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Liquidity and Capital Resources

The Company has financed its operations to date primarily through the issuance of common shares and the exercise of stock options. The Company continues to seek capital through various means including the issuance of equity and/or debt.

The financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future.

As at October 31, 2008, the Company had cash of $772,193 and had made exploration advances of $131,417, representing funds to be applied to future exploration work. As at April 30, 2008, the Company had cash of $1,477,634 and had made exploration advances of $118,191.

Working capital and exploration advances at October 31, 2008 amounted to a deficit of $2,456,220 compared to a surplus of $420,604 at April 30, 2008.

Liquidity at October 31, 2008 has been provided as a result of proceeds from the private placement equity financing completed in August 2007 and from financing received on behalf of the WSR joint venture. The Company also received advances from related parties of $234,142 (2007 – $Nil) used for mineral property expenditures. In order to service its significant working capital deficit and continue as a going concern, the Company must continue to rely on financial support from related parties until additional liquidity can be generated through a private placement financing or shares for debt settlement.

During the six month period ended October 31, 2008, the Company expended $201,891 (2007 – $74,767) for payments on capital leases.

During the six month period ended October 31, 2008, the Company expended $7,453,039 on mineral properties and recovered $6,182,911 compared to net expenditures of $4,265,613 during the comparable period in 2007. Other mineral property costs for the period were financed through non-cash transactions.

Subsequent Events

Subsequent to October 31, 2008, the Company:

a) granted an aggregate of 5,088,000 options to certain officers, directors, employees and consultants (subject to regulatory approval). Each of these options vest immediately and allow the holder to purchase one common share in the Company at a price of $0.10 until November 13, 2013. As a condition of these new grants, an aggregate of 3,820,000 options, originally granted to those certain officers, directors, employees and consultants with a weighted average exercise price of $0.65, were cancelled.

b) issued 402,505 common shares, with a deemed price of approx $0.153 per share, to a past director as compensation which was accrued under the deferred share unit plan.

Attawapiskat Property, Ontario

Big Red Diamond Joint Venture

During fiscal 2002, Kel-Ex Development Ltd. (“Kel-Ex”) formed an exploration joint venture with Big Red Diamonds Ltd. (“Big Red”), (the Big Red Diamond Joint Venture) with respect to certain mineral claims in the Attawapiskat area of Ontario, with Kel-Ex having an 80% interest and Big Red, a 20% interest. Also during this period, the Company entered into an agreement with Kel-Ex to acquire Kel-Ex’s 80% interest in these claims in consideration for $300,000 and the issuance of 1,000,000 common shares of the Company valued at $225,000. Kel-Ex is controlled by an individual who became a director of the Company subsequent to this agreement.

During fiscal 2003, the Company sold, to Arctic Star Diamond Corp. (“Arctic Star”), a 20% undivided interest in certain mineral claims for proceeds of $300,000.

As at October 31, 2008 the Company has a 60% working interest in certain mineral claims. These claims are subject to a 7.5% carried interest in favour of Kel-Ex, and the Company is obligated to contribute to the costs of the development program in proportion to its working interest.

Dumont Joint Venture

Pursuant to an agreement between Kel-Ex and Dumont Nickel Inc. (“Dumont”), Kel-Ex and Dumont formed a joint venture to explore certain mineral claims located in the vicinity of the Attawapiskat property. Kel-Ex was granted an option to earn up to a 90% interest in certain mineral claims held by Dumont and a 100% interest in any new claims staked by the joint venture subject to Dumont's right to receive a 5% interest in the new claims once commercial production is achieved. Under this agreement, Kel-Ex earned a 50% interest by incurring expenditures totaling $1,500,000. Kel-Ex can earn a further 25% by producing a feasibility study and a final 15% (20% on new claims) by bringing the property to commercial production.

