UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 10-K





(Mark One)





x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended April 30, 2012





o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from ______ to _______





Commission File No. 000-52550







Zoro Mining Corp.
 
 (Exact name of registrant as specified in its charter)




Nevada

N/A(State or other jurisdiction of incorporation

or organization)

(I.R.S. Employer Identification No.)3040 North Campbell Avenue #110

Tucson, Arizona 85719



(Address of principal executive offices)(520) 299-0390



(Issuer’s telephone number)Securities registered pursuant to Section

12(b) of the Act:

Name of each exchange on which

registered:None

N/ASecurities registered pursuant to Section 12(g) of the Act:Common Stock



(Title of Class)







Indicate by check mark if the registration is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. o Yes    x No







1







Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes    x No




Indicate by check mark whether the registrant has (i) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days. x Yes    o No




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. o Yes    x No




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer
o
Accelerated filer
oNon-accelerated filer
o
Smaller reporting company
x





Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes    x No


The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $7,271,432.
   ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:


Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  o Yes    o No   N/A


APPLICABLE ONLY TO CORPORATE REGISTRANTS:


Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.





Class
Outstanding as of July 27, 2012Common Stock
59,589,325











2











ZORO MINING CORP.


Form 10-K




INDEX










ITEM 1.
BUSINESS
4




ITEM 1A.
RISK FACTORS
48




ITEM 1B.
UNRESOLVED STAFF COMMENTS
53




ITEM 2.
PROPERTIES
54




ITEM 3.
LEGAL PROCEEDINGS
54




ITEM 4.
MINE SAFETY DISCLOSURES
54




ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
54




ITEM 6.
SELECTED FINANCIAL DATA
57




ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS
57




ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
65




ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
66




ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL  DISCLOSURE
92




ITEM 9A.
CONTROLS AND PROCEDURES
92




ITEM 9B.
OTHER INFORMATION
93




ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
93




ITEM 11.
EXECUTIVE COMPENSATION
96




ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND     RELATED STOCKHOLDER MATTERS
98




ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
98




ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
99




ITEM 15.
EXHIBITS
100














3





Forward-Looking Statements





Statements made in this Form 10-K that are not historical or current facts are “forward-looking statements.”  Such forward-looking statements involve risks and uncertainties regarding the market price of copper, availability of funds, government regulations, permitting, common share prices, operating costs, capital costs, outcomes of ore reserve development, recoveries and other factors. Forward-looking statements are made, without limitation, in relation to operating plans, property exploration and development, availability of funds, environmental reclamation, operating costs and permit acquisition. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology.  We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. In evaluating these statements, you should consider various factors, including the risks outlined in this Form 10-K for the year ended April 30, 2012.  We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.





Available Information





Zoro Mining Corp. files annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy documents referred to in this Annual Report on Form 10-K that have been filed with the SEC at the SEC’s Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  You can also obtain copies of our SEC filings by going to the SEC’s website at http://www.sec.gov.








PART I


ITEM 1.                        BUSINESS





BUSINESS DEVELOPMENT





Zoro Mining Corp. was incorporated under the laws of the State of Nevada on April 20, 2004 under the name “Rochdale Mining Corp”. Effective March 19, 2007, we merged with a wholly-owned subsidiary, Zoro Mining Corp., pursuant to Articles of Merger filed with the Nevada Secretary of State.  The merger was in the form of a parent/subsidiary merger with Rochdale Mining Corp. as the surviving corporation.  Upon completion of the merger, our corporate name was changed to “Zoro Mining Corp.” and our Articles of Incorporation were amended to reflect this name change. As of the date of this Annual Report, we are engaged in the acquisition and exploration of mineral properties located in South America.  We currently have interests in an aggregate of approximately 47,444 gross acres located in Chile and Peru, targeting gold, copper and platinum. After the effective date of our registration statement filed with the SEC (November 1, 2007), our shares were listed on the Over-the-Counter Bulletin Board, and our shares currently trade on the OTCQB Exchange. Our current symbol is “ZORM.QB”.





We have not established any proven or probable reserves on our mineral property interests.  To date, we have been engaged primarily in organizational activities and have engaged in minimal initial exploration at several of our projects, including exploratory drilling at one of our properties located in Chile. We plan to conduct exploration programs on our properties with the objective of ascertaining whether any of our properties contain economic concentrations of minerals that are prospective for mining. As such, we are considered an exploration or exploratory stage company. Since we are an exploration stage company, there is no assurance that a commercially viable mineral deposit exists on any of our properties, and a great deal of further exploration will be required before a final evaluation as to the economic feasibility of our properties is determined. We have no known reserves of gold, copper, platinum or any other type of mineral on our properties.





Please note that throughout this Annual Report, and unless otherwise noted, the words “we,” “our,” “us,” the “Company,” or “Zoro Mining,” refers to Zoro Mining Corp.




Subsidiaries





During May 2007 through October 2007 and in accordance with applicable local laws and regulations in Chile, Peru and Mexico, we incorporated three wholly-owned subsidiaries in Chile, Peru and Mexico as follows: Sociedad Zoro Chile Limitada, in Chile, Zoro Mining SAC, in Peru; and Aravena Mexicana, SA in Mexico. We have completed property transfers in Chile, and the title to our property interests in Peru will now be held by our subsidiary indirectly through the Yura Agreement described below under “Mineral Property Acquisition Agreements.”  The Mexican properties have lapsed due to non-payment of the concession maintenance fees.





4





ITEM 1.                        BUSINESS - continued





Transfer Agent




Our transfer agent is Transfer Online, Inc. of 512 SE Salmon Street, Portland, Oregon 97214.





CURRENT BUSINESS OPERATIONS




We are a natural resource exploration company currently engaged in the exploration and acquisition of property located in South America. We plan to conduct exploration programs on our properties with the objective of ascertaining whether any of our properties contain economic concentrations of minerals that are prospective for mining. We currently have interests in an aggregate of approximately 29,652 acres located in Chile and approximately 17,792 acres in Peru, targeting gold, copper and platinum.




Our current acreage and location of our property is summarized as follows:


Location

Project

Exploration Target

Concession Hectares/AcresChile, South America

The Escondida Project

Gold, Platinum

2,600/6,425Chile, South America

Don Beno Project

Gold, Copper

3,400/8,402Chile, South America

Sierra Fritis Project

Gold, Copper

2,400/5,931Chile, South America

Piedra Parada Project

Gold, platinum group metals

3,600/8,895(1)(2)Peru, South America

The Yura Project

Gold

7,200/17,792(3)Total Net Hectares/Acres:

19,200/47,444


(1)
Gareste Limitada, the vendor at Piedra Parada, owned and conveyed to Zoro senior concession rights on over 2,100 hectares (5,189 acres), and also conveyed overstaked concessions on 1,500 additional hectares (3,706 acres) which are subject to the senior rights of a third party.


(2)
All concessions at Piedra Parada owned by Zoro are subject to pre-existing contractual rights granted from Gareste to a third-party to extract and exploit lithium, light metals and commercial salts.


(3)
Zoro’s initial Yura Project interests are now subsumed within the Yura Agreement described below under “Mineral Property Acquisition Agreements,” whereby Zoro can earn up to a 75% indirect interest in the 7,200 hectare Yura District.




By resolutions dated July 16, 2010, the Board of Directors authorized the release and dropping of the Costa Rica and Rio Sur concessions in Chile. These properties, which were and are not material to the Company, in the aggregate covered 3,100 hectares (7,637 acres).




MINERAL PROPERTY ACQUISITION AGREEMENTS




In accordance with the terms and conditions of a Mineral Property Acquisition Agreement dated April 12, 2007 and effective on May 7, 2007 (the “Option Agreement”), as entered into among us and each of Eduardo Esteffan M., Fresia Sepulveda H., Eduardo Esteffan S., Gretchen Esteffan S., Claudio Esteffan S. and Integrity Capital Group, LLC (collectively, the “Vendors”), the Vendors granted to us the sole and exclusive option (the “Option”) to acquire a 100% undivided legal, beneficial and registerable interest in and to six separate unencumbered mineral property interests totaling approximately 39,787 gross acres located in Chile, Peru and Mexico and targeting potential gold, copper and platinum group prospects (collectively, the “Property”) and more particularly described as follows:


Location

Project

Exploration Target
Concession AcresSonora, Mexico

The Las Animas Project

Gold, Copper

6,672Chile, South America

The Costa Rica Project

Gold, Copper

5,189Chile, South America

The Escondida Project

Gold, Platinum

4,942Chile, South America

The Rio Sur Project

Gold, Copper

3,212Chile, South America

Don Beno Project

Gold, Copper

14,830Peru, South America

The Yura Project

Gold

4,942Total acreage:

39,787





5





ITEM 1.                        BUSINESS - continued
 
 In order to complete the acquisition of the Property, three wholly-owned subsidiaries in each of Peru, Chile and Mexico were incorporated by us to beneficially hold property titles in each country in order to comply with all applicable laws relating thereto. OnJuly 16, 2010, we decided to release and drop the Costa Rica and Rio Sur concessions.  In addition, the Mexican concessions lapsed due to non-payment of the maintenance fees.  All other properties were transferred to our wholly-owned subsidiary in Chile, while Peru Property related interests have been executed for transfer by the Vendors and have been submitted to Zoro’s Peruvian subsidiary’s (Zoro Mining SAC) property transfer notary to complete the transfer, pending the payment of required fees.  In order to complete the acquisition of the Property, we further caused one of our existing founding shareholders to sell an aggregate of 35,500,000 restricted shares of Common Stock held of record by such shareholder to the Vendors at an aggregate purchase price of U.S. $0.00001 per common share.





The Company has paid and will continue to pay all costs to keep the properties in good standing. The Company has been concentrating its exploration initiatives primarily in Peru on its Yura gold prospect located near Arequipa, Peru and on its Don Beno gold and copper project near Copiapo, Chile.





Don Beno Property, Atacama Region III, Chile





The Don Beno property is the subject of a technical report entitled “43-101 Technical Report on the Don Beno Project, Third Region, Copiapo, Chile” (the “Don Beno Technical Report”) dated March 1, 2010 and prepared for the Company pursuant to National Instrument 43-101 “Standards of Disclosure for Mineral Projects” of the Canadian Securities Administrator (“NI 43-101”) by John Hiner, Licensed Geologist.  A complete copy of the Don Beno Technical Report is available on the Company’s profile on SEDAR at www.sedar.com.  The following discussion of the Don Beno property is derived from the Don Beno Technical Report.





Property Description and Location





The Don Beno Project is located approximately 110 kilometers south-southeast of the industrial city of Copiapo, which is approximately 450 kilometres north of the capital city of Santiago.





The Mining Code of Chile guarantees the owner of mining claims the right-of-access to the surface area required for their exploration and exploitation. This right is normally obtained by a voluntary agreement between the mineral claim owner and the surface owner. The mining company may obtain the Rights of Way (Servidumbre) through the civil court system, if necessary, by agreeing to indemnify the surface owner for the court-determined value of the surface area.





Claims and Title at Don Beno





The Don Beno Project consists of 3,400 hectares of exploration claims staked by Gareste. The number of hectares has been reduced from the previous amount of 5,400 hectares reported last year to focus on higher value targets. Property boundaries are located by UTM coordinates and the corners are secured by concrete monuments.  Zoro holds a 100% interest in the property.  The mineral concessions at Don Beno  have as of April 30, 2012 been relocated and restaked as exploration pedimentos, but have not as of yet been re-constituted for purposes of expiration dates.


Zoro completed a purchase of a 100% interest in the Project through a Mineral Asset Acquisition Agreement dated May 7, 2007.  Under this agreement Zoro incorporated its Chilean subsidiary Zoro Chile Ltda. and obtained interests in six separate properties in Chile and Peru, and in return a number of Zoro shares and warrants to purchase shares were issued to the vending group. There is no royalty attached to the property.








6




ITEM 1.                        BUSINESS - continued


Don Beno Claim Map





Mineralization




IP surveys, geologic mapping, and limited drilling have been conducted at Don Beno.  To date, sporadic and low grades of copper, gold and silver have been identified, and are associated with disseminated pyrite and veinlets of quartz-calcite with pyrite.  The disseminated pyrite is hosted in a variety of rock types ranging from Cretaceous metasedimentary rocks to coeval intrusive and extrusive volcanic rocks.





Reconnaissance mapping indicates that virtually all the rocks on the property have been subjected to propylitic alteration, with local overprints of silicification, disseminated sulphide, and structurally-controlled potassic alteration.  In addition, a distinct relationship of epidote-chlorite alteration associated with hematite/magnetite has been noted in several areas of the property. Sodic and sodic-calcic alteration assemblages have been identified, as exemplified by the presence of secondary albite, scapolite, actinolite, and rarely clinopyroxene.  The author of the Don Beno Technical Report, Mr. Hiner, confirmed the presence of these minerals in the field.





Environmental Issues in Chile





The following summary is based upon Chile’s Environmental Law 19.300 and the Regulations regarding environmental impact studies.





Chile’s environmental law (Law No 19.300), which regulates all environmental activities in the country, was first published on March 9th, 1994. An exploration project or field activity cannot be initiated until its potential impact to the environment is carefully evaluated. This is documented in Article 8 of the environmental law and is referred to as the Sistema de Evaluación de Impacto Ambiental (SEIA).





The SEIA is administered and coordinated on both regional and national levels by the Comisión Regional del Medio Ambiente (COREMA) and the Comisión Nacional del Medio Ambiente (CONAMA), respectively. The initial application is generally made to COREMA, in the corresponding region where the property is located, however in cases where the property might affect various regions the application is made directly to the CONAMA. Various other Chilean government organizations are also involved with the review process, however most documentation is ultimately forwarded to CONAMA, which is the final authority on the environment and is the organization that issues the final environmental permits.





