incurs operating expenses predominantly in US dollars. However, the Company reports in Canadian dollars and unfavorable changes in the applicable exchange rates may result in foreign exchange losses.

At June 30, 2004, the Company’s accounts payable and accrued liabilities included the following foreign currency denominated amounts.

The Company does not engage in any hedging activities to mitigate currency exchange risk.

The Company’s long-term indebtedness bears fixed interest rates. Therefore the Company is not exposed to the risk of changing interest rates that may have a detrimental affect on its earnings in future periods.

Terms of sale of the Company’s diamond production require full payment before the delivery of diamonds sold. Therefore, the Company is not subject to significant risk of incurring bad debts.

The future revenue and profitability of the Company will be dependant, to a significant extent, upon prevailing market prices for diamonds. Prices are subject to wide fluctuations in response to changes in supply and demand for diamonds, market uncertainty and a variety of additional factors that are beyond the control of the Company. The Company does not engage in any hedging activities.