The Company, along with Arctic Star and Oasis Diamond Corp. (“Oasis”), entered into an agreement dated October 23, 2003 with Kel-Ex, whereby the parties acquired Kel-Ex’s interest in the Dumont joint venture in exchange for assuming Kel-Ex’s obligations under the Dumont agreement and reimbursing Kel-Ex for its costs incurred. Under this agreement, the Company acquired 70% of Kel-Ex’s interest in the Dumont joint venture with Arctic Star and Oasis acquiring 20% and 10% interests, respectively. Kel-Ex retains a 10% free carried interest of which the Company’s share is 7.78%. Pursuant to an agreement dated September 21, 2004, Big Red was assigned a 20% working interest of the Kel-Ex interest from the Company in consideration for payment to the Company of $909,747 comprised of a mineral property expense recovery of $892,001 and interest of $17,746. As a result, the Company’s working interest was reduced to 50% of Kel-Ex’s right to earn 90% (95% on new claims) in the Dumont joint venture. It remains to be negotiated between the parties as to which of the Company or Big Red shall be liable for payment of the proportionate share of the Kel-Ex free carried interest.

Since August 2003, work on the Attawapiskat project has focused on follow up of the locations where high counts of diamond indicator minerals were found in a D6 glacial fan.

This fan is located less than 10 kilometres from De Beers Victor diamond deposit, lies within the Attawapiskat kimberlite trend and straddles ground subject to both the Big Red and Dumont Joint Ventures.

Results from power auger sampling show that the D6 diamond indicator fan is more than 3.6 km long and 3.5 km wide. Within the D6 fan there are 18 separate interpreted glacial trains of diamond indicator minerals within the joint venture claims, which do not appear to originate from any of the known kimberlite pipes. The presence of multiple sources within the D6 fan is further supported by the high counts (<6 – 564 grains (Av 19) per 20 kg) of diamond indicator minerals present in 856 samples occurring throughout the D6 fan. These trains are characterized by varying amounts of fresh (near source) grains of pyrope and eclogitic garnets, chrome diopside, picroilmenite and olivine contained within glacial deposits. The freshness of many of the grains suggests that their source is nearby and this is supported by the discovery of an angular fragment of kimberlite, containing purple pyrope garnets, in one of the trains. As many of the diamond indicator grains have chemistries analogous to those minerals that grow with diamonds in commercial diamond deposits (e.g. Orapa), it is inferred that the source of the grains may contain significant diamond grades.

There are several sites within the D6 indicator fan containing strong diamond indicator counts (e.g. OT 134 which contains 44 diamond indicator and 466 kimberlite indicator grains per 20 kg) and during the period November 1, 2004 to January 31, 2005, a further 46 power auger holes, totaling 236 metres were drilled. Results for 557 samples of basal till show that 514 contain diamond indicator (“DI”) minerals (i.e. minerals that grow with diamond). The average DI count is 18 grains per 20 kg and some samples contain more than 50 DI grains per 20kg. Many of the diamond indicator grains are fresh and occasionally angular and friable showing they are close to their source. Moreover, some of the garnets have kelyphite rims and some of the picroilmenite grains (picroilmenite is considered a kimberlite indictor not a diamond indicator although it can be used to forecast preservation of diamonds within a kimberlite pipe) have leucoxene coatings, again indicting a proximal source.

All samples have now been processed. Future work will be determined from a review of these results, and research currently in progress to discriminate the sources of the diamond indicator minerals. Field work will focus on power augering and drilling aimed at locating the source(s) of the best of these trains.

Wemindji James Bay Property, Quebec

During fiscal 2003, the Company acquired a 33.3% interest in various mineral claims located in the Wemindji James Bay region of Quebec, Canada from Kel-Ex in consideration for 200,000 common shares of the Company valued at $80,000.

During fiscal 2007, the Company received notification from one joint venture party that they did not wish to participate in non-diamond related exploration on these claims. The Company is finalizing a joint venture agreement with the other party for the exploration of various base metals within the same claim area in the Wemindji James Bay region. The Company will hold a 50% interest in this joint venture while retaining its 33.3% share in the original project which will explore solely for diamonds.

On August 9, 2005, the Quebec Joint Venture announced that it had discovered anomalous concentrations of 28 metals within the reconnaissance area. In addition to analysis for diamond indicator minerals, the heavy mineral concentrates were also geochemically analyzed for copper, cobalt, nickel, silver, zinc and molybdenum by atomic absorption and for gold, silver, arsenic, barium, bromine, calcium, cobalt, chromium, cesium, iron, hafnium, mercury, iridium, molybdenum, sodium, nickel, rubidium, antimony, scandium, selenium, strontium, tantalum, thorium, uranium, tungsten, zinc and eight rare earth elements by neutron activation.

