Consolidated Balance Sheets 3

Consolidated Statements of Operations and Deficit 4

Consolidated Statements of Cash Flows 5

Notes to Consolidated Financial Statements 6 - 27

1

The accompanying consolidated financial statements of UC Resources Ltd. (An Exploration Stage Company) have been prepared by management in accordance with Canadian generally accepted accounting principles. The financial information contained elsewhere in this report has been reviewed to ensure consistency with the financial statements.

Management maintains systems of internal control designed to provide reasonable assurance that the assets are safeguarded, all transactions are authorized and duly recorded, and financial records are properly maintained to facilitate the preparation of financial statements in a timely manner. The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit Committee.

The Audit Committee of the Board of Directors has reviewed the financial statements with management and the external auditors, Dale Matheson Carr-Hilton Labonte LLP, an independent firm of chartered accountants, appointed as external auditors by the shareholders, have audited the consolidated financial statements and their report is included herein.

_________________________________ ______________________________

Gregg Roberts, Director Brian Gusko, Chief Financial Officer

Vancouver, Canada

October 28, 2008

2

We have audited the consolidated balance sheet of UC Resources Ltd. (An Exploration Stage Company)

as at June 30, 2008 and the consolidated statements of operations and deficit and cash flows for the year

then ended. These financial statements are the responsibility of the Company’s management. Our

responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those

standards require that we plan and perform an audit to obtain reasonable assurance whether the financial

statements are free of material misstatement. An audit includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management, as well as evaluating the

overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial

position of the Company as at June 30, 2008 and the results of its operations and its cash flows for the

year then ended in accordance with Canadian generally accepted accounting principles.

The audited financial statements at June 30, 2007 and for the year then ended were examined by other

auditors who expressed an opinion without reservation on those statements in their report dated

November 2, 2007.

DALE MATHESON CARR-HILTON LABONTE LLP

Chartered Accountants

Vancouver, Canada

October 24, 2008

See notes to consolidated financial statements. 3

(Restated-

Note 13)

Cash and cash equivalents $ 1,913,386 $ 277,614

Short term investments (note 4) 282,550 1,003,550

Receivables and advances 298,851 462,255

Prepaid expenses 17,171 57,211

Advance to contractor (notes 5 and 10) 216,463 86,964

2,728,421 1,887,594

Accounts payable and accrued liabilities $ 258,406 $ 137,794

Obligation for mineral property interest acquisition (note 6) - 207,106

258,406 344,900

…………&hel... Director

Gary Monaghan

…………&hel... Director

Gregg Roberts

See notes to consolidated financial statements. 4

Amortization $ 24,750 $ 74,761

Audit and accounting 84,532 46,756

Consulting fees 247,543 187,310

Interest 51,612 2,539

Investor relations 141,231 351,514

Legal 84,428 73,082

Management fees 389,295 224,061

Office and administration 909,954 545,085

Regulatory and transfer agent fees 56,737 64,389

Stock-based compensation (Note 9) 1,030,545 1,921,458

Travel 168,560 245,472

Interest income 88,442 31,660

Write-off of other receivables (80,736) -

Write-off of mineral property interest (Note 6) - (55,529)

Foreign exchange gain 32,770 81,704

Loss on sale of equipment (13,903) (6,429)

Future Income tax recovery (Note 9 and 11) 1,065,121 -

Net loss $ (2,097,493) $ (3,685,021)

Items not involving cash

Amortization 24,750 74,761

Write-off of other receivables 80,736 -

Future income tax recovery (1,065,121) -

Write-off of mineral property interest - 55,529

Consulting and travel expenses - 87,347

Stock-based compensation 1,030,545 1,921,458

(2,026,583) (1,545,926)

Changes in non-cash working capital

Accounts receivable and advances 82,668 (314,430)

Prepaid expenses 40,040 (47,575)

Advance to contractor (129,499) (86,964)

Accounts payable and accrued liabilities 120,612 (218,251)

113,821 (667,220)

Repayment of loans payable - (50,000)

Capital stock issued for cash, net 6,318,564 4,462,262

Loan receivable - 100,000

Obligation for mineral property interest acquisition (207,106) -

Expenditures on mineral property interests (2,420,798) (1,615,590)

Acquisition of short-term investments (282,550)

(1,337,050)

Disposition of short-term investments 1,003,550 333,500

Acquisition of plant and equipment (863,126) (777,845)

6

UC Resources Ltd. (the “Company”) is an exploration stage company engaged principally in the

acquisition, exploration and development of mineral properties in Canada and Mexico.