7





ITEM 1.                        BUSINESS - continued





There are two types of environmental review; an Environmental Impact Statement (Declaración de Impacto Ambiental, or “DIA”), and an Environmental Impact Assessment (Evaluación de Impacto Ambiental, or “EIA”). As defined in the SEIA, a Declaration (DIA) must be prepared prior to starting detailed drilling for a mining project (defined as the stage of reducing “uncertainty” in the quantification of mineral resources and for purposes of defining a mining plan). The regulations provide an exemption from the need to prepare a DIA during the “exploratory stage” when the extent of the orebody is being determined. A DIA is prepared in cases when the applicant believes that there will be no significant environmental impact or social controversy as a result of the proposed drilling and advanced exploration activities. The potential impacts include areas such as health risks, contamination of soils, air and/or water, relocation of communities or alteration of their ways of life, proximity to “endangered” areas or archaeological sites, alteration of the natural landscape, and/or alteration of cultural heritage sites. The DIA will include a statement from the applicant declaring that the project will comply with the current environmental legislation, and a detailed description of the type of planned activities, including any voluntary environmental commitments that might be completed during the project.





In the case of Don Beno; the project is located in an isolated setting far from any significant population, and a Declaration (DIA) is not required at the present stage of exploration whereby the existence of potentially economic mineralization or an ore body is still being determined by phased exploration efforts. For any detailed drilling phase, a DIA will be required. A full Environmental Impact Study (EIA) will only be required in connection with permitting process when the project moves forward to approval for construction. The EIA report is much more detailed and includes a table of contents, an executive summary, a detailed description of the design of the project facilities and operating parameters, a program for compliance with the environmental legislation, a detailed description of the possible impacts and an assessment of how they would be dealt with and repaired, a baseline study, a plan for compensation (if required), details of a follow-up program, a description of the EIA presentation made to COREMA or CONAMA, and an appendix with all of the backup documentation. Once an application is made, the review process by COREMA or CONAMA will take a maximum of 120 days. Question and answer cycles typically delay this process. After the basic environmental approval is given a number of construction/operating permits may be granted by the appropriate authorities allowing the mine development and facilities construction to commence. If, however, COREMA or CONAMA comes back with additional questions or deficiencies, an equal period of time is granted to the applicant to make the appropriate corrections or additions. Once re-submitted and a 60 day period has elapsed, if no further notification from COREMA or CONAMA is received, the application is assumed to be approved.





The Don Beno project is expected to have minimal impact on any existing community or significant environmental parameter. No towns or populated areas fall within the boundaries of the property and the nearest significant community is Copiapo, which is about 100km to the north. The area in the vicinity is sparsely populated at best, and in general the local residents have a long history of subsistence living from transient goat herding and very small scale mining of narrow gold-bearing veins. In general the local communities have a very favorable attitude towards mining, particularly in terms of the possibility of future employment.





Environmental Liability at Don Beno





There is no record of any exploration work, other than that detailed in this report, having been performed in this area in the past.  There are a few miniscule prospect pits that explore surface copper oxide occurrences, small quartz veins, and iron-altered zones, but not tunnels or shafts of any consequence.  Because there is no requirement by the Chilean regulatory agencies regarding the reclamation of such workings by subsequent lessees, there is no known environmental liability associated with the claims.





Permits





Permits for exploration and development are administered by the Chilean National Geological and Mining Service (SERNAGEOMIN).  Environmental compliance is assured via the offices of the National Environmental Committee (CONAMA).  Claim titles are recorded at the local Mining Conservator in Copiapo (Conservador de Minas).





Surface exploration and reconnaissance drilling as proposed by Mr. Hiner does not require permits under Chilean mining and environmental laws





Access, Climate, Local Resources, Infrastructure and Physiography





The small industrial city of Copiapo, 100 kilometers to the north northeast, is the closest community to the Don Beno Project.  Copiapo is the capital of Region 3 (the Atacama Region), and the province of Copiapo. Copiapo has a diversified economy, but mining is the principal activity.





8




ITEM 1.                        BUSINESS - continued


Location Map – Don Beno







The property is accessible via Pan American Route 5.  Travel south from Copiapo about 75km to provincial highway C-439, a maintained gravel and dirt road. Turn east on C-439 and proceed about 26 km to the central part of the property, which the road crosses.  Travel time is about 1.5 hours.  A four-wheel drive vehicle is not necessary, but recommended.





Climate in the area is typical of the Atacama region.  The area is known for its dry conditions, and rainfall is rare. It is a relatively cool, arid area and is occasionally subject to heavy fogs.  Because of its location between low coastal mountains and the high Andes inland, the region is meteorologically anomalous.    Summer temperatures average only 180 C, and winter low temperatures can be as low as 50 C.  Due to the temperate climate, work on the property can be done year round.


Elevations on the property range from 900 to 1400 meters above sea level.  Topography is moderate, and all areas of the property are easily accessible by vehicle or on foot.  Vegetation is minimal due to the extremely arid climate in the Atacama region.





The closest source of supplies and materials is Copiapo.  An industrial city with a long mining history, it is an excellent source for dried goods and consumables, various services, and an experienced work force is available.  Numerous hotels and restaurants provide a variety of food and lodging capabilities.





Power is available about 30 km west of the property.  Water is available in Copiapo or at the Candelaria mine, about 65km and 40km to the north respectively.





History





Little is known of the early prospecting or artisanal production from the Don Beno property.  Artisanal miners explored the area, and made numerous cuts and prospect pits, but no sustained mining took place.





In 1973 Placer Inc. conducted regional exploration activities, and examined a skarn occurrence that occurs near the eastern part of the Don Beno property.  Phelps Dodge examined the area as part of a skarn exploration program in the 1980’s.  From 1990 through 1995 Phelps Dodge drill-delineated a small porphyry copper deposit about 10km southwest of Don Beno.





9





ITEM 1.                        BUSINESS - continued





The entire area has been the locus of substantial exploration in the last ten years.  The Don Beno property abuts a large property position held by SAMEX Mining Corporation to the west.  To the south the Don Beno property is bounded by the IPBX Resources gold property. Both properties were explored in the late 1990s and early 2000s, but both properties are currently inactive.





Gareste began staking and acquiring claims in the Don Beno area in 2007, and by late 2008 had acquired and consolidated the claim package that was vended to Zoro.  The Company has no knowledge of any prior claimants in the area.





Geological Setting





Regional Geology





This portion of central Chile has a complex history with a Jurassic magmatic arc developed in the Coastal Range, progressing through a backarc sedimentary platform to the east.  During the early Cretaceous an “aborted marginal basin” formed to the east of the arc, through which large volumes of andesites and basalts were erupted.  Progressive deformation in the mid Cretaceous of the basinal volcanic formed the Aconcagua thrust fold belt.  This occurred in conjunction with an eastward migration of magmatism during the Cretaceous and Tertiary.  Andean deformation extended eastward for over 1000kms in this region indicating a shallow dipping Benioff zone.





Marine transgression and volcanism are represented in this area by the Cerrillos Formation or its equivalents.  Volcanism was both subaerial and submarine in nature.  During the early Jurassic volcanism, large granitic to gabbroic plutons of the Mincha Superunit were emplaced in the coastal regions.  Later uplift caused a shift to dominantly subaerial conditions resulting in pervasive burial metamorphism as the marginal basin was filled with conglomerates, lavas and limestones.  At the beginning of the Late Cretaceous the marginal basin rocks were intruded by granodioritic plutons of the Illapel Superunit, and this magmatic activity continued to the Miocene.  This magmatic and volcanic activity moved progressively farther east during this time as a result of the shallow dipping Benioff zone.





Continuing uplift to the east created the high Andes during the Miocene to Recent time.  Concomitant erosion and transport of the erosional products resulted in the deposition of the Atacama gravels, which blanket the peninsular region of Chile.





Property and Local Geology





The Don Beno property is underlain by Cretaceous metasedimentary and metavolcanic rocks that have been intruded by multiple small intrusive rocks of dominantly intermediate composition.





The eastern half of the property is dominated by andesitic flows, agglomerates, flow breccias, and tuffaceous units assigned to the Cerrillos Formation that have been intruded by irregular bodies of granodiorite appearing as sills, dikes, and small intrusive masses.





The western half of the property is underlain by Cretaceous marine sedimentary and metasedimentary rocks of Chanarcillos Group, (which includes the Pabellon, Totoralillo, Nantoco, and Abundancia Formations), and the younger Cerrillos Formation.  The rocks range in composition from massive limestone to siltstone and sandstone beds.  Where contact metamorphosed, the rocks have been converted to hornfels and marble.   The Chanarcillos Group consists largely of marine limestone and cherty limestone.  The Chanarcillos Group and its temporal equivalents (the Bandurrias Group – terrestrial volcanic, volcaniclastic, and sedimentary rocks) are the host rocks for the prolific silver deposits of the Chanarcillo District and the Candelaria copper gold mine, 13km and 45 km north of Don Beno, respectively. Rock units within the Chanarcillos Group that are exposed at Don Beno include the Pabellon Formation, which is made up of calcareous siltstone to cherty limestone units with common intercalations of very fine-grained arenaceous units.  Unnamed units that are possibly the Totarillo and Nantoco equivalents are also exposed, but poor exposure and fault contacts make reliable identification difficult.





All of the sedimentary and volcanic units have been intruded by thick granodiorite and diorite/gabbro sills up to 100m thick, and smaller, irregular granodiorite stocks.  Younger quartz monzonite, granodiorite, and diorite dikes ranging in width from 1 to 20m intrude all of the earlier rock types.  Quaternary terrace gravels, slope talus, and alluvium cover large parts of the property, particularly in the vicinity of deeply incised arroyos or quebradas.





Deposit Types





The principal metals of interest at Don Beno are gold and copper.  The exploration conducted to date by Zoro has concentrated on the identification and drill-testing of geochemical and geophysical anomalies that would be indicative of porphyry copper style mineralization.  In its simplest form, this deposit type involves the occurrence of copper minerals, usually chalcopyrite, disseminated within an intrusive rock.  The copper minerals generally occur with pyrite, and is the type of occurrence that lends itself well to geophysical techniques such as induced polarization and resistivity surveys, which are used to delineate high sulphide (and thus electrically conductive) rock masses within reach of the drill.  Because northern and central Chile has long been a locus of porphyry copper exploration, initial work by Zoro was aimed at delineating IP anomalies within or adjacent to the intrusive rocks that underlie part of the property.  Subsequent core drilling on known IP/resistivity targets appears to severely diminish the porphyry copper potential of the property.





10





ITEM 1.                        BUSINESS - continued





Re-evaluation of exploration results led Zoro geologists to reconsider the property’s potential for hosting a different type of mineral occurrence, particularly given the geologic and geochemical setting and the property’s location in Chile.  Iron oxide-copper-gold deposits (IOCG) are a recently-recognized class of hydrothermal ore deposit that has become the focus of exploration in many areas, in particular the 3rd region of Chile. IOCGs occur in a variety of geological settings around the world.  Their mode of origin remains controversial, but they appear to be replacement style deposits.  Typical features of IOCG deposits include:





1.
Copper-gold sulphide mineralization typically occurs with large concentrations of iron oxide minerals; mainly magnetite and hematite, as opposed to iron sulphides.


2.
IOCG deposits tend to be localized along subsidiary structures related to major, crustal-scale fault systems and are associated with widespread hydrothermal alteration.


3.
IOCG deposits appear to replace the host rock in which they are found.


4.
Sodic alteration and a complex suite of pathfinder elements are common, and may include cobalt, rare earth elements, and uranium, among other elements.





Numerous examples of IOCG deposits in the 3rd region include presently or formerly operating mines such as Candelaria, Punta del Cobre, Manto Verde, Mantos Blancos, and the recently discovered Relincho deposit.  The Cretaceous metasedimentary rocks at Don Beno are the host rocks at Candelaria and Punta del Cobre.  The Chilean IOCG deposit types form a north-south trending belt that extends from near Antofagasta in the north to near La Serena in the south.  The best known of the IOCG deposits in the Chilean belt are centered in the 3rd region, in the general vicinity of Don Beno.





The recognition of IOCG characteristics at Don Beno, such as low titanium, high iron, and elevated trace element chemistry, and widespread sodic-calcic alteration, has led Zoro to reconsider its exploration program and objectives.  IOCG deposits are generally characterized by sulphide-deficient low titanium magnetite and/or hematite breccias, veins and lenses of hydrothermal origin with polymetallic enrichments (Cu, Au, Ag, U, REE, Bi, Co, Nb, P), and therefore do not generally respond to the geophysical techniques utilized in porphyry copper exploration.  Instead, the diagnostic features of IOCG deposits include field recognition of regional calcic-sodic alteration overprinted by focused potassic and iron-oxide alteration, and the coincidence of aeromagnetic, ground magnetic, and gravity highs.  The association of uranium and thorium in many IOCG deposits has led to the use of radiometric surveys as well.  However, the Chilean IOCG deposits are not enriched in uranium, and only locally contain elevated rare earth elements. In addition, trace element geochemistry has been successful utilized in exploration at Manto Verde and Mantos Blancos.  Companies have successfully utilized proprietary chemical ratio techniques, radiometric surveys, and subtle trace element patterns to substantiate geophysical targets and fine-tune drilling programs.





Mineralization





Gold, silver, and copper mineralization identified by fieldwork and drilling to date is sporadic and limited to narrow zones in areas where IP surveys generated geophysical anomalies.  The style and mode of precious metal mineralization does not appear to be related with any porphyry system event. The intensity of alteration generally associated with a porphyry copper deposit (argillic, phyllic, and potassic alteration over wide areas) is not present at Don Beno, although limited hydrothermal evidence exists that indicates a modest mineralizing system is present in the area investigated to date.  None of the work done to date has successfully identified copper gold mineralization that could be construed to be of a size and tenor to suggest an orebody could be developed.





Mapping and sampling suggest a strong relationship at Don Beno of epidote-calcite-chlorite alteration with hematite and magnetite.  Further, limited trace element geochemistry suggests the iron minerals are titanium deficient.  Sodic alteration is present and is manifested by the presence of sodic feldspars, scapolite, and sodic amphiboles and actinolite.





Samples taken by Mr. Hiner are sulphur deficient but anomalous in Sr, P, Fe, Co, Ni, Ca, and Bi, and enriched in Na and Ca.  The chemistry, although not confirmatory, is indicative of the type of trace element chemistry associated with IOCG deposits.