Anomalous gold concentrations were found in more than 400 samples, anomalous copper values were found in 109 samples and anomalous uranium values were found in 173 samples. As the Archaean shield of eastern Canada contains a number of world-class metal mines, e.g. gold in the Val d'Or region of Quebec, nickel - copper - cobalt at Sudbury and Voisey Bay, and Uranium at Blind River, the geochemical results obtained above are regarded as most encouraging; particularly since they are spread throughout the regional area. A follow up program of priority results was conducted during 2006.

On March 3, 2008 the Quebec Joint Venture announced the discovery of a diamond bearing conglomerate. The conglomerate appears to extend for four kilometres along strike and is up to 500 meters wide. 772 claims have been staked covering 39,472 hectares. One hundred and eleven samples collected from the conglomerate totalling kilograms have been processed and fifty four of these samples contained a total of 1,717 diamonds. One hundred and six rare purple diamonds were amongst these diamonds recovered. In the sampling completed to date the Ekomiak V conglomerate appears to have the greatest potential with 1,672 diamonds being recovered from 923 kilograms. Autogenous milling of selected conglomerate samples recovered diamond and kimberlite indicator minerals including olivine, chromite, picroilmenite, clinopyroxenes, pyrope and eclogitic garnets.

Future work will include more detailed sampling of the diamond bearing conglomerates and exploration for the primary kimberlite sources of the diamonds.

Kyle Lake Property. Ontario

The Kyle Lake area is located approximately 200 km west of James Bay in Northern Ontario and about 100 km west of the Company’s Attawapiskat project and De Beers’ Victor Mine.

The Company acquired, by staking, a 100% interest in certain mineral claims located in the Kyle Lake area of Ontario, Canada. The Company then entered into an agreement effective June 30, 2004 with Arctic Star to sell a 20% contributing interest in the property to Arctic Star for proceeds of $100,000, reimbursement of 20% of previous staking and exploration costs incurred on the property and an agreement to pay 20% of on-going exploration costs.

During fiscal 2005, Arctic Star advised the Company that it declined to contribute financially to exploration of the Kyle Lake project and the Company elected to increase its interest in the project by funding Arctic Star’s contribution. At October 31, 2008, the working interest of the Company in the project was approximately 91.5%.

The property is subject to a 10% free carried interest in favour of Kel-Ex. This interest is financed on a pro-rata basis by the Company and Arctic Star and will be carried through to commercial production.

Funds expended by the Company and Arctic Star in financing this interest will be repaid out of 90% of Kel-Ex’s share of mine profits.

Technical Rationale

The Kyle lake region is considered prospective for commercial diamond bearing kimberlite pipes as all five of the previously known kimberlite pipes in the area contain diamonds. This percentage (100%) of diamond bearing to non-diamond bearing kimberlite pipes is much higher than the global average of 14% and indicates that this part of the Superior craton is extremely fertile for diamonds. The kimberlites are spread over a north – south distance of more than 100 km and, based on empirical observation of kimberlite fields elsewhere, this indicates potential for discovery of additional diamond bearing kimberlites. The known kimberlites were discovered by drilling aeromagnetic anomalies and are overlain by a layer of Paleozoic sedimentary rocks.

Conclusion

The Company is most encouraged by the quality and appearance of the diamonds it has recovered so far although it is too early to tell if this quality is indicative of the quality of diamonds that will be recovered in a production situation. The Company is also most encouraged by the excellent mineral chemistry of the G10 ten and G10 nine garnets as these indicate exceptionally favourable physical conditions for the formation of diamonds and are therefore normally associated with kimberlites that contain high diamond grades. The clinopyroxenes include a grain whose composition equates to the composition of clinopyroxenes found in large (greater than 100 carat) diamonds from the Ekati and Premier Diamond Mines. The Company eagerly awaits the results of the 200 to 300 tonne bulk sample.

Discovery of New Kimberlites at the Kyle Project

A 28,620 line kilometre airborne geophysical survey was flown in late 2006. A total of 34 targets were identified by the survey and have been staked. Priority targets are in the process of being drilled.

On December 13, 2006 the Company reported the drill intersection of a new kimberlite (U1) on its T1 project. The new kimberlite is located in between the soon to be Victor Diamond Mine and the Company’s prospective T1 diamond project.