At June 30, 2008, the Company had working capital of $2,470,015 (2007 - $1,542,694) and an

accumulated deficit of $15,259,651 (2007 - $13,162,158). The Company will require additional

financing or outside participation to undertake further exploration and subsequent development of its

mineral property interests. The Company’s ability to continue as a going-concern is dependent on the

ability of the Company to raise equity financing in the future to fund further exploration work and to

fund continuing operating losses, and ultimately on the attainment of profitable operations to meet the

Company’s liabilities as they become payable.

The recovery of the Company's investment in mineral property interests is dependent upon the

discovery of economically recoverable reserves, the ability of the Company to obtain financing to

complete development and the future proceeds from the disposition of those reserves.

These financial statements have been prepared on a going-concern basis, which assumes the

realization of assets and settlement of liabilities in the normal course of business. These financial

statements do not include any adjustments for the recoverability and classification of recorded asset

amounts and classification of liabilities that might be necessary should the Company be unable to

continue as a going-concern.

These financial statements have been prepared in accordance with accounting policies generally

accepted in Canada and reflect the following policies.

(a) Principles of consolidation

These financial statements include the accounts of UC Resources Ltd. and its wholly-owned

integrated subsidiaries, Minera Planet Exploration, S.A. de C.V. (“Minera Planet”) and Minera

Silver Creeck S.A. de C.V. (“Silver Creeck”), companies incorporated under the laws of

Mexico, hereinafter collectively referred to as the “Company”. All significant inter-company

balances and transactions have been eliminated.

(b) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and highly liquid short-term interest

bearing securities with terms at the date of purchase for three months or less.

(c) Short-term investments

Short-term investments are temporary investments with original maturities of greater than

three months and less than one year at the time the investment is made. Short-term

investments are valued at the lower of cost and market value.

7

8

9

10

Unless otherwise stated, the carrying values of the Company’s financial instruments at June

30, 2008 and 2007 approximate their fair values due to the relatively short-term periods to

maturity of these instruments. The Company’s financial instruments consist of cash and cash

equivalents, accounts receivable and advances, advance to contractor, and accounts payable

and short term investments.

The Company retains and/or has obligations related to certain carried interest rights and net

smelter royalties, the value of which is derived from future events and commodity prices.

These rights are derivative instruments. However, the mineral interests to which they relate

are not sufficiently developed to reasonably determine value.

11

Effective July 1, 2007, the Company adopted the following new accounting standards issued by the

Canadian Institute of Chartered Accountants (“CICA”):

Effective July 1, 2007 the Company adopted the new accounting standards issued by the CICA

relating to financial instruments. As required by the transitional provisions of these standards, these

standards have been adopted on a prospective basis without restatement of prior period financial

statements.

This standard requires all financial instruments within its scope, including derivatives, to be included

on a Company’s balance sheet and measured either at fair value or, in certain circumstances when

fair value may not be considered most relevant, at cost or amortized cost. Unrealized changes in fair

value are to be recognized in the statements of loss or comprehensive loss.

All financial assets and liabilities are recognized when the entity becomes a party to the contract

creating the item. As such, the Company’s outstanding financial assets and liabilities at the effective

date of adoption are recognized and measured in accordance with the new requirements as if these

requirements had always been in effect. Changes to the fair values of certain assets and liabilities as

at July 1, 2007, are recognized by adjusting opening deficit or opening accumulated other

comprehensive loss.

All financial instruments are classified into one of the following five categories: held for trading, heldto-

maturity, loans and receivables, available-for-sale financial assets or other financial liabilities. Initial

and subsequent measurement and recognition of changes in the value of financial instruments

depends on their initial classification.

Held-to-maturity investments, loans and receivables are initially measured at fair value and

subsequently measured at amortized cost. Amortization of premiums or discounts and losses due to

impairment are included in current period net earnings.

Net Smelter Royalties (“NSR”) are a form of derivative financial instrument. The fair value of the

Company’s right to purchase the NSR (refer to Note 6) is not determinable at the current stage of the

Company’s exploration program. No value has been assigned by management. The Company does

not engage in any other forms of hedging activity.