Exploration





In 2007, three reverse-circulation holes were drilled by Gareste.  Two holes were drilled to test for downdip extensions of mineralization encountered in drillholes on the adjacent SAMEX property to the west and a third hole was drilled adjacent to a copper prospect on the Don Beno property.  Geochemically anomalous amounts of gold and silver were encountered in holes 1 and 2.  The third hole encountered no mineralization because it was drilled in the footwall of a mineralized fault and did not cross the mineralized zone.





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In early 2008, Zoro engaged geologic consultant Michael Fox to conduct geologic mapping to evaluate the potential for intrusive rocks at Don Beno to host porphyry copper type mineralization.  The mapping was done on a reconnaissance basis. In his summary he postulated that faults he interpreted as subsidence structures provide evidence for down dropped blocks that could host a blind porphyry at depth in a caldera relationship.  Fox also noted that “widespread propylitic alteration is present in all areas of the property mapped to date, but more intense hydrothermal alteration typically associated with porphyry centres has not yet been identified.”  Fox observed property-wide epidote-carbonate-chlorite alteration, and a consistent relationship of calcite with hematite/magnetite.  Fox took 30 samples, which were analyzed at Viga Laboratories in Copiapo for Cu, Mo, Ag, Pb, Zn, and As, but no trace element chemistry was undertaken.





A geophysical program was conducted at Don Beno in 2008.  Hydrogeophysics Inc., a Tucson-based geophysical contractor, engaged in substantial IP/Resistivity surveys.  By the end of 2008, the company had completed 12 survey lines totalling 63 km.  Ground magnetic surveys were run concurrently along 5 of the IP lines.  Several strong near-surface IP anomalies were detected, which encouraged Zoro to engage in additional surface work followed by core drilling.  Hydrogeophysics Inc. summarized their work about halfway through their program at 33 line-kilometers.





Subsequent geologic mapping and drilling of the IP anomalies ascertained that most of the sulphide detected was pyrite.  Low and sporadic values of copper and gold were encountered in narrow zones within the pyrite occurrence. Later mapping indicated that surface evidence of disseminated pyrite was present in numerous rock types and that IP anomalies were largely derived from variable concentrations of disseminated pyrite.





As a complement to the geophysical work, Zoro retained geologic consultant Eberhardt Schmidt to map the geology of the part of the property in the vicinity of the IP surveys, an area of about 47km2.  Schmidt’s mapping results were consistent with the IP anomalies, in that disseminated pyrite casts were mapped in surficial rocks underlain by IP highs that were subsequently drill-tested.





Schmidt, working with assistants, also oversaw a soil sampling program, which was designed to test the soil geochemical response to potential underlying mineralization.  Geochemical soil sampling surveys covered a portion of the Don Beno property during the period April to June 2008.  Samples were collected on a 200 m grid and analyzed for Cu, Mo, As, Ag, Sb, Pb, and Zn at Viga Labs in Copiapo.  Results indicated small, inconsistent +100ppm Cu values that are likely related to wide-spaced siderite-chalcedony veins that locally exhibit copper oxide staining in an otherwise unmineralized granodiorite and andesite terrain.  The other elements analyzed as part of this program returned low and inconsistent values with no discernible pattern.





Zoro contracted Perfo Andes, a local drilling company, to conduct a core drilling program at Don Beno.  The program was initiated in July 2008 and was designed to test the various IP anomalies detected by the geophysical surveys.  Eight holes were completed, ranging in depth from 10 to 700 m.  A total of 1,960 meters was drilled.  Results of core logging and geochemical analysis indicate the presence of abundant pyrite in sedimentary rocks and to a lesser extent in underlying volcanic and intrusive rocks.





Drilling





A total of 10 holes have been drilled on the property: three reverse circulation holes by Gareste in 2007, and eight core holes by Zoro in 2008.





2007 Drill Program




2007 - Drillhole PDB-1.  Because the carbonaceous unit dips easterly beneath the Don Beno property, Gareste drilled an RC hole in 2007 to test for the occurrence of the carbonaceous unit and to determine the extent of gold mineralization, if any.  A total of 381 meters was drilled in a -70o W angle hole.  A black carboniferous unit was encountered from 280m to 364m.





2007- Drillhole PDB-2.  A second RC hole was drilled about 4km NE of PDB-1.  The hole was drilled due east at -70o for a total of 354m.  The hole was apparently not logged, but samples were split and assayed.





2007 – Drillhole PDB-3.  A third RC hole was collared adjacent to a prospect known locally as the Volka Mine.  The prospect is a small prospect sited on an oxide copper occurrence in a fault zone.  Unfortunately the hole was sited in the footwall of the fault zone and drilled at about the same angle as the fault dip, thus never crossed the target structural zone.





Samples from the 2007 RC program were split three ways.  One split was sent to Viga Labs in Copiapo for ICP-AA analysis, one split was sent to Jacobs Assay Office in Tucson for fire assay, and one split was retained and stored at a rented facility in Copiapo.  Jacobs analyses revealed ubiquitously low gold and silver values.





Silver values in Jacob’s fire assays are at or below detection limits, whereas ICP-AA methods detected geochemically anomalous but low silver. Copper is also anomalous, but the highest values are in the hole drilled adjacent to a structure, not across it.  In the opinion of Mr. Hiner, the RC drilling method and the potential for sample contamination raise serious concerns as regards the accuracy of precious and base metals assay results.





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Noteworthy among the RC analyses and assays are the anomalously low sulphur, titanium, and tungsten values, and elevated cobalt, iron, and phosphorous values.  Although these values are not reliable in respect of drilled or sampled intervals, they are indicative of the geochemistry of the rock sequence drilled.





2008 Drill Program




The encouraging results of the geophysical program led to a drill program to test the strong IP anomalies delineated by Hydrogeophysics Inc.  Eight core holes were drilled by contractor Perfo-Andes under contract to Zoro from July 2008 through September 2008.  Hole depths ranged from 10 to 700 m and a total of 1960 meters was completed.





Hole DB-1 (365,017E 6,907,504N: -90o).  Sited to test a strong near-surface IP anomaly on Lines 1 and 3 in Quebrada Majada Principal, the hole penetrated 22m of oxidized calcareous siltstone and then intersected a sequence of black calcareous siltstone cut by granodiorite dikes and sills, all containing 1-2% pyrite and pyrrhotite.  No copper minerals were observed.  The hole was stopped at 333m in very firm, unaltered granodiorite porphyry that contains trace amounts of disseminated pyrite.





Hole DB-2 (368,869E 6,910,735N: -90o).  Both DB-2 and DB-3 tested a strong near-surface IP anomaly on Line 9 in Quebrada Garcia within an area of abundant surficial iron-oxide staining.  Hole 2 penetrated bleached and oxidized andesite agglomerate to 16m and then continued in andesite agglomerate before bottoming at 116m in strongly silicified granodiorite.  The andesite agglomerate contains 3-5% disseminated pyrite and pyrite clusters, commonly associated with epidote veinlets.  Locally, there are steeply dipping seams of fragmental granodiorite with a pinkish-gray blotchy matrix (probable K-spar alteration) accompanied by disseminated epidote.




Hole DB-3 (368,995E, 6,910,590N: -60o@bearing 305o).  Hole DB-3 is located 200m southeast of DB-2, and also penetrated andesite agglomerate containing up to 3% disseminated pyrite to 75m depth.  The hole then entered silicified granodiorite that contains epidote-pyrite veinlets and 2-3% disseminated pyrite.  The hole was ended at 150m in granodiorite breccia with irregular epidote clasts.




Hole DB-4 (367,795E 9,910,866N: -60o@ bearing145o).  This hole tested an IP anomaly located on Line 4 beneath a limestone ridge.  The hole penetrated a variable sequence of cherty limestone and balck silty limestone, locally containing up to 3% very fine-grained pyrite distributed in thin <1mm lamellae.  Black sooty carbonaceous siltstone containing 3% pyrite occurs near crosscutting dacite dikes.  The hole bottomed in a dacite sill that contains up to 3% disseminated pyrite.





Hole DB-5 (369,099E 6,911,292N: -60o @bearing 252o).  This hole was located to test an extensive area of iron oxide-stained andesitic rocks near Quebrada Garcia.  The hole was collared in propylitically altered andesite flows containing 1-4% disseminated goethite and iron-oxides in boxworks and casts after pyrite.  The hole penetrated an alternating succession of oxidized andesite flows and diorite dikes to 47m, and then intersected andesitic agglomerate containing finely disseminated epidote with traces of pyrite.  The hole remained in agglomerate with occasional diorite dikes until the hole was suspended at total depth of 110m.




Hole DB-6 (367,299E 6,910,894N: -60o @bearing 145o).  Sited to test a deep IP anomaly on Line 11, the hole was collared in dense cherty limestone and silicified siltstone.  Due to miscommunication the hole was stopped at 10.5m, and the rig moved.  This location was not further tested.
 
 Hole DB-7 (367,111E 6,911,013N: -60o @ bearing 355o).  This hole tested a deep IP anomaly on Line 8 beneath a +400m thick diorite sill.  The hole collared in very firm fine-grained diorite exhibiting abundant brecciation at its base.  Beneath the sill at 453m, the hole intersected an alternating sequence of black calcareous siltstone, clastic interbeds, and occasional massive limestone units tentatively assigned to the Nantoco Formation.  The hole was ended at 700m in finely laminated calcareous siltstone with 1-3% very finely disseminated pyrite.
 
 Hole DB-8 (368,632E 6,910,202N: -60o@bearing 300o).  A strong IP anomaly detected on Line 4 in Quebrada Garcia was tested by Hole DB-8.  Located 600m southwest of DB-2, the hole was collared in oxidized siltstone and penetrated an alternating sequence of calcareous siltstone and sandstone containing 1-3% disseminated pyrite.  The hole ended at 292.5m in a sedimentary breccia that contains 2%pyrite.





Assays





Due to lack of funding, no other assay work was completed. However, the best intervals were selectively sampled by Schmidt and found lacking.  It is the opinion of Mr. Hiner that additional sampling of marginal mineralization would not substantively change the mineral potential in the zones where IP anomalies were targeted.





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Conclusions from Drilling Programs





2007 Drilling





Results from three 2007 reverse circulation holes drilled by Gareste encountered only geochemically anomalous base and precious metal values.  Rotary holes PDB-1 (RC-1) and PDB-2 (RC-2) bottomed in carbonaceous sedimentary rocks, according to Zoro personnel.  Assay results are all low in gold and silver. In multi-element analysis, samples from the drill holes exhibit affinities to the trace element chemistry commonly associated with Chilean type IOCG type deposits.  In particular the elements cobalt, copper, phosphorous, and to a lesser extent cesium are elevated, and sulphur and titanium are low.  Although not conclusive, the trace element chemistry is more supportive of an IOCG mode of occurrence than a porphyry copper occurrence.





2008 Drill Program





The 2008 core program tested several IP anomalies, all of which appear to be generated by disseminated and veinlet-controlled pyrite occurrences in a variety of volcanic, intrusive, and sedimentary rocks.  Only minor amounts of copper, gold, and silver were reported in assays taken from drill core in zones associated with the pyritic material. The best intervals were assayed, and returned sporadic and low results in narrow zones.





Sampling Method and Approach





Rejects and pulps from the 2007 drill program conducted by Gareste were discarded by the laboratory and thus unavailable for examination.  Residual samples and splits from 2007 RC drilling were also unavailable due to a storage dispute.





Sample pulps and rejects taken by Michael Fox were unavailable to Mr. Hiner.  Fox took 125 rock chip samples from outcrops during reconnaissance mapping activities, of which 39 were submitted for multi-element analysis to Viga Labs.  Due to lack of funding, only 25 samples were assayed by Viga Labs. According to his interim report, which Mr. Hiner reviewed, the objective of his mapping and sampling was focused on the evaluation of the potential of intrusive rocks at the property for hosting porphyry copper type mineralization.  Fox made detailed notes about location, rock type, alteration, structure, and mineralization at each sample location. Samples were collected on a reconnaissance basis, and sample density is very low, as Fox examined approximately 80 square kilometres during his mapping effort.  Sample sites were not tagged in the field, but Mr. Hiner visited and sampled three outcrops noted by Fox. The field and geologic observations of Mr. Hiner agree with Fox, but Mr. Hiner’s copper assay values are higher than Fox reported, whereas silver values generally agree.





The 2007 drill program was conducted using reverse circulation methods.  Due to sampling inefficiencies related to the method of drilling, the RC program’s results as regards precious metals should be discounted.





Ground magnetic studies undertaken by Hydrogeophysics personnel were conducted to industry standards. The field instrument used is a GSM-19W magnetometer.  Base stations were established, calibrated, and checked in the morning, at noon, and at the end of the day.  Mr. Hiner accompanied the geotechnician on part of one survey line, and was satisfied with the methodology, and believes the results are valid.  No physical samples were created by the geophysical work.





Geologic mapping by Schmidt was field checked by Mr. Hiner and found to be accurate.





Soil sampling was observed in progress, and soil sample stations were later checked for consistency of sample horizon, pit depth, and sample size.  Mr. Hiner believes the methodology was good, and sample security measures were adequate to provide a reliable sample to the laboratory.  Results of the soil program noted erratic anomalies with no discernible pattern.  It is Mr. Hiner’s judgment that the soil sample results track local, narrow veinlet mineralization of little to no interest.





The 2008 drill program was conducted under the supervision of independent consultant E. Schmidt.  Core logging and sampling by Schmidt were observed by Mr. Hiner and carried out to industry standards.  Core recovery was good.  Sample security was adequate to ensure a representative sample was delivered to the laboratory.    However, due to funding limitations, only narrow zones of visibly mineralized material was split and sampled.  The samples are thus not representative of any larger mass of rock. Further, because sampling was selective, the zones that were sampled do not represent true thicknesses or any zones other than the material in the narrow zones that were sampled. It was evident from low drill assay results from selectively sampled core that disseminated sulfides bodies as defined by IP/resistivity studies and encountered by core drilling do not constitute the target at Don Beno. Due to the overall low results, Mr. Hiner saw no reason to verify drill results.