Drilling intersected kimberlite at a depth of approximately 10 metres. Geophysical surveys indicate that U1 is a small pipe (less than one hectare). Continued drilling to a depth of 90 metres recovered a sample of about 108.42 kilograms which was air freighted to the CF Mineral Research laboratory for extraction of contained diamonds and analysis of indicator minerals. The diamond indicator minerals found within the sample are similar to those of samples from De Beers’ Victor Mine 40 kilometers away. Diamond indicator minerals recovered include 59 Group I eclogitic garnets, 17 olivines, 6 clinopyroxenes, 3 chromites and 1 peridotitic G10 garnet.

Three microdiamonds were recovered. On January 30, 2007 the Company reported the drill intersection of a second new kimberlite, U2, at a depth of 17 meters. An 87.88 kilogram sample of kimberlite from the discovery hole was processed for indicator minerals and microdiamonds by attrition milling. Two micro-diamonds were recovered. Diamond indicator minerals recovered from this sample include 67 Group I eclogitic garnets, 20 clinopyroxenes, 16 olivines, 9 orthopyroxenes, 5 chromites and 3 peridotitic G10 garnets.

The diamondiferous nature of U2 was confirmed on May 23, 2007 when 17 diamonds were recovered from 142.82 kg of drill core from 71.3 to 99.1 meters in hole U2-2. The diamonds have a coarse size distribution and are predominantly gem quality, similar to those recovered from DeBeers’ Victor Mine.

The Company has completed four NQ (4.76 cm diameter) inclined delineation holes in U2 to intersect additional kimberlite phases that occur as breccia clasts in the discovery hole. This delineation drilling indicates that the U2 kimberlite is approximately 9 hectares in size.

Drilling has shown that, like Victor, U2 contains varying diamond contents. Diamond contents range from nearly barren to values approaching those expected from Victor. Combining samples U2-2-234-325 and U2-3-198-300 yields 77 diamonds greater than 106 microns per 1000 kilograms. The percentage of gem quality diamonds greater than 106 microns for the two aforementioned samples is 78% while the average for all of the samples from U2 is 74%. The presence of high grade regions with a high proportion of gem quality diamonds, as evidenced by the current results, supports the continued processing of the delineation drill core.

The Company has also discovered a third new kimberlite. U2NW is just to the northwest of U2 and is approximately 1 hectare in size. Processing of the discovery hole confirmed that the kimberlite is diamondiferous.

The small sample of U2-NW processed does not allow an accurate estimation of the diamond count of the pipe. However, the diamond indicator minerals and microdiamonds recovered from the discovery hole indicate that the U2 NW kimberlite warrants additional testing. Delineation drilling (5.61cm core) of U2-NW has been completed.

The diamond results of the delineation drilling will be used to assess the potential of the kimberlites. Should there be sufficient potential U2 and/or U2-NW will be bulk sampled.

James Bay Lowlands Property, Ontario

During fiscal 2008, the Company acquired, by staking, an interest in several claims located in the James Bay lowlands area of Northeastern Ontario. The Properties are strategically located on and around the “Ring of Fire” and cover approximately 36 square kilometres (8,944 acres) of ground. Based on geophysical work completed by Metalex and Arctic Star, there are 33 high priority Volcanic Massive Sulphide (“VMS”) drill ready targets that have been identified and staked.

In March 2008, the Company and Arctic Star entered into a farm-in agreement whereby WSR Gold Inc. (“WSR”) can earn up to a 50% interest in certain mineral claims (regulatory approval subsequently granted in May 2008). Certain of these claims were previously included as part of the Kyle Lake project. Under the terms of the agreement, WSR has the right to earn up to a 50% interest in the project by funding up to $20,000,000 in expenditures on the property over a 4 year period. For each $5,000,000 in expenditures, WSR will acquire a 12.5% interest in the property.

By mid 2008, an aggressive exploration program was underway. An airborne helicopter magnetic and electromagnetic geophysical survey was completed over most of the joint venture’s claims. Ground geophysical studies over anomalies identified on the airborne survey have been conducted and 21 electromagnetic anomalies with a sympathetic magnetic response have been identified, as well as 19 with just electromagnetic anomalies.

Drilling commenced on the targets that have been refined by ground geophysics in mid-May 2008. Anomaly number 5.01 was the first tested and several holes have intersected significant widths of sulphide mineralization.