Available-for-sale financial assets are measured at fair value. Revaluation gains and losses are

included in other comprehensive income until the asset is removed from the balance sheet.

Held for trading financial instruments are measured at fair value. All gains and losses are included in

net earnings in the period in which they arise.

12

All derivative financial instruments are classified as held for trading financial instruments and are

measured at fair value, even when they are part of a hedging relationship. All gains and losses are

included in net earnings in the period in which they arise, except for derivative instruments which

represent a cash flow hedge, where the gain or loss is recognized in other comprehensive income.

Effective July 1, 2007, the Company implemented the new CICA accounting section 1506 (Accounting

Changes). Under these new recommendations, voluntary changes in accounting policy are permitted

only when they result in the financial statements providing reliable and more relevant information.

This section requires changes in accounting policy to be applied retrospectively unless doing so is

impracticable, requires prior period errors to be corrected retrospectively and requires enhanced

disclosures about the effects of changes in accounting policies, estimates and errors on the financial

statements. These recommendations also require the disclosure of new primary sources of generally

accepted accounting principles that have been issued but not yet effective. The impact that the

adoption of this section will have on the Company’s financial statements will depend on the nature of

future accounting changes and the required additional disclosure on Recent Accounting

Pronouncements.

The Company adopted CICA Section 1530, Comprehensive Income effective July 1, 2007. This

section establishes for reporting and presenting comprehensive income or loss, which is defined as

the change in equity from transactions and other events from sources other than income or loss,

which is defined as the change in equity from transactions and other events from sources other than

the Company’s shareholders. Other comprehensive income or loss refers to items recognized in

comprehensive principles such as unrealized gains or losses on available-for-sale investments.

Amounts initially recorded to other comprehensive income or loss is reclassified to earnings when the

financial instrument is derecognized or impaired. For the year ended June 30, 2008, the Company

did not have any items that affected other comprehensive income or loss, therefore, the

comprehensive loss for the year is equal to the net loss for the year.

This standard requires disclosure of an entity’s objectives, policies and processes for managing

capital, quantitative data about what the entity regards as capital and whether the entity has complied

with any capital requirements and, if it has not complied, the consequences of such noncompliance.

This standard is effective for the Company for interim and annual periods relating to fiscal years

beginning on or after July 1, 2008. The Company is currently evaluating the effects of adopting this

standard.

General Standards of Financial Statement Presentation, CICA 1400, was amended to include

requirements to assess and disclose an entity’s ability to continue as a going concern. The new

requirements are effective for interim and annual periods relating to fiscal years beginning on or after

July 1, 2008. The Company is currently evaluating the effects of adopting this standard.

13

These standards will replace CICA 3861, Financial Instruments – Disclosure and Presentation. They

increase the disclosures currently required, which will enable users to evaluate the significance of

financial instruments for an entity’s position and performance, including disclosures about fair value.

In addition, disclosure is required of qualitative and quantitative information about exposure to risks

arising from financial instruments, including specified minimum disclosures about credit risk, liquidity

risk, currency risk, interest rate risk and market risk. The quantitative disclosures must provide

information about the extent to which the entity is exposed to risk, based on information provided

internally to the entity’s key management personnel. This standard is effective for the Company for

interim and annual periods relating to fiscal years beginning on or after July 1, 2008. The Company

expects that its disclosures will be expanded to incorporate the additional requirements.

In 2006, the Canadian Accounting Standards Board (“AcSB”) published a new strategic plan that will

significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan

outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period.

In February 2008, the AcSB announced that 2011 is the changeover date for publicly-listed

companies to use IFRS, replacing Canada’s own GAAP. The date is for interim and annual financial

statements relating to fiscal years beginning on or after January 1, 2011. The transition date of

January 1, 2011 will require the restatement for comparative purposes of amounts reported by the

Company for the year ended June 30, 2010.

While the Company has begun assessing the adoption of IFRS for 2011, the financial reporting impact

of the transition to IFRS cannot be reasonably estimated at this time.

Short-term investments consist of money market investments that are designated "held-for-trading"

and are measured at fair value. The cost of the short-term investments approximates their fair value of

$282,550 at June 30, 2008 (2007 - $1,003,550).

Money is advanced to a contractor that the Company has contracted to operate the projects in both

Canada and Mexico. The operating costs are recorded as deferred exploration costs when incurred.