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ITEM 1.                        BUSINESS - continued
 
 Mr. Hiner took eight 2kg rock samples of altered volcanic rocks, sedimentary rocks, and intrusive dikes and sills. The samples were collected in 10 mil plastic bags, noted by sample tag and felt marker, and sealed with plastic zip ties.  The sample locations were noted by GPS location, and photographs of the sample area were taken.  The eight samples taken by Mr. Hiner are representative of silicification, iron-stained, and mineralized zones found in altered intrusive rocks, metasedimentary rocks, and volcanic extrusiverocks.  Mr. Hiner attempted to sample obviously altered rocks in order to determine both precious metal content and the trace element content of mineralized or altered rocks.  The samples are thus visually biased toward mineralized material, and are not representative of either the country rock in the area, and may not be representative of mineralization, if any, which may occur at depth in the area.  Brief descriptions of these samples are set forth below.





Samples by Author of Don Beno Technical Report


Sample No.
Length
Rock Type
Alt + Minl527001
12m
Fg granodiorite
CuOx dissem –chrys+malac527002
15m
Frac’d granodiorite
Chrys, neot, cal, ep, chl530001
1m
Andesite
Lim + si, com feox,mnr ser+/-py530002
Dump
Screened fines-limest
Feox, si, in 3m shear zone530003
3m
Vein in limest
Hvy feox, lim, hem,mnr chrys,mnr Mo530004
4m
Silica flooded zone
Hvy feox,lim, mag,723001
2m
Granodior dike
Si, fe stn, tr py, indist. Bxwk, trc mag723002
1m
Vein/silic zone in limest
Feox, cuox,cpy, com chl +gar


Mr. Hiner did not attempt to sample unmineralized rocks.





Sample Preparation, Analyses and Security





2007 Drill Program





Samples from Gareste’s 2007 RC drilling were bagged in 2 meter intervals on site in 12 mil plastic bags and sealed with plastic zip ties.  Sample intervals were noted by black felt marker and delivered daily to Viga Labs in Copiapo.  Viga Labs split the samples using a Jones Riffle Splitter.  One half of the split sample was sent to Jacobs Assay Lab in Tucson for fire assay, and the other half was sent to ALS Chemex in La Serena for ICP analysis.





Jacobs Assay Lab prepared the samples as follows:


1.
samples as received were dried and ground to 90% -100m.


2.
All samples were placed in a rolling cloth and mixed a minimum of 24 times before sampling.


3.
Standard fire assay procedures were utilized using 1/2assay ton charges.  Gold and silver were determined gravimetrically and reported in grams per metric ton.


4.
Copper and arsenic assays were obtained using 1⁄2 gram samples.


5.
1⁄2 gram samples were digested in Aqua Regia, raised to 200ml, and analyzed via Perkin Elmer atomic absorption.


6.
Copper and arsenic were reported in percent.


7.
Jacobs placed internal standards and blanks randomly throughout the analysis stream.





ALS Chemex prepared the samples as follows:


1.
dried the samples as necessary and crushed the samples to  greater than 70% -2mm using a jaw crusher.


2.
A 250 gram split is obtained using a Jones Riffle Splitter and pulverized to greater than 85% -75 microns using standard ring and puck style pulverizing equipment.


3.
A 30 gram split was analyzed by for gold ICP-AA and fire assay (ALS method Au-ICP21) and by ICP-AES (ALS method ME-ICP41a) for copper and 33 other elements respectively.





Michael Fox Samples





Fox collected rock chip samples as part of a reconnaissance commissioned by Gareste.  Mr. Hiner was unable to find tagged sample locations in the field or any sample tags evidencing a sample site, although individual outcrops located by GPS were examined.  Fox’s samples were analyzed by Viga Labs in Copiapo using atomic absorption.  The level of security employed by Fox is unknown to Mr. Hiner and Fox could not be reached to obtain additional detail.





2008 drill program





Selected drill core was split by Schmidt and bagged and sealed.  The samples were couriered to Jacobs Assay in Tucson.  Jacobs conducted standard fire assay for Au, Ag, and Cu.  Samples were dried, crushed to greater than 90% -2mm using a jaw crusher.  A 250 gram split is obtained using a Jones Riffle Splitter, and pulverized to greater than 85% -75microns using a standard ring and puck pulverizer.  A 50 gram split was analyzed by fire assay gravimetric methods for Au and Ag.  An additional 50 gram split was digested in Aqua Regia and analyzed for Cu using atomic absorption.  Zoro engaged independent consultant Schmidt to conduct the logging, splitting, and sampling.  It is Mr. Hiner’s opinion that Schmidt exercised all due caution to ensure the independence and security of samples he took and subsequently sent to Jacob’s Assay Office.





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In respect of Mr. Hiner’s samples, no employee, officer, director, or associate of Zoro Mining Corporation was involved in the selection of samples to be taken by Mr. Hiner, involved with the collection of the samples, or the preparation of the samples.





The samples were sealed at the sample site and remained in Mr. Hiner’s possession.  The samples were stored in his hotel room until they were sealed and shipped by standard carrier to the ALS Chemex Laboratory in La Serena.  ALS Chemex is a certified assay laboratory under ISO 9001-2000.





ALS Chemex at La Serena prepared the samples as follows:


1.
dried the samples as necessary and crushed the samples to  greater than 70% -2mm using a jaw crusher.


2.
A 250 gram split is obtained using a Jones Riffle Splitter and pulverized to greater than 85% -75 microns using standard ring and puck style pulverizing equipment.


3.
A 30 gram split was analyzed by for gold ICP-AA and fire assay (ALS method Au-ICP21) and by ICP-AES (ALS method ME-ICP41a) for copper and 33 other elements respectively.





Quality control procedures were employed by Mr. Hiner in the field for the samples collected to ensure that samples are representative of the material sampled.  ALS Chemex maintains a program of internal quality assurance and quality control to maintain and control precision, accuracy, and contamination.  These include the insertion of ALS geochemical standards and blanks into the sample analysis stream and duplicate analyses of both standards and client samples.  Mr. Hiner relied on the laboratory’s quality control program to manage precision, reliability, and reproducibility.





It is Mr. Hiner’s opinion sample preparation, security, and analytical procedures are adequate for this level of evaluation.  However, future programs to evaluate the Don Beno property should include development of a company-held geochemical standard, and utilization of blanks (geochemically inert material such as silica sand) inserted into the sample stream for submission to the laboratory to ensure and verify the precision and accuracy of the assay results, and to enable detection of contamination.





Data Verification




Geological information for the Don Beno property has been compiled from public and private sources and is dominantly of a geological or geophysical nature.  Selected geochemical results from work by Gareste and consultants Fox and Schmidt were made available and inspected, but only minor duplicate sampling or data verification was undertaken to substantiate field checks of geology, visible mineralization, drill hole locations and core examination.  Fox’s sample locations were not tagged and could not be located in the field except by GPS location with an accuracy of +/-3m.





Mr. Hiner is not aware of any quality control measures that may have been used by Gareste geologists in their sampling programs.  Because pulps and rejects from the 2007 RC program at Don Beno were not available, Mr. Hiner could not verify prior results.  The 2007 drilling was conducted using RC drill methods, which are unreliable.





Fox’s previous sample locations were not tagged or otherwise visible in the field.  Mr. Hiner visited outcrops noted by Fox that were located by GPS, and sampled three of the outcrops in the same locations.  Geochemical results are comparable; and Mr. Hiner ascribes minimal variations in chemistry to sampling bias by either or both individuals.





Due to the low and disappointing assay results from thin zones encountered in the 2008 drilling, Mr. Hiner did not resample any core.





Geophysical data was made available to Mr. Hiner and reviewed.  Both raw data and subsequent data reductions were reviewed. Mr. Hiner was present part of the time when the geophysical survey crews were operating in the field.  Mr. Hiner held discussions with field personnel and the chief geophysicist regarding work completed and work in progress.  The quality of field work, data reduction and interpretation appears to be consistent with industry standards, and line-to-line comparisons are verifiable.  However, Mr. Hiner is not a geophysicist and therefore not fully qualified to make judgment as to the quality of the work.





Mr. Hiner was present when consultant Eberhard Schmidt Ph.D. began geologic mapping in the area where geophysical studies were ongoing.  A day was spent with Schmidt examining outcrops, mineral occurrences, and various rock units that would be used in geologic mapping.  Mr. Hiner is personally acquainted with Schmidt, who is an experienced mineral exploration geologist.  Subsequent field checks of Schmidt’s mapping and interpretation are consistent with Mr. Hiner’s observations.





Soil sampling surveys conducted by Zoro personnel were ongoing during Mr. Hiner’s first visit to Don Beno.  The soil programs were managed by geologist T. Worthington under the supervision of E. Marino.  Worthington is an experienced geologist.  Marino is an experienced Chilean geologist whom Mr. Hiner has known for some time.  Marino’s experience as Chief Geologist at Candelaria and his substantial exploration background in the 3rd region of Chile have been helpful to Zoro as exploration has proceeded.  Mr. Hiner held numerous conversations with both Worthington and Marino and is comfortable with the experience and attention to detail that both geologists have applied to soil programs at Don Beno.  Soil sample results indicate low and sporadic responses that do not appear to be beneficial for the definition of mineral targets at Don Beno.  Due to the poor geochemical response, Mr. Hiner believes there was no reason to conduct duplicate soil sampling.





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Additionally, Marino managed the drill program during the drilling of the last three holes of the 2008 drill program and he logged the core.  Mr. Hiner re-examined core from the first 5 holes in the field with Marino, and agrees with his lithologic, mineral, and structural observations.  Core from the final 3 holes was examined later and compared with logs constructed by Marino, and “quicklogs” (summary core logs) assembled by Schmidt.  Schmidt independently sampled selected intervals of 2008 drill core.  Geologic conclusions and interpretations by both geologists are consistent with observations made by Mr. Hiner.





In particular, Mr. Hiner considers the results from the 2007 program to be generally representative but unreliable for accurate determination of precious metal content, due to the inherently difficult sampling conditions associated with RC drilling. Mr. Hiner did not examine drill cuttings from RC holes drilled in 2007.  In any case, cuttings from 2007 drilling may have undergone additional oxidation or contamination, and the veracity of any check sampling could be suspect.  The drill locations were found and verified in the field.   Mr. Hiner considers the drilling results for 2007 and 2008 to be informative for geologic considerations only.





Mr. Hiner’s assay data was checked against field notes to ensure that there were no unusual inconsistencies between Mr. Hiner’s reported results and field observations.  Mr. Hiner is satisfied as to the adequacy of sample collection, handling, security, preparation and analytical procedures that have been carried out.





Mineral Processing and Metallurgical Testing





The property is at an early stage of exploration and no Mineral Processing or Metallurgical testing has been carried out.





Mineral Resource and Mineral Reserve Estimate





The property is at an early stage of exploration and no Mineral Resource or Mineral Reserve Estimates have been carried out.





Interpretation and Conclusions





Work to date has concentrated on IP anomalies considered to represent potential porphyry copper targets.  Assay results of limited RC and core drilling are low, sporadic, and associated only with narrow zones within larger masses of disseminated pyrite.  The widespread occurrence of disseminated pyrite found in core, RC cuttings, and in outcrops is notable, but there is no obvious evidence of porphyry copper mineralization or a hydrothermal system strong enough to support a porphyry deposit.  Neither the type nor grade of mineralization or the accompanying alteration is strong enough to suggest a porphyry system is present at Don Beno.  Additional work on porphyry systems is neither warranted nor recommended.





However, trace element chemistry coupled with stratigraphic similarities to Candelaria, and a complex structural and intrusive environment provide a compelling argument for continuing exploration to identify whether or not Don Beno could host an IOCG style copper gold deposit.  The presence of sodic alteration noted by secondary albite and actinolite at the outcrop level overprinted locally by structurally-controlled potassic alteration suggests the environment is permissive for an IOCG setting.  The presence of abundant hematite associated with chlorite and epidote property-wide may be suggestive of IOCG chemistry.  Further, the type of geophysics (IP-resistivity) utilized to date is not the best means of evaluating the property for IOCG style minerals.  It is Mr. Hiner’s opinion that drilling to date has been influenced by porphyry copper style exploration methods, and IOCG potential remains to be evaluated. Further, it is Mr. Hiner’s opinion that the geology, geochemistry, and alteration discerned to date are more supportive of an IOCG occurrence than a porphyry system.





Geologic mapping conducted by Schmidt on parts of the property are sufficiently detailed, but was concentrated in areas where IP anomalies were found.  Additional mapping at the same or similar scale is needed on the entire property to complement any interpretations that may be made in the future.  Geochemical data are likewise concentrated in specific areas and additional property-wide sampling is necessary to aid any interpretation of both geologic conditions and for the development of targets.  It is Mr. Hiner’s opinion that data collected to date are reliable, but density is insufficient to develop new targets or expand on existing targets.





Recommendations





First and foremost, Mr. Hiner sees no reason to continue exploration at Don Beno for a porphyry copper target.  Second, to accurately evaluate any targets developed during geologic, geochemical, or geophysical programs, core drilling is recommended and the utilization of RC drilling is specifically not advised. To compile sufficient information to evaluate the property’s potential to host an IOCG deposit and to adequately guide a drilling program, a detailed mapping and sampling program is recommended.  Additional IP/Resistivity studies should be supplanted with the following geophysical and geologic tools:





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ITEM 1.                        BUSINESS - continued




1.
An aeromagnetic compilation of the entire property


2.
Concurrent with the aeromagnetic survey, conduct a radiometrics survey


3.
A ground magnetic survey of the entire property


4.
Geologic mapping of the entire property at a scale of 1:5,000 or 1:10,000


5.
Sufficient geochemical sampling to establish a property-wide trace element distribution





Commercial aeromagnetic data are available for purchase.  The quality of this information should be examined, and if suitable could be purchased to save time and repetition.





Structural analysis coupled with thematic imagery analysis is also recommended to complement the surface and geophysical work. Manipulation and analysis of Landsat thematic imagery will help delineate both structural zones that may control mineralization and the associated alteration that would help define drill targets.  Although the Chilean IOCG deposits are not noted for high U+ or REE presence, a radiometric survey may help define lithologies or structural components, and is easily included if an airborne aeromagnetic survey is conducted.