The best intercept to date is in hole number six which intersected 95 meters of semi-to-near-massive sulphides from 72.7 meters. Visible copper, zinc, lead and iron sulphide mineralization is typical of the deposit.

Analysis of the mineralized core at ALS Chemex confirmed the significant mineralization seen visually. Significant intersections include:

· DDH5.01-06 intersected near-massive to massive sulphides from 65-167m downhole for a length of 102m averaging 6.5% Zn, 0.44% Cu, 0.19% Pb, and 3 g/t Ag. Included within this section, from 99.7-125.7m, for a length of 26m, the zone averaged 13.8% Zn, 0.50% Cu, 0.05%Pb, and 2 g/t Ag.

· DDH5.01-14 intersected similar near-massive to massive sulphides from 83.0-120.0m downhole for a length of 37.0m, averaging 6.0% Zn, 0.34% Cu, 0.05% Pb and 6 g/t Ag. Included in this section, from 103.0-111.0m, for a length of 8m, the zone averaged 17.4% Zn, 0.24% Cu, 0.04% Pb and 5 g/t Ag.

· DDH5.01-15 intersected similar near-massive to massive sulphides from 158.8-184.2m downhole, for a length of 25.4m, averaging 7.6% Zn, 0.35% Cu, 0.36% Pb, and 8 g/t Ag.

A second phase of drilling comprising 17 holes totaling 5,095.5m has been completed. To date 42 holes totaling 10,785.9 meters have been drilled on the 5.01 project. 719 samples from the second phase of drilling have been sent for analysis and the results are awaited.

Mineralization, alteration and the geological environment at the 5.01 anomaly appears to be typical of a Noranda-Mattabi-style VMS (Volcanogenic Massive Sulphide) deposit. The mineralized zone appears to subcrop beneath approximately 15 meters of glacial till. The massive sulphide occurrence is still open up and down dip in areas, as drilling has failed to close off the upper or lower plunge of the deposit. The strike length has been extended to almost 200 meters, with a vertical depth extension of 275 meters from a near surface depth of 10 meters. The width of the zone varies from 3 to 22 meters with an approximate average of 12 to 15 meters.

Additional ground and airborne geophysical studies are planned over the 5.01 project area. The results of these surveys, in conjunction with the results of the completed drilling will guide future work.

Wawa Property, Ontario

In July 2005, the Company executed an agreement with Mori Diamonds Inc (“Mori”) that allows the Company to earn a 60% interest in certain claim units by solely funding the first diamond deposit discovered in the claim units to bankable feasibility. The Company paid $229,500 to Mori during fiscal 2006 and agreed to pay $100,000 annually until it earns its interest or withdraws from the venture. The minimum spending requirement of $400,000 to have been incurred by May 31, 2006 was met. The claim units are subject to a 2% net smelter royalty.

In August 2005 the Company assigned certain rights and obligations under the Mori agreement to Dianor Resources Inc. (“Dianor”). Under the agreement, Dianor will pay 50% of all of the Company’s costs pertaining to the Mori agreement and will receive 50% of the Company’s entitlements and obligations. Dianor will also allow the Company access to its technical data base covering certain claims at Wawa.

On August 10, 2005 the Company announced that reconnaissance sampling has been completed over the Wawa claims with 130 drainage and rock samples collected. These samples were analyzed by the CF Mineral Research laboratory and the largest diamond recovered was a 0.093 carat, brown crystal measuring 2.87 x 2.51 x 1.85 millimetres. It was also reported that the diamondiferous conglomerate had been geologically mapped and had a strike length of three kilometres and a breadth of up to 180 meters.

Results of a further nine conglomerate grab samples were reported on April 27, 2007. In the eastern part of the conglomerate (Mori East Block), 119 diamonds were recovered from 79.60 kg. Analysis of 112.63 kg of conglomerate from the western part (Mori West Block) returned 18 diamonds.

In 2007, a 13 hole drill program was completed on the joint venture’s Mori East Block to determine the subsurface extent of the outcropping diamond bearing conglomerates. Results of the drill program recovered 5,234 diamonds from 8,078 kilograms of conglomerate drill core. Of interest is the discovery that over half of the diamonds in the core are coloured. The coloured diamonds range from brown (26.8%), grey (13.9%), yellow (5.7%), green (5.1%), orange (0.8%), purple (0.1%), amber (0.1%) and black (0.1%). One pink diamond was also recovered. Photos of some of these coloured stones are contained on Metalex’s website (www.metalexventures.com).