14

At June 30, 2008 and 2007, the Company's deferred exploration and acquisition costs for mineral

property interests was comprised of properties located in Canada and Mexico, as follows:

The Company classified the Mill costs of $489,964 under mineral properties as deferred preproduction

costs in 2007 and they have been reclassified to property, plant and equipment as Mill for 2008 (Refer

to notes 8 and 13).

15

16

17

18

The Company holds a 5.4% interest, represented by 153,194 shares of SVB Nickel Co. Ltd., in a

mineral property syndicate holding mineral claims in the South Voisey Bay area of Newfoundland,

carried at a nominal carrying value of $1, which approximates its current estimated fair value.

Accumulated

Cost Amortization Net

Office equipment $ 37,133 $ 17,141 $ 19,992

Computer equipment 26,316 11,101 15,215

Machinery and equipment 952,007 94,567 857,440

Transportation equipment 144,510 42,343 102,167

Mill 894,154 - 894,154

$ 2,054,120 $ 165,152 $ 1,888,968

Accumulated

Cost Amortization Net

Office equipment $ 25,199 $ 14,576 $ 10,623

Computer equipment 21,355 5,004 16,351

Machinery and equipment 419,978 42,286 377,692

Transportation equipment 184,344 28,382 155,962

Mill 489,964 - 489,964

$ 1,140,840 $ 90,248 $ 1,050,592

19

The authorized capital stock consists of 100,000,000 common shares without par value.

Issued and outstanding

Number of Number of

Shares Amount Shares Amount

Balance, beginning of year 89,725,326 $ 21,173,315 58,363,759 $ 13,134,118

Issued during the year

For cash

Private placements, net 10,310,030 4,436,772 2,678,568 1,337,050

Exercise of options 900,000 121,300 3,101,500 395,015

Exercise of warrants 5,272,770 1,760,492 19,581,499 2,730,197

16,482,800 6,318,564 25,361,567 4,462,262

Non-cash

Reallocation of contributed

surplus for options exercised - 145,542 - 438,698

Future income tax recovery (1,065,121)

For broker warrants & options - (363,436) - (54,620)

For mineral properties - - 6,000,000 3,192,857

16,482,800 5,035,549 31,361,567 8,039,197

Balance, end of year 106,208,126 $ 26,208,864 89,725,326 $ 21,173,315

During the year ended June 30, 2008, the Company received $121,300 and issued 900,000 common

shares pursuant to the exercise of stock options. A further $1,760,492 was received on the issue of

5,272,770 common shares on the exercise of warrants.

In November 2007, the Company completed a private placement and issued 6,810,030 non-flowthrough

units at $0.45 per unit and 3,500,000 flow-through units at $0.50 per unit for aggregate gross

proceeds of $4,814,514 and incurred expenses of $377,742 in the form of finder’s fees and other

issuance costs for net proceeds of $4,436,772. Each unit consists of one common share of the

Company and one-half of one common share purchase warrant. Each whole warrant entitles the

purchaser to purchase one additional share at $0.70 per share for a period of two years. The

Company has the right to accelerate the expiry date of the warrants, on not less than 30 days prior

written notice, if the closing price of the common shares of the Company is at least $1.50 per share for

any period not less than 30 consecutive trading days. All securities are subject to a hold period, which

expires March 17, 2008. An additional 877,778 broker options were issued that entitles the holder to

acquire one additional common share and one-half of one common share purchase warrant at $0.45

per share on or before November 16, 2009. Each whole warrant entitles the broker to purchase one

additional share at $0.70 per share for a period of two years. Management has determined the fair

value attributed to the options and warrants to be $363,436 which is included in capital stock.

The Company renounced flow-through expenditures of $3,247,320 on December 31, 2007 relating to

the above private placement and the private placement completed in March 2007 described below,

and recorded a recovery of future income taxes of $1,065,121 to record the utilization of previously

unrecognized tax loss carry forwards to offset the future income tax liability resulting from the tax

benefits renounced.