If the integrated approach successfully indicates suitable and defensible drill targets, a second phase program of drilling is recommended.





Budget Estimate





The recommended exploration program at the Don Beno property is estimated at $241,587 for Phase 1 and $482,900 for Phase 2. The table below provides a breakdown of projected expenditures for the proposed geochemical and geophysical surveys, along with follow-up drilling.





Proposed Budget Phase 1


Activity

Description
TotalGeologyGeologic Mapping

60days @ $700/day
$ 42,500Structural Analysis

10days @ $700/day
$   7,000Landsat Imagery & thematic analysis

Est. $25,000
$ 25,000GeochemistryRock chip sampling

45 days @ $500/day
$   22,500Rock chip analyses

15 smpls/day x 45 x $35
$   23,625Geophysical SurveysAeromagnetic Survey

15 days est. $35,000
35,000Radiometrics Survey

Est. $50,000
$  50,000Ground magnetometry+report

20 days @ $ 700/day
$  14,000SubTotal


$219,625Contingency @ 10%


21,962Phase 1 Total


$241,587





Proposed Budget Phase 2


Activity

Description
TotalDrill ProgramDrill Mobilization Costs


$  25,000Core Drilling

3000 m’s x $100/m
$300,000Geological & supervision

35 days @ $700
$   24,500Analyses – rock

1500 samples at $35/sample
$   52,500SupportMisc. supplies & materials

Estimate
$    5,000Food & Lodging, 2 personnel

Estimate 60 days @ $300/day
$  18,000Vehicles

Estimate 70 days @ $200/day
$  14,000Subtotal
$439,000Contingency @ 10%


$  43,900Total


$482,900











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ITEM 1.                        BUSINESS - continued





Escondida Project, Atacama Region III, Chile





Effective on August 18, 2008, the Company authorized the execution of an option agreement (the “Option Agreement”) with Michael H. Kobler (“Kobler”), whereby Kobler had the option to acquire an undivided 50% interest in our Escondida property (the “Escondida Property”). In accordance with the terms and provisions of the Option Agreement, Kobler had an exclusive three-month period commencing August 16, 2008 (the “Initial Term”) to perform due diligence relative to the Escondida Property. At any time prior to the end of the Initial Term, Kobler could elect to give us notice to commence to earn the undivided 50% interest in the Escondida Property (the “Election Notice”), whereby: (i) Kobler would have engaged in a series of proposed financings on our behalf; (ii) based upon certain closing dates of proposed financings, Kobler would have been responsible for payment of his share of certain budgeted costs of exploration and drilling programs at the Escondida Property; and (iii) we would have remained as operator of the Escondida Property.




It was proposed that at the time Kobler earned the undivided 50% interest in the Escondida Property, we would have entered into a joint venture agreement with Kobler. At the date of this Annual Report, the Option Agreement has lapsed and the joint venture funding agreement relating to the Escondida Property will not be consummated.





On March 31, 2011 the Company entered into an Earn-In agreement with Llanos de Caldera, S.A. Cerrada, (“Llanos”), a privately-held Chilean corporation, for participation by Llanos in the Escondida project.  The agreement granted Llanos a one-year period during which to act as operator and expend US$500,000 in qualifying expenditures at the project, constituting an initial exploration program and including drilling, sampling analytical and metallurgical test work.  At the end of the period, if it has properly incurred the qualifying expenditures, Llanos can elect to Earn-In and acquire an undivided 70% of the Escondida project.  On Earn-In the parties will form a joint venture and execute a Joint Operating Agreement whereby Llanos will be the Operator, and the parties shall fund their respective shares of expenses going forward.Llanos subsequently assigned its rights in the earn-in agreement to the Escondida Chile Joint Venture, a partnership between Llanos and the HEI Escondida Joint Venture. As at April 30, 2012, Escondida Chile was still in the process of conducting the exploration and drilling program with the results to be determined in the latter half of 2012. As at April 30, 2012, the parties have agreed to extend the agreement an additional 12 months.





The Escondida Project is the subject of a technical report entitled “43-101 Technical Report on the Escondida Project, Third Region, Copiapo, Chile” (the “Escondida Technical Report”) dated March 12, 2010 and prepared for the Company pursuant to NI 43-101 by John Hiner, Licensed Geologist.  A complete copy of the Escondida Technical Report is available on the Company’s profile on SEDAR at www.sedar.com.  The following discussion of the Escondida Project is derived from the Escondida Technical Report.





Property Description and Location





The Escondida Project is located 58 kilometers west northwest of the industrial city of Copiapo, which is approximately 450 kilometres north of the capital city of Santiago





The Mining Code of Chile guarantees the owner of mining claims the right-of-access to the surface area required for their exploration and exploitation. This right is normally obtained by a voluntary agreement between the mineral claim owner and the surface owner. The mining company may obtain the Rights of Way (Servidumbre) through the civil court system, if necessary, by agreeing to indemnify the surface owner for the court-determined value of the surface area.





Claims and Title at Escondida




The Escondida Project consists of 9 Carbonatos concessions which cover 2,600 hectares which represents a nominal contraction of 100 hectares from the previous filing.   The claims were originally staked in 2006, but have since been surveyed and monumented, and all concessions are currently in the process of conversion to mensuras (exploitation claims).  Property boundaries are located by UTM coordinates, and the corners are secured by concrete monuments.





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ITEM 1.                        BUSINESS - continued
  Escondida Claim Map








Zoro completed a purchase of a 100% interest in the Project through a Mineral Asset Acquisition Agreement dated May 7, 2007.  Under this agreement Zoro incorporated its Chilean subsidiary Zoro Chile Ltda. and obtained interests in six separate properties in Chile and Peru, and in return a number of Zoro shares and warrants to purchase shares were issued to the vending group. There is no royalty. A 1km2 mensura in the central part of the claim block covers the area where the processing plant is located.  This mensura was not part of the original Zoro land acquisition, but a subsequent agreement was reached between the parties for the inclusion of both land and pilot plant.





Mineralization





Copper, silver and possible gold was detected in young sedimentary rocks that accumulated in coastal basins as a function of erosion of the Andes.  Based on limited examination and sampling, mineralization appears to be associated with very fine-grained pyrite in a gray, slightly altered limy tuff deposited in a northeast-trending graben in Miocene sedimentary rocks.








20
 
 
 ITEM 1.                        BUSINESS - continued





Environmental Issues in Chile





A summary of Chile’s Environmental Law 19.300 and the Regulations regarding environmental impact studies is included in the discussion of the Don Beno Project above.





In the case of Escondida, the project is located in an isolated setting far from any significant population, and a Declaration (DIA) is not required at the present stage of exploration whereby the existence of potentially economic mineralization or an ore body is still being determined by phased exploration efforts. For any detailed drilling phase, a DIA will be required. A full Environmental Impact Study (EIA) will only be required in connection with permitting process when the project moves forward to approval for construction. The EIA report is much more detailed and includes a table of contents, an executive summary, a detailed description of the design of the project facilities and operating parameters, a program for compliance with the environmental legislation, a detailed description of the possible impacts and an assessment of how they would be dealt with and repaired, a baseline study, a plan for compensation (if required), details of a follow-up program, a description of the EIA presentation made to COREMA or CONAMA, and an appendix with all of the backup documentation. Once an application is made, the review process by COREMA or CONAMA will take a maximum of 120 days. Question and answer cycles typically delay this process. After the basic environmental approval is given a number of construction/operating permits may be granted by the appropriate authorities allowing the mine development and facilities construction to commence. If, however, COREMA or CONAMA comes back with additional questions or deficiencies, an equal period of time is granted to the applicant to make the appropriate corrections or additions. Once re-submitted and a 60 day period has elapsed, if no further notification from COREMA or CONAMA is received, the application is assumed to be approved. The Escondida project is expected to have minimal impact on any existing community or significant environmental parameter. No towns or populated areas fall within the boundaries of the Property and the nearest significant community is Puerto Viejo, a sparsely populated former port which is 10km to the south southwest. The area in the vicinity of the claims is sparsely populated at best, and in general the local residents have a long history of subsistence living from transient goat herding. In general the local communities have a very favorable attitude towards mining, particularly in terms of the possibility of future employment.





Environmental Liability at Escondida





There is no record of any exploration work, other than that detailed in this report, having been performed in this area in the past.  Existing workings developed by Gareste include small pits and bulldozer trenches concentrated in a small area of the claim block near the pilot plant.  In 2008, a former Zoro joint venture partner cut additional trenches at other locations on the property. Because there is no requirement by the Chilean regulatory agencies regarding the reclamation of such workings by subsequent lessees, there is no known environmental liability associated with the claims.





Permits





Permits for exploration and development are administered by the Chilean National Geological and Mining Service (SERNAGEOMIN).  Environmental compliance is assured via the offices of the National Environmental Committee (CONAMA).  Claim titles are recorded at the local Mining Conservator in Copiapo (Conservador de Minas).





Surface exploration and reconnaissance drilling as proposed by the author of the Escondida Technical Report, John Hiner, does not require permits under Chilean mining and environmental laws





Access, Climate, Local Resources, Infrastructure and Physiography




The small industrial city of Copiapo, 58 kilometers to the east southeast, is the closest community to the Escondida Project.  Copiapo is the capital of Region 3 (the Atacama Region), and the province of Copiapo. Copiapo has a diversified economy, but mining is the principal activity.










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ITEM 1.                        BUSINESS - continued


Location Map - Escondida





The property is accessible from Copiapo by traveling 52 kilometers north on Pan American Route 5. Paved and graded gravel provincial highway C-318 leads west from Route 5 to coastal highway C-320, a distance of 15 kilometers.  Travel north on C-320 5.3 kilometers to the property. The roads are all well maintained by the local provincial authorities and accessible via 2 wheel drive vehicles.  Travel time from Copiapo to Escondida is about 1 hour.





There are no accommodations available at Puerto Viejo.  However, adequate supplies and housing facilities are available in Copiapo.





Climate in the area is typical of the Atacama region.  The area is known for its dry conditions, and rainfall is rare. It is a relatively cool, arid area and is occasionally subject to heavy fogs.  Because of its coastal location and proximity to the nearby high Andes inland, the region is meteorologically anomalous.  Summer temperatures average only 180 C, and winter low temperatures can be as low as 50C.  Due to the temperate climate, work on the property can be done year round.





Elevations on the property range from 30m to 128m. Power is available 10km to the east, where a major north-south high voltage power line runs parallel to Pan American Highway Route 5. Water occurs at shallow levels, generally at one meter or less, and is available on the property.





The closest source of supplies and materials is Copiapo.  An industrial city with a long mining history, it is an excellent source for dried goods and consumables, various services, and an experienced work force is available.  Numerous hotels and restaurants provide a variety of food and lodging capabilities.





History




In 2007, prior to the agreement to vend the property to Zoro, Gareste drilled two reverse circulation rotary holes. Both holes encountered substantial water inflows, rendering sample collection difficult and sample quality unreliable.





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ITEM 1.                        BUSINESS - continued





Geological Setting





Regional Geology





Central Chile has a complex geologic history with a Jurassic magmatic arc developed in the Coastal Range, progressing through a backarc sedimentary platform to the east.  During the early Cretaceous an “aborted marginal basin” formed to the east of the arc, through which large volumes of andesites and basalts were erupted.  Progressive deformation in the mid Cretaceous of the basinal volcanic formed the Aconcagua thrust fold belt.  This occurred in conjunction with an eastward migration of magmatism during the Cretaceous and Tertiary.  Andean deformation extended eastward for over 1000kms in this region indicating a shallow dipping Benioff zone.





Marine transgression and volcanism are represented in this area by the Cerrillos Formation or its equivalents.  Volcanism was both subaerial and submarine in nature.  During the early Jurassic volcanism, large granitic to gabbroic plutons of the Mincha Superunit were emplaced in the coastal regions.  Later uplift caused a shift to dominantly subaerial conditions resulting in pervasive burial metamorphism as the marginal basin was filled with conglomerates, lavas and limestones.  At the beginning of the Late Cretaceous the marginal basin rocks were intruded by granodioritic plutons of the Illapel Superunit, and this magmatic activity continued to the Miocene.  This magmatic and volcanic activity moved progressively farther east during this time as a result of the shallow dipping Benioff zone.





Continuing uplift to the east created the high Andes during the Miocene to Recent time.  Concomitant erosion and transport of the erosional products resulted in the deposition of the Atacama gravels, which blanket the peninsular region of Chile.  Uplift along the coast is evident by stranded wavecut shoreline features, a prominent peneplain at least 30 meters above mean sea level, and downcut erosional features (drainages, quebradras, and small alluvial fans) that dissect the peneplain.





Property and Local Geology





The coastal lowlands are dominated by young sedimentary accumulations, commonly an intermixture of marine sediments and terrestrial detritus and basin deposits.  Most of these deposits are flat-lying, and were deposited unconformably upon Mesozoic intrusive rocks.  In the area of the claims, two sedimentary units predominate; a Miocene-Pliocene sedimentary sequence of largely clastic rocks, and a thin layer of Quaternary alluvium that blankets the entire area.





The rocks of principal interest at Escondida are the Miocene-Pliocene sequence. This sequence, called the Bahia Inglesa Formation, comprises a thick package of flat-lying marine, litoral, and terrestrial sedimentary clastic rocks, commonly fossiliferous and semiconsolidated.  The formation is noteworthy for extremely rapid lateral and vertical facies changes.  A basal conglomerate is common, but thereafter the formation is correlative mostly by its stratigraphic position and fossil dating, due to the highly variable rock type content.  To the north of the claims, at Bahia Inglesa, the rock units are mostly limestones and limy sandstones.  These are intercalated with basinal accumulations of diatomite, phosphoratic horizons, and volcanic ash.  In the vicinity of the Escondida claims, the rocks are largely clastic, and contain a high volcanic ash component in the fine-grained horizons.





The coastal area where the claims are located has been eroded to a peneplain, and outwash from higher elevations to the east has coated the entire area with a thin veneer of Quaternary gravels.  Several former shorelines remain visible in satellite images. Recent uplift has allowed erosion of the peneplain, creating numerous gullies (called quebradas) trending generally from northeast to southwest, draining the area.