Although the quantities of diamonds present in the conglomerates of the Mori East Block are comparable to those from Dianor Resources Inc’s Leadbetter conglomerate, the Leadbetter conglomerate does not contain the abundant coloured stones. The Leadbetter conglomerate is the fault offset extension of the conglomerate on Dianor’s adjacent property where Dianor is about to undertake a 6,000 meter drill program and conduct a 34,000 tonne bulk sampling program.

A three hole drill program on the Mori West Block recovered 137 diamonds from 975 kilograms of conglomerate of core. This suggests that the conglomerate of the Mori West Block is more distal to the diamond source. This is further supported by the abundance and nature of the diamond indicator minerals found within the conglomerates.

Mali

The Company acquired an Authority to Prospect in 2004 over an area in northeastern Mali. In exploring the area the Company found exceptionally anomalous gold values (6 to 77 ppm) in reconnaissance heavy mineral concentrates and the Company announced that approximately 1,000 follow up samples have been collected from anomalous areas and have been sent to Australia for gold analysis by bulk cyanide leach. The results of these samples indicated that a portion of the Authority to Prospect was prospective for metal mineralization and the Company applied for two exploration licences to cover these anomalous areas.

In May 2007, the Company was granted an exploration license covering 490 square kilometers. The license covers a period of three years and is renewable twice for a total of nine years.

The annual exploration commitment in CFA Francs (“CFA”), with Canadian Dollar equivalents using exchange rates at October 31, 2008 is as follows:

Fiscal 2009 121,000,000 CFA $284,592 2010 103,000,000 CFA $242,256

The fiscal 2008 exploration commitment was not been met due to circumstances beyond the Company’s control. However, a work program is planned for early in calendar 2009 which will satisfy the commitment. The Company has received written confirmation from Malian government officials that the license remains in good standing.

In June 2008, the Company was granted an additional exploration license covering 500 square kilometers. The license covers a period of three years.

The annual exploration commitment in CFA Francs (“CFA”), with Canadian Dollar equivalents using exchange rates at October 31, 2008 is as follows:

Fiscal

Angola

The Company entered into an agreement for kimberlite diamond exploration in Angola pursuant to an agreement executed by the Angolan Council of Ministers in April 2005. Under the terms of the agreement, the Company contributes 100% of all costs incurred by the project up to the end of feasibility studies. These costs are repaid out of future profits and during the period the costs are being repaid, the Company’s interest in the project is 55-60%. After the Company’s costs have been repaid, the Company’s interest in the project is 25%. Under the terms of the kimberlite license, the Company was required to spend US$10,000,000 by April 29, 2008. This commitment has not been met as of October 31, 2008. The license is twice renewable for one year periods and the Company has applied to have the license extended to April 29, 2009. To date, the Company has not received an extension in writing, although it has been given verbal assurance that an extension will be granted. The Company’s ability to meet this expenditure commitment will be dependent upon its success in raising additional financing.

A heavy mineral survey has been carried out over the entire Chitamba license. Kimberlite indicator minerals with diamond inclusion composition occur at seven drainage sites and three auger sites. At one drainage site six diamond inclusion composition G10 garnets were found and this result upgrades the priority of nearby aeromagnetic anomalies.

Interpretation of aeromagnetic data over the 3,000 km2 Angola kimberlite license was completed by Scott Hogg and Associates, geophysicists, and 127 anomalies were identified. There were thirteen known kimberlites within the Chitamba licence at the start of the joint venture and, in November 2005, the Company announced that it had discovered three new kimberlites. The kimberlites were found by follow up of aeromagnetic anomalies using ground magnetic surveys and shallow auger drilling. The modelled sizes of the kimberlites, based on a re-interpretation of aeromagnetic data in 2006, are 164 by 248 metres (1.64 ha); 150 by 150 metres (1.76 ha) and 200 by 82 metres (1.3 ha). Auger samples were collected and were processed by the CF Mineral Research laboratory.

The three kimberlites discovered by the Company in 2007 are either diamondiferous or show potential for being diamondiferous. Two microdiamonds were found in 26.7 kg of weathered rock taken from the Caicala kimberlite, one of minus 0.15 mm plus 0.106 mm, the other minus 0.106 mm plus 0.074mm. A 10.5 kg sample of kimberlite 14032A contained one minus 0.15 mm plus 0.106 mm microdiamond and one diamond inclusion composition garnet. The Company proposes to collect a 200 kg sample from each kimberlite phase within these deposits to determine their commercial diamond potential.

