Liquidity and Capital Resources

We were formed as a mineral exploration company on January 21, 1998. We are an exploration stage company. There is no assurance that commercially viable mineral deposits exist in sufficient amounts in our areas of exploration to justify exploitation. Further exploration will be required before a final evaluation as to the economic and legal feasibility of the concessions can occur. Because we are still in our exploration stage, we have no revenues and have had only losses since our inception. Accordingly, a comparison of our financial information for accounting periods would likely not be meaningful or helpful in making an investment decision regarding our Company. Our plan of operations for the next twelve months is to continue the drilling campaign as more fully described in the Company's Amended Form 10-K/A, provided that we receive sufficient funding to do so. However, we have made no commitments for capital expenditures over the next 12 months. Our management estimates that approximately $1,335,000 will be required over the next 12 months to maintain our current status. This amount does not include any additional exploration. We estimate these expenses to include approximately $350,000 for salaries, outsourced labor and consulting services, $600,000 for professional services, including work undertaken by the independent accountant and legal fees, $50,000 for rent, maintenance, and utilities, $130,000 for permits and expenses required to maintain the concessions, $105,000 for taxes and insurance, $80,000 for office expenses, and $20,000 for other miscellaneous expenses, including marketing and investor relations expenses.

We may attempt to interest an operating company to enter into a joint venture to undertake exploration work on the concessions owned by us, or we may attempt to access the public or private debt or equity markets to move toward the production phase, or even consider an outright sale.

All of the Company's plans are predicated on the Company's ability to raise sufficient capital to complete them which we can not assure you will occur in a timely manner, on terms acceptable to the Company, or at all. If we are unable to obtain additional funding, we will not be able to continue our drilling campaign or execute our current plan of operation.

During the nine month period ending February 28, 2009, we invested approximately $928,126 in our exploration drilling campaign and the development of our Mexican operations. The Company commissioned and received an NI 43-101 Compliant Ore Reserve Report (the "43-101 Report") from Applied Minerals, Inc. Michael Floersch, the CEO of Applied Minerals, Inc., was engaged in February 2008 by the Company to advise us regarding our drilling program, initiate and maintain the chain of custody procedure for the core samples from the drill site to the assayer in Kellogg, Idaho and assume responsibility for quality control in the drilling campaign. The proven and probable reserves reflected in the 43-101 Report relate to and have been developed from core samples retrieved from ten holes located on less a five acre area of the 37,000 acre concessions, leaving 99.9% of the holdings unexplored. If we are able to raise sufficient financing to do so, the company expects to continue to explore and develop the property over the next 12 months to determine the proven and probable reserves on a more significant portion of the property.

Data available to the Company from the 43-101 Report dated as of October 30, 2008 shows the following estimated reserves and related values using market pricing on April 9, 2009:

                                             As of April 9, 2009

                                                               Total Value of
           Proven Reserves:      Amount       Market Price        Reserves

          Gold (Au) (oz.)           57,432   $       883.00   $     50,712,456
          Silver (Ag) (oz.)        403,532   $        12.18   $      4,915,019
          Copper (Cu) (tons)         3,057   $     4,140.00   $     12,655,980

          Total                                               $     68,283,455



                                                               Total Value of
          Probable Reserves:     Amount       Market Price        Reserves

          Gold (Au) (oz.)          156,288   $       883.00   $    138,002,304
          Silver (Ag) (oz.)      1,295,857   $        12.18   $     15,783,538
          Copper (Cu) (tons)         8,922   $     4,140.00   $     36,937,080

          Total                                               $    190,722,922

The value of the reserves is subject to price fluctuations in the commodities market. A low demand for copper due to the current global economic crisis has pushed the value of this metal down in previous months, while the recessionary trends have pushed the value of gold and silver slightly higher. As more exploratory drilling is completed, we expect the amount of proven and probable reserves to fluctuate.

We previously reported that we anticipated completion of an on-site metallurgical and chemistry laboratory with operations to begin in 2009. General construction of the lab has been completed; however the lab is not yet functional. The Company has suspended additional improvements until such time as it receives sufficient funding to move forward. Additionally, the lab is currently expected to function as a support facility rather than a main processing facility under our current business plan.

During the quarter ended February 28, 2009, we raised $500,000 in convertible promissory notes which can be converted into shares of common stock of the Company at the option of the holder or automatically under certain circumstances as defined in the note and described above in Note 3 to the Consolidated Financial Statements. Additionally, in February 2009, the Company's Board of Directors approved the issuance of up to an additional $1,500,000 in convertible promissory notes on similar terms, and as of April 10, 2009, the Company has issued convertible promissory notes of $145,000.

The Company had total assets in the amount of $482,386 with a cash balance of $141,202 as of February 28, 2009, as compared to $897,681 in total assets and a cash balance of $623,017 as of May 31, 2008.

Since we do not anticipate generating any revenue for the foreseeable future, we will have to continue to seek additional funding from outside sources. However, we are facing declining and volatile financial markets that may make it difficult to satisfy our need for additional capital to finance our plan of operations for fiscal 2009 through either debt or equity. As a result, we continue to seek appropriate opportunities that are likely to provide the Company with adequate fiscal resources to execute its plan of operations in the current fiscal year and beyond.

Because of the exploratory nature of our current business plan, we anticipate incurring operating losses for the foreseeable future. Our future financial results also are uncertain due to a number of factors, some of which are outside our control. These factors include, but are not limited to:

(i) our ability to raise sufficient additional funding;

(ii) the results of our proposed exploration programs on the mineral properties; and

(iii) assuming significant mineral deposits, our ability to be successful in commercially producing mineral deposits, find joint venture partners for the development of our property interests or find a purchaser for the property interests or finding a purchaser for the property interests.

Results of Operations for the Three and Nine Month Periods Ending February 28, 2009 and February 29, 2008.

We did not earn any revenues and have had only losses since our inception, including during the nine month periods ended on February 28, 2009 and February 29, 2008.

We incurred operating expenses in the amount of $736,695 and $3,016,487 for the quarters ended February 28, 2009 and February 29, 2008, respectively. We granted options and shares in lieu of compensation valued at $2,140,000 during the quarter ended February 29, 2008 compared to none in the comparable period for 2009. Geological expenses and salaries paid to consultants was reduced by $95,204 and $75,154, respectively during the quarter ended February 28, 2009 compared to the comparable period for 2008 because of a decrease in exploration activities performed during the quarter ended February 28, 2009. Additional office expenses, depreciation, insurance and other related expenses in Mexico increased by $30,566 during the quarter ended February 28, 2009 compared to the comparable period in 2008 due to the general construction of the metallurgical laboratory.

We incurred operating expenses in the amount of $6,356,109 and $3,314,709 for the nine month period ended February 28, 2009 and February 29, 2008 respectively. We granted options and shares in lieu of compensation valued at $4,035,300 during the nine month period ended February 28, 2009 compared to $2,140,000 in the comparable period for 2008. Geological expenses increased by $390,065 for the nine months ended February 28, 2009 compared to the comparable nine month period. We hired additional staff at the corporate office and staff and consultants in connection with the subsidiary's operations. These actions resulted in an increase in payroll and consulting expenses of $417,665 over the comparable nine month period. Additional office expenses, depreciation, insurance, and other related expenses in Mexico caused an increase of $338,670 over the expenses for the period ended February 29, 2008.

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.