20

21

22

$ 0.125 June 23, 2007 50,000 - 50,000 - -

$ 0.125 July 17, 2007 100,000 - 100,000 - -

$ 0.34 Sept. 30, 2007 5,282,770 - 5,122,770 160,000 -

$ 1.00 Mar. 13, 2009 1,607,139 - - - 1,607,139

$ 0.50 Nov. 16, 2009 - 5,155,015 - - 5,155,015

7,039,909 5,155,015 5,272,770 160,000 6,762,154

Weighted Average

exercise price $ 0.443 $ 0.500 $ 0.336 $ 0.340 $ 0.771

Exercise

Price Expiry Date

Outstanding

at June 30,

2006 Issued Exercised Expired

Outstanding

at June 30,

2007

$ 0.125 Feb. 22, 2007 13,137,500 - 13,067,500 7 0,000 -

$ 0.125 June 23, 2007 2,450,000 - 2,400,000 - 50,000

$ 0.125 July 17, 2007 2,900,000 - 2,800,000 - 100,000

$ 0.340 Sept. 30, 2007 6,596,769 - 1,313,999 - 5,282,770

$0.800/

$1.00

Mar. 13, 2008/

2009 - 1,607,139 - - 1,607,139

25,084,269 1,607,139 19,581,499 70,000 7,039,909

Weighted Average

exercise price $ 0.182 $ 0.800 $ 0.139 $ 0.125 $ 0.443

The weighted average remaining life of all outstanding warrants is 1.22 years (2007 – 0.58

years).

(c) Stock-based compensation

Stock-based compensation expense of $1,030,545 (2007 - $1,921,458) was comprised as

follows: consulting $188,115 (2007 - $511,881), and management $842,430 (2007 -

$1,409,577). In addition, $145,542 (2007 - $438,698) was transferred from contributed

surplus to capital stock on the exercise of stock options.

23

Risk-free interest rate 3.40% - 4.27% 3.96% - 4.74%

Expected dividend yield - -

Expected stock price volatility 105% - 106% 101% & 110%

Expected option life in years 1-5 5

Share issue costs of $363,435 (2007 - $54,620) was recorded upon the issue of broker

options and warrants.

The fair value of broker options and warrants were determined using the Black-Scholes option

pricing model based on the following assumptions:

Risk-free interest rate 4.23% 3.88%

Expected dividend yield - -

Expected stock price volatility 105% 107%

Expected option/warrant life in years 2 2

Subsequent to year end, 150,000 options expired without being exercised.

(d) The following summarizes information about contributed surplus:

Balance, beginning of year $ 2,177,220 $ 639,840

Stock-based compensation expense 1,030,545 1,921,458

Broker warrants/options 363,436 54,620

3,571,201 2,615,918

Transferred to capital stock (145,542) (438,698)

Balance, end of year $ 3,425,659 $ 2,177,220

During the year ended June 30, 2008, in addition to amounts disclosed elsewhere in these financial

statements, the Company paid $163,000 (2007 - $216,196) for management fees to officers of the

Company. During the year ended June 30, 2008, the following were amounts paid to the former CEO

and President: $40,000 (2007 - $120,000) in management fees, $14,000 (2007 - $42,000) in living

expenses, $nil (2007 - $56,805) in bonuses and $120,000 (2007 - $nil) in severance. In addition, $nil

(2007 - $26,632) was paid out in the form of a bonus to a former Vice President of the Company and

$nil (2007 - $10,315) was paid to a company controlled by a director and Vice President of the

Company.

The Company has engaged Billiken Management Services Inc. (“Billiken”), a private company, to

manage the McFauld’s Lake and the Mexican properties. Billiken charges a fee based on a

percentage of expenses incurred on behalf of the Company. The fee totaled $143,450 for the fiscal

year ended June 30, 2008 (2007 - $22,652). At June 30, 2008 there was a balance on deposit with

Billiken of $216,463. The President/CEO of the Company holds a non-controlling interest in Billiken

through a private company.

24

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

Future income tax assets and liabilities:

Non-capital losses carried forward $ 1,635,261 $ 1,240,534

Donations carried forward 1,664 1,861

Investment tax credits carried forward 19,737 18,536

Resource pools in excess of book value of (203,914) 751,812

Mineral property interests

Share issue costs 112,511 53,087

Plant and equipment 9,261 8,385

1,574,520 2,074,215

Valuation allowance:

Valuation allowance opening (2,074,214) (1,961,587)

Change in valuation allowance 499,694 (112,628)

Valuation allowance, ending (1,574,520) (2,074,214)

Net future income tax assets $ - $ -

The Company has Canadian non-capital loss carryforwards of approximately $4,386,000 (2007 –

$3,478,000)) and Mexican net operating loss carryforwards of approximately $1,790,000 (2007 -