As the existing aeromagnetic data was found not to be detailed enough to position drill locations a high resolution helicopter borne magnetic survey was undertaken in 2007. This survey refined the results of the previous survey and drilling of the resultant geophysical anomalies commenced early in 2008. To date, 22 kimberlites have been discovered on the property by drilling or pitting. In excess of 200 kilograms of kimberlite has been collected from each of these discoveries and has been shipped to CF Mineral Research Ltd for the recovery of diamond indicator minerals and microdiamonds. The first kimberlite results are expected shortly.

All of the aeromagnetic anomalies referred to above, and about 70 other kimberlites within and to the east of the Chitamba license (the Chitamba – Lulo kimberlite cluster), are drained by the aforementioned Cuango River and its tributaries. The Company believes it is well placed to discover the source of the abundant alluvial diamonds found downstream in the Cuango River by follow up of the aeromagnetic anomalies referred to above.

Morocco

In May 2004, the Company entered into an agreement with the Office National de Hydrocarburers et des Mines (“ONHYM”) to conduct preliminary exploration work in Southern Morocco in order to identify areas on which to undertake further exploration work. In May 2005, the Company added additional areas for exploration work on the same terms and conditions as the first agreement. The agreements were governed by the laws and regulations of the Kingdom of Morocco and were valid until November 2006. The reconnaissance mineral sampling program over these areas is complete and, based on the positive results of this work, the Company is negotiating a joint venture agreement with the ONHYM for further exploration of the claim areas. Although the Company has every intention of reaching an agreement with the ONHYM, due to the length of time elapsed during negotiations, capitalized costs of $2,551,890 were written off to operations during fiscal 2008 in order to comply with accounting guidelines.

The concessions cover part of an Archaean craton and are considered highly prospective for diamond bearing kimberlite, base and precious metals. Follow up work of geochemical and geophysical anomalies discovered from earlier reconnaissance sampling commenced in late 2005 with 389 heavy mineral samples, 50 bleg samples and 60 rock samples having been collected for analysis. An additional 1,000 follow up samples were also taken in 2006.

Sample results announced on June 27, 2006 indicated that G10 peridotitic garnets occur in 6 drainage/loam samples collected over an area of approximately 1,000 km2. One of these samples contained an outstanding result of three G10 garnet grains comprising one G10 - 9, one G10 - 5 and one G10 - 3. Many of the G10 grains are fresh, and they are interpreted to be derived from nearby diamond bearing kimberlite(s). Additionally, 17 sample sites contain picroilmenite grains clustered over an area of 1,000 km2. Several samples sites also contain pyrope garnet and a diamond stability field olivine has been found at one location. These results are interpreted to reflect an undiscovered kimberlite field.

First pass field follow up of the encouraging diamond indicator results was complete in mid 2006 and the samples collected were sent to the CF Mineral Research Laboratory for analysis. The Company is particularly encouraged by both the diamond indicator results and metal results of the Morocco project. Follow up work on these results will commence once the joint venture with ONHYM is formalized.

Greenland

In December 2003, the Company applied for an exploration license in the Umiiviit area of West Greenland. The license was granted in May 2004 and is effective to December 31, 2008. Kel-Ex was granted a 10% free carried interest.

In January 2005, the Company entered into an agreement with Cantex Mine Development Corp. (“Cantex”), whereby two exploration licenses held by Cantex in Greenland were transferred and assigned to the Company. In return, the Company will solely fund exploration of these licenses until January 20, 2008 and Cantex was granted an option to purchase a 25% interest in these licenses, and the Company’s Umiiviit license, for $120,000. Cantex declined to execute the option in January 2008, relinquishing all interests in the project. Cantex is related to the Company by virtue of directors in common.

In December 2006, portions of the exploration licenses were relinquished and the remaining ground was amalgamated into a single license.