Recent faulting is mostly hidden by Quaternary deposits. However, the alignment of the quebradas, the distribution and outcrop pattern of older crystalline rocks, and the abrupt termination of older shoreline wavecut features suggests that the dominant fault trend is northeast.





Deposit Types




Gold is contained in fine-grained tuffaceous rocks intercalated in the Formation Bahia Inglesa.  In particular, there is a sequence of light gray, limy tuffaceous siltstone and sandstone bearing 1-3% very fine-grained pyrite that appears to be consistently anomalous in gold and silver.  This unit, which varies from 0.5 to 3 meters in thickness, appears to be constrained in a 1⁄2 km wide structural zone that trends northeast through the claim area.





The zone is probably the remnant of a structural trough, and it is possible that seafloor hot spring vents were operative at the time.  Evidence for this includes the disseminated pyrite, the lightly clay-altered aspect of the tuffaceous units, and the disposition of gold in samples taken to date.





Although information is sparse, the type of deposit considered for this property is a structurally controlled, shallow-water black-smoker type of occurrence.  Sedimentary rocks consisting of marine limestones, sandstones, and water-lain tuffs of both marine and terrestrial origin were deposited in a graben.  Black smokers (or sea floor hot springs) are considered to be the source of mineralization, by discharging precious metal-laden waters into seawater and by flooding unconsolidated sediments at shallow depths below the seawater-seafloor interface. Resulting temperature, pH, eH, and solubility changes result in selective stratiform deposition of minerals in those rocks susceptible to being mineralized.





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ITEM 1.                        BUSINESS - continued





Mineralization





Mr. Hiner spent considerable time investigating the area and nearby exposed rock units for hot spring alteration, or other evidence of black smoker activity.  Several thin horizons of cherty and silicified limestone were noted.  The occurrences of thin silicified units in limestone were accompanied by increased fossil accumulations, which could suggest warm or hot water environments.  However, no association of visible mineralization with the silicic units was noted macroscopically, and Mr. Hiner did not sample the units.





Insufficient work has been done to adequately determine the nature and habit of any base or precious metal mineralization.  The samples taken from bulldozer trenches by a joint venture partner’s personnel indicate that there may be a northeast corridor of mineralization, but this may also be a function of exposure from erosion, as most of the areas trenched were in quebradas or other erosional windows exposing the Bahia Inglesa Formation.





Exploration





After acquiring the property, Zoro entered into a joint venture agreement with Michael H. Kobler (“Kobler”). Kobler conducted trenching and sampling in 2008, and cut 35 test pits to a depth of at least 5 meters.  Samples from eleven of the thirty-five pits returned anomalous gold and silver.  Trench sample locations are shown in the figure below, and sample assays are noted in the table immediately following such figure.





Trench Location and Sample Map








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ITEM 1.                        BUSINESS - continued


Trench Sample Assays


Sample

Au
Ag

Sample

Au
AgID

oz/t
oz/t

ID

oz/t
oz/tTP - 01

0.023
0.10

TP - 23 - B
<0.001
0.10TP - 02

0.041
0.05

TP - 23 - C
<0.001
0.05TP - 03

0.120
0.30

TP - 24 - A
0.051
0.20TP - 04

<0.001
0.05

TP - 24 - B
<0.001
0.20TP - 05

<0.001
0.05

TP - 25 - C
<0.001
0.15TP - 06

<0.001
0.10

TP - 25 - D
<0.001
0.20TP - 07

0.029
0.05

TP - 26 - A
<0.001
<0.05TP - 08

<0.001
0.05

TP - 26 - B
<0.001
<0.05TP - 09

<0.001
0.05

TP - 26 - C
<0.001
0.05TP - 10

0.065
0.05

TP - 27 - A
<0.001
0.05TP - 11

<0.001
<0.05

TP - 27 - B
<0.001
0.05TP - 12

<0.001
0.05

TP - 28 - A
<0.001
<0.05TP - 13

<0.001
0.10

TP - 28 - B
<0.001
<0.05TP - 14

0.011
0.05

TP - 29 - A
<0.001
<0.05TP - 15

0.048
0.10

TP - 29 - B
<0.001
0.05TP - 16

<0.001
0.05

TP - 30 - A
<0.001
0.10TP - 17

0.003
0.30

TP - 30 - B
<0.001
0.05TP - 18

0.015
0.25

TP - 31

<0.001
<0.05TP - 19

<0.001
0.10

TP - 32

<0.001
0.05TP - 20

0.002
0.05

TP - 33

<0.001
0.20TP - 21

0.206
0.15

TP - 34

<0.001
<0.05TP - 22

<0.001
0.20

TP - 35

<0.001
0.10TP - 23 - A
<0.001
0.10








A northeast-trending lineament disrupts the arcuate shoreline features visible on the property, and serves to localize the principal drainage in the area. Anomalous gold and silver in trench samples approximates the northeast trend.  Examination of available exposures of Miocene sedimentary rocks suggests the northeast trend is a fault structure or graben feature that is partially covered.  Although hampered by lack of exposure, a gray limy pyritic tuffaceous sequence appears to be constrained within the northeast trending zone.  The zone is about 500 meters wide from northwest to southeast, and no gray tuffaceous material was seen outside the zone, based on limited examination by Mr. Hiner.





Drilling





Prior to the agreement with Zoro, Gareste drilled two reverse circulation holes as stratigraphic tests of the Bahia Inglesa Formation. Drill holes S-1 and S-2 were drilled to depths of 92 meters and 73 meters respectively.  Mr. Hiner visited both drill sites, noted vertical cemented casing at each site and confirmed the physical location by GPS with accuracy to +/- 4m.  Both drill holes are located near the boundary of the mensura.  Since both the mensura and the surrounding pedimentos are controlled by Zoro, the drill hole locations are not sensitive to internal boundary concerns.





No drill logs were assembled, but samples were collected and later assayed by Zoro.





Both holes were vertical holes drilled through essentially flat-lying sedimentary rocks; therefore the assays are true thickness.  However, both holes encountered heavy water inflows.  Air compressors on the RC drill rig were apparently inadequate to control the incursion of formation waters, and sampling became a matter of trying to separate muds and water. As a result sample quality and integrity are questionable.  Anomalous gold and silver were detected despite the poor sampling conditions, but the thickness and distribution of mineralization cannot be reliably estimated.





Although Mr. Hiner does not doubt the veracity of Jacob’s assays, the reader is cautioned that the reverse samples provided to the laboratory are highly unreliable due to the inherent sampling problems related to reverse circulation drilling in general, but in particular when high water inflows are encountered during drilling and sampling, such as occurred at Escondida.








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ITEM 1.                        BUSINESS - continued





Sampling Method and Approach





Reverse circulation drill hole samples were taken as 2m composites.  Samples were collected at the RC rig’s cyclone discharge in wire screens, water was decanted, and the wet samples were placed in 10mil plastic bags.  Individual samples are probably not fully representative of the interval for which the sample was taken, because of the likelihood of sloughing of the drill hole walls higher in the hole. Therefore, the presence of substantial amounts of water almost certainly compromised the quality of the samples. The presence of water in RC drilling can severely impact gold content, in that contributions of material from elevations in the hole other than the sample interval can contribute a non-representative gold fraction to an otherwise unmineralized section.  Also, gold tends to settle in heavy water settings during RC drilling, providing for the possibility of biased assays downhole. The samples were sent to Jacobs Assay Office in Tucson, where traditional fire assay analyses were completed.





Trench samples were taken as vertical cuts on the walls of the trenches.  In trenches TP 23-30, multiple samples were taken to determine whether different stratigraphic horizons were mineralized.  Because the strata are flat lying, the vertical samples are representative of the horizons sampled.  In conversation with Kobler, he indicated that his technical personnel made every attempt to collect a representative sample.  It is Mr. Hiner’s opinion that the trench samples are representative of the material exposed in the trenches. The samples were bagged and sealed, and shipped to Jacobs Assay Office in Tucson for fire assay analysis.





Mr. Hiner took ten samples on the property: two rock samples of available outcrop, two samples from stockpiles, three pilot plant concentrate samples, and three water samples.  Outcrop samples are chip channel samples where appropriate stratigraphy was exposed.  Stockpile samples are selections of various material exposed in the stockpile, taken to be as proportional to content as possible.  Water samples were taken to determine water chemistry and any possible relationship with mineral or soil chemistry.  Three concentrate samples were taken from metal drums at the pilot plant that the Gareste guide indicated were pilot plant output. All the samples were collected in 10 mil plastic bags, noted by sample tag and felt marker, and sealed with plastic zip ties.  The sample locations were noted by GPS location, and photographs of the sample area were taken.  Water samples were taken in sterilized polystyrene flex bottles.  Sample bottles were submerged and rinsed, then filled to capacity underwater and sealed.





The chip channel samples from outcrop are reliable indicators of mineralization, if any, in the stratigraphy exposed and sampled by Mr. Hiner.  No attempt was made by the Gareste guide to influence location or type of material, and the samples were independently selected by Mr. Hiner.





The stockpile samples are considered by Mr. Hiner to be representative of the material in the stockpiles, but the material sampled has been moved from its original site. Mr. Hiner could not reliably determine the original site of excavation.  However, examination of the closest pits and exposed upper pit walls (approximately 1 m) suggests that the material was excavated and stockpiled beside individual pits.  However, all the pits were full of water and not accessible for detailed inspection. None of the pits in the immediate 50m2 vicinity of the pilot plant was materially different; the material could have been retrieved from any of the pits.





Therefore, the stockpile samples should be considered as indicative only and not reliable as to sample location.  Mr. Hiner believes however, that the material was stockpiled from nearby excavations and not transported onto the property from elsewhere.





The concentrate samples were taken from sealed drums stored at the pilot plant.  The material was highly ferruginous, silt to granule size, and contained a strong magnetite component.  No attempt was made to determine mineral content, as the sample material was entirely stained with iron coatings.  The material in the concentrate drums was of the same size and consistency of residual materials examined in the electrolysis tanks, and Mr. Hiner has no reason to believe the materials sampled are not derived from the pilot plant operation.





Sample Preparation, Analyses and Security




Drill samples sent to Jacobs Assay Office were prepared as follows:


1.
samples as received were dried and ground to 90% -100m.


2.
All samples were placed in a rolling cloth and mixed a minimum of 24 times before sampling.


3.
Standard fire assay procedures were utilized using 1⁄2assay ton charges.  Gold and silver were determined gravimetrically and reported in grams per metric ton.


4.
Copper and arsenic assays were obtained using 1⁄2 gram samples.


5.
1⁄2 gram samples were digested in Aqua Regia, raised to 200ml, and analyzed via Perkin Elmer atomic absorption.


6.
Copper and arsenic were reported in percent.


7.
Jacobs placed internal standards and blanks randomly throughout the analysis stream.





It is Mr. Hiner’s opinion that Jacobs Assay Office is a reliable laboratory, and the sample results are reliable insofar as the assay technique is concerned.  An independent comparative study of numerous assay laboratories (including Jacobs) was conducted by the U.S. Bureau of Land Management in 2002.  The study utilized a series of independent geochemical standards, which were submitted to each lab for analysis and comparison.  Jacobs’ results were well within industry standards for precision, accuracy, and reproducibility.  However, whether or not the samples are representative of the intervals sampled in the drill holes is highly questionable, due to the water contamination discussed earlier.  The samples were stored in a locked facility on the property until funds were available for analysis.  However, there is a time lag between the drilling and collection of samples in 2007, and the transmission of samples to Jacobs in 2008.  In Mr. Hiner’s opinion, the chain of security is acceptable, but cannot be completely verified. Mr. Hiner reiterated in the Escondida Technical Report that the RC sample results should not be trusted or utilized, and are reported in Section 10 only for historical reasons.





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ITEM 1.                        BUSINESS - continued





The trench samples collected by Kobler’s personnel were sent to Jacobs Assay Office for analysis.  Jacobs analyzed the samples as follows:


1.
Samples as received were dried and ground to 90% -100m.


2.
All samples were placed in a rolling cloth and mixed a minimum of 24 times before sampling.


3.
Standard fire assay procedures were utilized using 50 gram assay charges.  Gold and silver were determined gravimetrically and reported in grams per metric ton.


4.
Copper and arsenic assays were obtained using 1⁄2 gram samples.


5.
1⁄2 gram samples were digested in Aqua Regia, raised to 200ml, and analyzed via Perkin Elmer atomic absorption.


6.
Copper and arsenic were reported in percent.


7.
Jacobs placed internal standards and blanks randomly throughout the analysis stream.





It is Mr. Hiner’s opinion that the trench samples are representative of the materials sampled.  The assay method used by Jacobs employs a large assay charge in the fire assay process, and due to the increased sample size results in a more reliable and representative assay value than the atomic absorption or ICP methods used in general exploration.  Because only Kobler’s personnel had access to the samples, it is also Mr. Hiner’s opinion that standard security measures undertaken by Kobler’s personnel were adequate to protect the integrity of the samples between time of collection and shipment to Jacobs.





In respect of Mr. Hiner’s samples, no employee, officer, director, or associate of Zoro Mining Corporation or Gareste Ltda. was involved in the selection of samples to be taken, involved with the collection of the samples, or the preparation of the samples.





The samples were sealed at the sample site and remained in Mr. Hiner’s possession.  The rock and concentrate samples were stored in Mr. Hiner’s hotel room until transported by pickup truck to the Viga Labs facility in Copiapo, where the samples were personally delivered to lab personnel for analysis.  Viga Labs is a certified assay laboratory under ISO 9001-2000.  Viga Labs was provided instructions to crush, homogenize, and split the samples.  One half of the sample split was sent by Viga Truck to ALS Chemex Laboratory in La Serena. ALS Chemex is a certified assay laboratory under ISO 9001-2000.  The sample flow sheet controlling sample distribution is shown below.