$637,000) which can be applied to reduce future taxable income in Canada and Mexico, respectively

and expiring as follows:

Canada Mexico

2009 134,000 -

2010 107,000 -

2014 328,000 131,000

2015 349,000 5,000

2016 - 291,000

2017 - 210,000

2018 - 1,153,000

2026 1,059,000 -

2027 1,207,000 -

2028 1,202,000 -

$ 4,386,000 $ 1,790,000

25

Loss before income taxes $ (3,162,614) $ (3,629,492)

Combined statutory income tax rate 29.96% 31.18%

Expected tax expense (recovery) (947,528) (1,131,510)

Increase (decrease) resulting from:

Decrease in Canadian statutory income tax rate 54,755 202,573

Difference in foreign tax rates (9,239) (4,676)

Unrecognized items for tax purposes 353,918 714,919

Expiry of non-capital losses carried forward 76,412 219,881

Share issue costs incurred (98,213) (66,359)

Change in future tax asset valuation allowance (499,694) 120,763

Tax losses acquired - (65,126)

Other 4,468 9,535

Future income tax provision (recovery) $ (1,065,121) $ -

The Company renounced flow-through expenditures of $3,247,320 on December 31, 2007 and

recorded a recovery of future income taxes of $1,065,121 to record the utilization of current year and

previously unrecognized future tax assets to offset the future income tax liability resulting from the tax

benefits renounced.

Part XII.6 tax

$2,139,298 of the flow-through amounts renounced on December 31, 2007 were done under the look

back provision whereby the Company is required to incur the amounts by December 31, 2008 and is

subject to Part XII.6 tax to the extent flow through expenditures are incurred after February 28, 2008.

The Company incurred flow-through expenditures of $847,017 in the period from January 1, 2008 to

June 30, 2008 and thus is required at June 30, 2008 to incur additional flow-through expenditures of

$1,292,281 by December 31, 2008. The Company accrued $50,000 in Part XII.6 tax related flow

through expenditures incurred from March 1 to June 30, 2008. The Company will incur additional Part

XII.6 tax related to flow through expenditures incurred from July 1 to December 31, 2008.

The balance of the flow-through expenditures must be incurred by December 31, 2008 to avoid

additional penalties and reversal of the renunciation of any unspent look back amounts renounced

under the look back provision.

26

The Company operates in one industry segment which is the acquisition and exploration of mineral

properties. Geographic information is as follows:

In preparing the current year’s financial statements, it was noted that the prior years property plant

and equipment and the related payable to a concession titleholder were overstated by $185,326.

Accordingly, the comparative financial statements for 2007 have been restated to correct for this

accounting error. An adjustment has been made to the 2007 balance sheet decreasing both the

carrying value of the La Yesca Mill and accounts payable. The restatement for 2007 had no impact

on the 2007 Consolidated Statement of Operations or on the total Shareholders’ Equity of the

Company.

27

The Company and Minera Planet has had a legal claim filed against it by Miguel Angel Matas

Martinez and Compañia Minera Copalquin, S.A. de C.V., concessionaires of the Copalquin Project,

alleging that they have not been able to reach a deal with another company to which they asked for

US$20 per ounce of gold or its equivalent in other metals that they considered as found in the

Copalquin Project.

The Company has had an exhaustive resources calculation completed by a qualified Mexican

Engineer regarding the resource at the Copalquin Project to determine the purchase price of this

project and as a result a cheque for US$33,154 based on such calculation, will be deposited with the

Mexican court in payment of the balance of the purchase price of the Copalquin Project. This is

because Mr. Matas and Compañía Minera Copalquin, S.A. de C.V. would not accept payment from

the Company. It is management's position that Minera Planet has met all of the payments required

under the contract agreement.

The Company considers Mr. Matas’s action as frivolous and unsubstantiated. The Company and

Minera Planet are vigorously attending to this action and will continue to do so. A defense will be filed

stating no further amounts are owing, except for the payment of a NSR royalty. The Company has

filed a response to a previous suit.

The outcome of this legal action and the loss, if any, is currently not determinable and no amounts

have been accrued in the financial statements at year end relating to this contingency.

The Company received a US$350,000 loan facility from the Mexican Mining Development Trust -

Fideicomiso de Fomento Minero (FIFOMI), which is a Mexican government agency. Funds from this

loan will be used for the completion of the Company’s production facility at La Yesca and working

capital.