The annual exploration commitment in Danish Kroners (“DKK”), with Canadian Dollar equivalents using exchange rates at October 31, 2008 is as follows:

Calendar 2008 7,082,460 DKK $1,466,777

The expenditure commitments are based on a fixed amount plus a sliding scale based on the surface area of the license. The commitment will be reduced if certain ground is relinquished. As confirmed by the Greenland Bureau of Minerals and Petroleum, the Company has already incurred 4,708,322 DKK in expenditures towards this commitment as at October 31, 2008.

Diamond indicator sampling around the shores of the lake returned largely negative results and this is entirely consistent with a diamond source being located within the 5 km by 500 – 1000 metre lake.

Interpretation of the ground geophysics, carried out by Scott Hogg and Associates, had identified 14 magnetic targets ranging in size from 50 metres to 250 metres in diameter. Two of these, located in the lake, are coincident with ground gravity anomalies.

Sixteen shallow drill holes were drilled in a broadly north-south section across the lake to collect basal till samples to assist in determining the ice direction. The drill holes continued into bedrock and several holes intersected thin kimberlite-like sills. However, as no significant amounts of pyrope garnet have been found in these rocks, the sills are not the source of the exceptional diamond indicator minerals discovered.

The coincident magnetic and gravity anomalies remain high priority drill targets because they are up ice (first glaciation) from the two samples containing exceptional diamond indicators considered to be derived from nearby diamond bearing kimberlite pipes.

Brazil

In May 2007, the Company announced that is has entered into a letter of intent with Kel-Ex Development Ltd. to acquire certain mineral claims located in the State of Mato Grasso, Brazil in consideration for the issuance of 10,000,000 common shares of the Company. The mineral claims are subject to a 10% Net Profits Interest (“NPI”) retained by Kel-Ex and two 5% NPI’s held by two individuals. The Company has entered into agreements with each of the two individuals to acquire their 5% NPI’s in consideration for the issuance of 500,000 common shares of the Company to each individual. The Company also announced that it had entered into an agreement with a third party under which the third party would have an option to acquire an interest in these claims by incurring certain exploration expenditures. These transactions received shareholder approval subject to regulatory approval. Subsequent to such shareholder approval, the third party decided not to proceed with the agreement. The Company is currently negotiating a similar transaction with another third party and if an agreement is reached, will require regulatory approval before the agreement can be finalized.

The claims area has been the focus of historical work conducted previously by several other companies. Prior work has discovered at least eight untested kimberlite pipes, of which, three have been recently sampled with results pending as well as numerous high quality diamond indicator mineral anomalies from alluvial heavy mineral samples derived from as of yet undiscovered source kimberlites.

An airborne survey completed by Kel-Ex covers the most significant diamond indicator anomalies received from bulk (~ 10kg of material smaller than 1 mm) stream sediment samples sieved from alluvial gravels that have contained many large diamonds reportedly up to 300 carats in size recovered by garimpeiros mining the gravels. These samples contained not only Group I eclogitic garnets but also diamond inclusion composition chrome diopsides with angular near source textures. Chrome diopside is a soft mineral that normally does not survive alluvial transport in tropical conditions more than 2 to 3 kilometers from source. Several of the near source chrome diopsides have compositions equivalent to those from large (50+ carat) diamonds from Ekati and from chrome diopsides from kimberlites which contain large diamonds such as Premier and Jagersfontein.

An airborne magnetic and electromagnetic geophysical survey has been completed using a helicopter over the postulated (3.4 by 3.7km) source area of these high quality indicator minerals. Interpretation of the magnetic portion of the survey is now complete and 5 targets potentially reflecting kimberlites have been modelled to have widths of up to 300 meters. These targets have been identified in areas upstream of the aforementioned diamond inclusion indicators.

Interpretation of the electromagnetic results of the survey is currently underway. Upon completion of this geophysical interpretation a program will be undertaken to test the anomalies.

General

Certain Metalex exploration projects are managed by Kel-Ex Development Ltd., a company owned by Dr. Charles Fipke, an internationally recognized diamond geologist. Dr. Fipke is the Chairman of Metalex. Kel-Ex provides Metalex with access to its advanced proprietary databases and interpretational techniques.

In return Kel-Ex receives a 10% administration fee on certain projects to cover costs and, in the case of certain projects, a 10% interest carried to production.

Dr. Fipke also owns the CF Mineral Research (“CF Minerals”) laboratory where samples collected in certain exploration programs are analyzed. Metalex’s management is satisfied that all such related party transactions are entered into on terms that are reflective of current market conditions.