Viga Labs at Copiapo prepared the samples as follows:


1.
Dried the samples as necessary and crushed the samples to -1/4 inch using a jaw crusher.


2.
Homogenized the samples and made two splits using a Jones Riffle Splitter.


3.
One split of each sample was packaged and sent to ALS Chemex in La Serena.


4.
The Viga split was further split to obtain a 250 gram sample by utilization of a Jones Riffle Splitter.


5.
The 250gram split was pulverized to greater than 85% -75microns using standard ring and puck style pulverizing equipment.


6.
A 30 gram split was analyzed for Cu, Mo, Au, and Ag by ICP-AA (induction coupled plasma and atomic absorption).





ALS Chemex at La Serena prepared the samples received from Viga as follows:


1.
dried the samples as necessary and crushed the samples to greater than 70% -2mm using a jaw crusher.


2.
A 250 gram split is obtained using a Jones Riffle Splitter and pulverized to greater than 85% -75 microns using standard ring and puck style pulverizing equipment.


3.
A 5 gram split was analyzed using ICP-AA (ALS method Au-ICP21) and by ICP-AES (ALS method ME-ICP41a) for copper and 33 other elements respectively.





Water samples were sealed in a 5 gallon bucket and sent to ALS Chemex in La Serena for export to ALS Chemex Environmental Division in North Vancouver, British Columbia.  The water samples were analyzed for metals utilizing ICP-AA, for alkalinity, chloride and sulfate by titration, and for total dissolved solids by conductivity analysis.





Results of these analyses are summarized below.





Quality control procedures were employed by Mr. Hiner in the field for the samples collected to ensure that samples are representative of the material sampled.  Both Viga Labs and ALS Chemex maintain a program of internal quality assurance and quality control to maintain and control precision, accuracy, and contamination.  These programs include the insertion of ALS geochemical standards and blanks into the sample analysis stream and duplicate analyses of both standards and client samples. Mr. Hiner relied on the laboratory’s quality control program to manage precision, reliability, and reproducibility.





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ITEM 1.                        BUSINESS - continued





It is Mr. Hiner’s opinion sample preparation, security, and analytical procedures are adequate for this level of evaluation.  However, future programs to evaluate the Escondida property should include development of a company held geochemical standard, and utilization of blanks (geochemically inert material such as silica sand) inserted into the sample stream for submission to the laboratory to ensure and verify the precision and accuracy of the assay results, and to enable detection of contamination.





Author’s Sample Information


Sample No.
Sample type
UTM E
UTM N
Remarks809001
Rock
311,859
6,984,214
Stockpile809002
Rock
311,856
6,984,230
Stockpile809003
Concentrate
311,850
6,984,200
Plant site809004
Concentrate
311,850
6,984,200
Plant site809005
Concentrate
311,850
6,984,200
Plant site809006
Rock&Water
311,904
6,984227
Pit Area809007
Water
311,904
6,984227
Pit Area809008
Rock
310,981
6,983,287
Quebrada809009
Water
314,018
6,987,162
Dug well809010
Rock
314,018
6,987,162
Dug well site





Data Verification





Geological information for the Escondida property has been compiled from scant public and private sources and is dominantly of a geological or geochemical nature.  JV partner Kobler’s trenches were either collapsed or filled with water. Other than the results obtained by Mr. Hiner’s work, earlier data could not been verified due to lack of safe access.





Mr. Hiner did not attempt to duplicate any of the trench sampling, because all the trenches were full of water and substantial sloughing of trench walls rendered approach and access unsafe. Furthermore, stored samples, if any, from 2008 sampling or drilling may have undergone additional oxidation or contamination, and the veracity of any check sampling could be suspect.  As stated previously, the RC drill sample results are untrustworthy.  Additionally the manner of storage of the samples could induce contamination or other problems that would render reanalysis unreliable. Prior sample locations were not visible or identifiable in the field, and Mr. Hiner therefore could not conduct duplicate sampling of any prior sample locations.





Mr. Hiner’s samples were designed to test specific horizons for base and precious metal content independently of Gareste results, and to check for base and precious metal content in stockpiles near the processing plant.  Original location of stockpiled material was not available for check sampling.





Mr. Hiner’s assay data was checked against field notes to ensure that there were no unusual inconsistencies between Mr. Hiner’s reported results and field observations.  Mr. Hiner is satisfied as to the adequacy of sample collection, handling, security, preparation and analytical procedures that have been carried out.





Viga Labs analyses indicate elevated levels of copper, silver, and geochemically anomalous gold in Mr. Hiner’s samples, whereas ALS Chemex analyses disclosed only anomalous silver.  However, ALS Chemex noted that there could be potential issues regarding gold analysis due to the small sample size utilized in their analysis.  Other elements that are anomalous, according to analyses by ALS Chemex, include chrome, manganese, nickel, strontium, and uranium.  There is not enough information to conduct a statistical analysis regarding correlations or associations of anomalous elements with gold or silver.





Mr. Hiner’s sample suite was delivered to Viga Labs with instructions to crush, homogenize, split, and send a second sample to ALS Chemex.  Mr. Hiner instructed both labs to conduct analysis utilizing ICP methods.  The sample method employed by Mr. Hiner at both Viga Labs and ALS Chemex is satisfactory for the detection of geochemically anomalous elements such as copper and silver, but inadequate for the accurate or reliable detection of gold.





Mineral Processing and Metallurgical Testing





Although the property is at an early stage of exploration, minimal Mineral Processing and Metallurgical testing was carried out. Gareste constructed a small pilot plant consisting of a grinding circuit feeding into cyclones for separation and clarification.  Clarified material was mixed with dilute acids and water, and then split and run through two separate process circuits.  One circuit treated the pregnant solutions with activated carbon, and the second circuit involved passing the pregnant solution through a series of electrolysis tanks. Results from both methods were inconclusive, as throughput was small, and the cyclones were hampered by clays.  Head grades were not sufficiently known to calculate recoveries. Because of these issues, the results may not be reliable or representative, and should not be trusted.  Furthermore, Mr. Hiner’s results did not substantiate any concentration of metals in the processes selected, as described above.





28








ITEM 1.                        BUSINESS - continued




Mr. Hiner took three samples of concentrate stored on the property, which were made from the electrolysis process.  No activated carbon from the alternate process was available for testing.





Mineral Resource and Mineral Reserve Estimate





The property is at an early stage of exploration and no Mineral Resource or Mineral Reserve Estimates have been carried out.





Interpretation and Conclusions





The original supposition by Gareste personnel that the Escondida area could host a placer deposit is not supported by the available geologic information.  However, samples were analyzed by Jacobs Assay in Tucson, Arizona in large samples delivered by Zoro and Kobler independently.  Mr. Hiner’s Viga Labs results substantiate anomalous copper, silver, and very low and variable gold values, albeit not at the same concentrations as Jacobs.  Unfortunately, ALS Chemex’s ICP thresholds are too high and their sample sizes too small to reliably analyze gold at the levels ascertained by Viga.  In the instance of both Viga and ALS Chemex, ICP techniques necessitate the use of a small sample, which is a standard procedure.  Jacobs Assay utilizes only fire assay techniques, and uses a full 50 gram assay charge after blending the entire crushed sample.  All three laboratories report anomalous copper and silver, but gold values are geochemically anomalous at best.  Nevertheless, the anomalous copper and silver values, as well as the presence of elevated trace elements such as chrome, manganese, nickel, strontium, and uranium tend to support the existence of some sort of mineralizing system.





Alteration is subtle, consisting largely of localized clay alteration, silicification, and fossiliferous limestone occurrence in shallow seawater settings. These may be indications of a subsea thermal spring system operating in a graben setting, and provides a plausible explanation of the presence of widespread fine-grained pyritic mineralization accompanied with some component of precious metals.





Insufficient work has been done to determine the mode and economic viability of the Escondida occurrence.  The development of a pilot plant prior to determining whether a viable orebody exists may have been premature, but the elevated levels of copper, silver, associated trace elements, and to a lesser extent possible gold indicates that some form of mineralization is present.





Recommendations





Before any additional time and money are spent regarding the development of a pilot plant or flow sheet, work should be done to determine whether or not adequate mineralization exists.  A detailed mapping and sampling program is recommended prior to implementation of a drill program.  Structural analysis coupled with thematic imagery analysis is recommended to complement the surface work.  Detailed sampling to determine the habit of precious metals is recommended as part of a mapping program, as well as to determine the viability of utilizing any trace element geochemistry that may complement target development.





If a copper-gold-pyrite and/or a copper-silver-gold-pyrite relationship can be demonstrated, it may be possible to utilize some form of geophysics, such as IP to provide additional confidence in the design of a drill program.  In order to determine whether or not gold is associated with any mineralization, large samples should be taken and analyzed by both ICP methods and by fire assay methods, preferably utilizing a large sample charge of at least 30 grams.





Because of the degree of uncertainty regarding the development of a viable target, a two phase exploration budget is proposed.  The initial program entails geologic mapping, geochemical sampling, thin section or micro-probe analysis, followed by trenching and sampling if warranted.  If results merit continuing exploration, a modest drill program to test any targets developed is recommended.  Geologic and geohydrologic conditions, combined with the low levels of mineralization encountered to date, absolutely preclude the use of reverse circulation drilling methods.  Core drilling is highly recommended.





Budget Estimate





The recommended two-phase exploration program at the Escondida property is estimated at $92,950 for Phase 1, and $437,250 for Phase 2 if justified.  The program total is $530,200. The tables below provide a breakdown of projected expenditures for the proposed mapping and geochemical surveys, with follow-up drilling if merited.





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ITEM 1.                        BUSINESS - continued




Description
Explanation
Mth 1
Mth 2
Mth 3
Mth 4
Mth5
Mth 6
SbTotPersonnelSr.Geol-2mos, $750/day
7500
7500

7500


$22,500Jr. Geol-4mos,$350/day

7000
7000
7000


$21,000LogisticsFood & Lodging est$25/day
250
1000
500
750


$2,500Travel-Sr. Geol expat
2000





$2,000Travel-Jr. Geol

500
500



$1,000Vehicle-est $1500/mo
1500
1500
1500
1500


$6,000Field ActivitiesMapping- purch imagery est $2500
2500





$2,500Thin sections/Microprobe


2500



$2,500Trenching- excavator

10000
10000



$20,000Geochemistry-est 100smpls, $25ea


1250
1250


$2,500Office & AnalysisComputer entry & analysis



1,000


$1,000Report & Recommend-Sr Geol



1,000


$1,000Sbtot

$84,50010%cont

$  8,450Ph 1 Tot

$92,950











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ITEM 1.                        BUSINESS - continued





Proposed Budget Phase 1





Phase 2 Drill Program


Description
Explanation
Mth 1
Mth 2
Mth 3
Mth 4
Mth5
Mth 6
SbTotPersonnelSr.Geol-1/2mos, $750/day




3750
3750
$   7,500Jr. Geol-1mos,$350/day




7000

$   7,000LogisticsFood & Lodging est$25/day




500

$      500Travel-Sr. Geol expat




2000

$   2,000Travel-Jr. Geol




500

$   500Vehicle-est $1500/mo




1500
1500
$    3000Field ActivitiesDrilling – 2500m H core@ $125/m




312500

$312,500Drill Geochem-2500smpls, $25ea





62,500
$  62,500Office & Analysis






1000
$    1,000Computer entry & analysis





1000
$    1,000Report & Recommend-Sr GeolSbtot

$397,50010% cont

$  39,750Ph 2 Tot

$437,250Tot Prgm

$530,200




Effective March 31, 2011, through its subsidiary Sociedad Zoro Chile, Limitada, we entered into a binding letter of intent (the "LOI") with Llanos de Caldera, S.A. Cerrada ("LDC"), a privately-held Chilean corporation, whereby LDC can earn an undivided 70% interest in our Escondida precious metals project located near Copiapo, Chile, and following which our Company and LDS will form a joint venture to govern operations at Escondida, as follows:




1.
Earn-In Requirement.To earn the 70% interest, LDC must commence, pay for and complete qualifying Earn-In Expenditures totaling at least five hundred thousand dollars (US$500,000) within one (1) year of the date of the LOI ("Earn-In Term"). Earn-In Expenditures are defined as all the costs and expenses to complete an initial exploration, drilling, sampling and metallurgical testing program as set forth in the LOI (the "Initial Exploration Program"), and include, in addition, all tax payments and related costs of maintaining the mineral titles to Escondida during the Earn-In Term ("Holding Costs") and payments for overhead expenses. Harold Gardner, a director of our Company and a principal within LDC, shall have oversight responsibility for the Initial Exploration Program, and LDC shall be the operator under the LOI.






2.
Declaration of Earn-In.At any time prior to or at the end of the Earn-In Term, LDC can elect to give notice in writing to the Company that it has completed the Initial Exploration Program and has successfully incurred the Earn-in Expenditures for Escondida (the "Earn-In"). At such time, to the extent not previously done, LDC shall furnish our Company with copies of all reports, information and data developed during the Initial Exploration Program, and satisfactory evidence of the incurrence and payment of the Earn-In Expenditures, which our Company shall reasonably accept, and LDC shall be deemed to have earned an undivided 70% interest in Escondida. Upon reasonable request from LDC, our Company shall cause the transfer of this 70% interest to LDC, or, alternatively, 100% of the property to the Joint Venture described below.






3.
Joint Venture and Joint Operating Agreement.At the time that Earn-In is achieved, the parties will form a Joint Venture and finalize and execute a Joint Operating Agreement ("JOA") to govern their interests in Escondida, whereby LDC will be the Operator, and the parties shall fund their respective shares of expenses going forward. With Zoro’s consent, Llanos subsequently assigned its rights in the earn-in agreement to the Escondida Chile Joint Venture, a partnership between Llanos and the HEI Escondida Joint Venture. As at April 30, 2012, Escondida Chilewas still in the process of conducting the exploration and drilling program with the results to be determined in the latter half of 2012. As at April 30, 2012, the parties have agreed to extend the agreement an additional 12 months.







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ITEM 1.                        BUSINESS - continued




The Yura Project, Arequipa, Peru




As discussed above, in 2007 we acquired a 100% interest in approximately 2,114 hectares (5,422 acres) of exploration properties which covers the Yura property.





We entered into an Asset Purchase Agreement (the “Fortuna Agreement”) dated February 22, 2010, with two vending parties to acquire a 100% interest in three property mineral exploration concessions covering approximately 1,500 hectares as an extension to our existing Yura gold prospect located 30 kilometers west of Arequipa, Peru (the “Fortuna Properties”).





The Fortuna Properties target precious metals and are comprised of three concessions that are accessible year round via paved highway and improved roads. Harold Gardner, an officer and director of Zoro, is an indirect minority shareholder of one of the vending parties. Subject to final due diligence, the lifting of a cease trade order issued by the British Columbia Securiites Commission (which occurred on October 21, 2010), and other customary closing conditions, we planned to (i) issue 6,000,000 restricted shares of its common stock to the vending parties; (ii) pay to the vending parties $100,000 prior to the closing of the acquisition, $125,000 at the closing date, and $100,000 six months from the closing date; and (iii) grant to the vending parties, a 2.5% net smelter return (“NSR”) royalty on the proceeds of any production from the Fortuna Properties capped at $20,000,000, 1.5% of which can be repurchased by us at any time before commencement of any production for the sum of $8,000,000. The NSR also called for an advance minimum yearly payment of $100,000 to the vending parties, which amounts are credited against any royalties ultimately payable. This Fortuna Agreement was never closed and the Fortuna Properties were folded into the Yura Agreement described below.





On October 4, 2011, we announced that we had entered into a binding Letter of Intent with various parties (the “Yura Agreement”), to earn up to a 75% indirect interest in the consolidated Yura Mining District (roughly 7,200 hectares), located approximately 30 km west of Arequipa, Peru. We had also entered into an agreement with Minex Ventures II, LLC (“Minex”), to compensate Minex for consideration furnished to or on behalf of us for both pre-existing and future obligations owed by us in the Yura District (the “Minex Agreement”).





Our holdings (the “Zoro Properties”) in the Yura District consisted of over 2,100 hectares of exploration concessions acquired in 2007 by Zoro Peru S.A.C. (“Zoro Peru”), our 99%-owned subsidiary, in exchange for shares of our common stock.





The Yura Agreement in principal part provides for the following:





·
All of the rights, titles and interests to the Zoro Properties, Fortuna Properties, and related assets, and the balance of the properties in the Yura District, are being conveyed to Formacion Yura Exploracion S.A.C. (“Yura Exploracion”)





·
To earn an undivided 50% indirect interest in the Yura District, Zoro has the responsibility under the Yura Agreement to complete a minimum $5.0 million exploration program within 30 months





·
Provided that the exploration program produces a minimum 600,000 ounce gold measured and indicated resource estimate at Yura, Zoro has the option to purchase an additional undivided 25% indirect interest in the Yura District for a minimum of $30 million





A copy of the Yura Agreement was attached as an Exhibit to our Form 10-Q filed with the SEC on March 21, 2012.





The Minex Agreement recognizes the contributions of Minex and consideration furnished on behalf of Zoro, and provides the following key terms:





·
Minex has contributed or has caused to be contributed US$1.6 million for exploration, and concession and permitting maintenance expenses, and related overhead at the Zoro Properties





·
Minex has absolved Zoro from the shares and monies otherwise payable to the Fortuna Vendors with respect to the acquisition of the Fortuna Properties totalling approximately 1,500 hectares of exploration concessions, which have now been contributed to the Yura Project





·
Minex has agreed to use its best efforts to raise an additional $1.2 million for Zoro, to fund the first phase exploration programs on the consolidated Yura Project





·
Zoro and Minex agreed that the value of the Minex contributions is US$3 million and Zoro has agreed to issue 18 million shares of its common stock to Minex or to those designated by Minex, subject to satisfying applicable securities law





·
Minex shall have the right to appoint two members to Zoro’s Board of Directors








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ITEM 1.                        BUSINESS - continued





A copy of the Minex Agreement was attached as an Exhibit to our Form 10-Q filed with the SEC on March 21, 2012.





On March 15, 2012 but having an effective date of September 27, 2011, we entered into an Amendment Agreement with Minex (the “Amendment Agreement”) whereby the parties agreed to amend the Minex Agreement so that the agreed value of the Minex contributions under the original Minex Agreement is US$1.6 million instead of US$3 million and that we agree to issue 10 million shares of common stock instead of 18 million shares of common stock to Minex or to those designated by Minex, subject to satisfying applicable securities laws.





A copy of the Amendment Agreement was attached as an Exhibit to our Form 10-Q filed with the SEC on March 21, 2012.





The Yura Project is the subject of a technical report entitled “43-101 Technical Report on the Yura Project, Arequipa, Peru” (the “Yura Technical Report”) dated March 2, 2010 and prepared for the Company pursuant to NI 43-101 by John Hiner, Licensed Geologist.  A complete copy of the Yura Technical Report is available on the Company’s profile on SEDAR at www.sedar.com.  The following discussion of the Yura Project is derived from the Yura Technical Report.





Property Description and Location




The Yura Project is located approximately 30 kilometers west of Arequipa in southern Peru. Arequipa is the capital city of the Arequipa Region. Its population is approximately 1 million, and it constitutes the second most populous city of the country.  Both the Yura project and Arequipa are situated in the Andes Mountains at an elevation of about 2,400m.





The Mining Code of Peru guarantees the owner of mining claims the right-of-access to the surface area required for their exploration and exploitation. This right is normally obtained by a voluntary agreement between the mineral claim owner and the surface owner. The mining company may obtain the Rights of Way through the civil court system, if necessary, by agreeing to indemnify the surface owner for the court-determined value of the surface area.





Claims and Title at Yura





The Yura Project consists of 7,200 hectares held by Formacion Yura Exploracion S.A.C. (“Yura Exploracion”) to which Zoro has the right to earn up to a 75% joint venture interest in the Yura Project pursuant to the Yura Agreement as more fully discussed above.





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ITEM 1.                        BUSINESS - continued


Yura Property Map





Mineralization





Gold mineralization is hosted in northwest-trending shear zones in a medium- to coarse-grained granodiorite.  The shear zones vary in width from a few centimetres to tens of meters.  Quartz veins and veinlets within the shear zones commonly contain visible gold, and free gold can also be panned from sheared granodioritic material.  There is an empiric relationship of gold and quartz veining with an envelope of potassic alteration within the shear zones.  Potassic alteration is exemplified by common sericite, k-spar flooding, and occasionally secondary biotite formation in and adjacent to the shear zones.





Environmental Issues in Peru





As part of the structural reforms that resulted in the General Mining Law, the Peruvian government initially adopted the Environment and Natural Resources Code in 1990.  Subsequent revisions addressed emission limits, periodical monitoring, economic liability, and mandatory environmental impact statements.  To streamline the process, the government enacted Supreme Decree 042-2003-EM, which had the objective of additional requirements for obtaining mining and beneficiation permits as shown in the bullet points below:





Prior Commitments – Supreme Decree No. 042-2003-EM


·
Perform production activities under a policy framework that aims for environmental excellence;


·
Respect the local institutions, authorities, culture, and customs; keep a propitious relationship with the population of the mining operation’s influence area;


·
Keep a continuous and opportune dialog with the regional and local authorities, the population of the mining operation’s influence area, and its representative organizations, providing them with information  regarding its mining operations;


·
Foment, preferably, local employment, offering the required training opportunities; and


·
Acquire, preferably, local goods and services to cover the necessities of its mining activities and staff, in reasonable conditions of quality, opportunity and price; creating the adequate mechanisms for agreements.





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ITEM 1.                        BUSINESS - continued





Mining and exploration companies operating in Peru have generally found the environment for development and operation to be positive, so long as the socio-economic issues are managed in accordance with the law.





The Yura project is expected to have minimal impact on any existing community or significant environmental parameter. No towns or populated areas fall within the boundaries of the Property and the nearest significant community is Arequipa, which is about 30km to the east. The area in the vicinity is unpopulated, and in general the local residents have a long history of subsistence living from subsistence agriculture, transient goat herding and very small scale mining of narrow gold-bearing veins. In general the local communities have a very favorable attitude towards mining, particularly in terms of the possibility of future employment.





An environmental review of the project area has been conducted, and there do not appear to be any existing environmental liabilities.  There are no known sites of archaeological interest on the property or in the vicinity.  For these reasons, the Yura project was approved in 2008 for exploration and drilling activities by the Minister of Energy and Mines.





Environmental Liability at Yura





There is no record of any exploration work, other than that detailed in this report, having been performed in this area in the past.  There are a few miniscule prospect pits that explore surface gold occurrences, small quartz veins, and iron-altered zones, but not tunnels or shafts of any consequence.  Because there is no requirement by the Peruvian regulatory agencies regarding the reclamation of such workings by subsequent lessees, there is no known prior environmental liability associated with the claims.





The Company is required under its existing and valid permits to mitigate its surface activities and conduct reclamation.  The Company conducted environmental and air quality studies as part of its permit application process.  The Minister of Energy and Mines determined that project activities would have no ill effects on the environment.





Permits





Permits for exploration and development are administered by the offices of the National Institute of Concessions and Mining Cadastre and the Office of Mining Concessions.  Environmental compliance is assured via the offices of the Organismo Supervisor de la Inversion en Energia (OSINERGMIN).





The Company has received permits for its exploration activities and environmental compliance permits from OSINERGMIN.  The permits and associated annexes were reviewed by the author of the Yura Technical Report, John Hiner, and are satisfactory.





Access, Climate, Local Resources, Infrastructure and Physiography





The project area is located 30km west of the capital city of Arequipa.  Arequipa is a mining and tourism center for southern Peru, and offers international airport connections.





35





ITEM 1.                        BUSINESS - continued





Location Map - Yura Project








The property is accessible from Arequipa by traveling about 25km northwest on Regional highway 30B through the small community of Yura.  A graded gravel and dirt road leave the highway near the Yura cement plant follows local drainages through the small Yura community, then southwest to Zoro’s camp on the Yura property, a distance of about 21km. Travel time is about 1.5 hours.  A four-wheel drive vehicle is not necessary, but recommended.  Elevations on the property range from 1200 to 2400m.





Climate in the area is typical of the Arequipa region.  It is generally warm and dry throughout the year.  The city of Arequipa is situated at the southernmost tip of Peru’s Desert Coast and enjoys plenty of sunshine, with daytime temperatures rarely dipping below 20oC.  Night time temperatures can drop sharply, particularly in June, July and August, when temperatures hover around 10oC and can feel very chilly.





The closest source of supplies and materials is Arequipa.  An industrial city with a long mining history and a diversified industrial base, it is an excellent source for dried goods and consumables, various services, and an experienced work force is available.  Numerous hotels and restaurants provide a variety of food and lodging capabilities.





Elevations on the property range from 1200m to 2400m above sea level.  Topography is moderate, with locally steep terrain from incised drainages.  The climate is warm and dry.  Vegetation is moderate to non-existent.





Water is available on the property, and can also be purchased from a private agricultural canal that traverses the southern border of the property.  Power is available 5km to the east.





History




Little is known of the early prospecting or artisanal production from the Yura property.  Artisanal miners, known locally as “informales”, explored the area, and made numerous cuts and prospect pits, but no sustained mining took place.  According to local informales with whom Mr. Hiner spoke, prospecting activity probably dates back to the Incas, although Mr. Hiner saw no evidence to support this.





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ITEM 1.                        BUSINESS - continued





The area has not experienced modern exploration, despite the intense activity that has occurred in southern Peru.  The combination of very remote and poor access, limited outcrop exposure, and a dogmatic belief that the gold mineralization in the area occurs only in small quartz veins have led modern exploration and mining groups to shun the area.





In July 2006 the Yura property (then referred to as Yebacha) was visited and briefly examined by geologists of Minera Penoles de Peru S.A., as part of a two-property tour.  There were no roads, and access was difficult, requiring a substantial hike into the area.  Lack of exposure limited their evaluation to existing prospect pits and small cuts made by artisanal miners. They took six rock samples of vein, altered granodiorite, and breccia material.  They concluded that there was not a target on the property that met their requirements.





Stiles began staking and acquiring claims in the Yura area before 2007, and by early 2010 had acquired and consolidated the claim package that was vended to Zoro.  Mr. Hiner has no knowledge of any prior claimants in the area.





Geological Setting





Regional Geology





The Arequipa region is situated within a large, pre-Devonian age metamorphic complex.  Amphibolite to greenschist facies metamorphism is the result of at least three metamorphic events dating to 1918, 440, and 392 Ma respectively.  Later intrusive activity from Paleozoic through Jurassic time has created a complex intrusive pattern most likely related to subduction events related to the nascent Pacific Ocean.  Recent volcanism overprints the older rocks, and eruptions from young volcanoes have been recorded in modern history.





Property and Local Geology





The geology of the Yura property is dominated entirely by a large granodiorite intrusive rock mass.  The granodiorite varies in composition and texture locally.  In general it is a medium- to coarse-grained equigranular intrusive body that covers an area in excess of 100 square kilometres.  The rock is made up of varying percentages of equigranular plagioclase, hornblende, augite, and biotite crystals and minor quartz.  Locally the texture varies from equigranular and fine-grained to a porphyritic texture wherein large hornblende crystals are set in a fine-grained aphanitic to equigranular groundmass.





The intrusive granodiorite is cut by numerous very fine-grained to medium-grained quartz feldspar dikes that trend north to northeasterly.  Andesitic to basaltic dikes occur discontinuously and locally, and appear to be the youngest igneous activity.





The strongest structural pattern is a ubiquitous series of east-northeast fractures that likely mimic intrusive joint patterns. The east-northeast joints are cut by mineralized northwest trending faults and structures that appear to be related to regional strain events.  The strike of the northwest trending faults is regional in extent.  The faults vary from single slip planes showing largely strike-slip as the last movement to shear zones that range in width from a few centimetres to 50meters or more.  Outcrop is sparse, and is covered largely by granodiorite detritus and unaltered boulders of granodiorite that largely mask the underlying rocks and structural aspects of the bedrock.  The degree of shearing that the intrusive rock has undergone is largely unnoticed in undisturbed terrain, and becomes apparent only when examining fresh road cuts and prospect pits.





Virtually the entire intrusive body has been altered, and exhibits widespread propylitic alteration effects.  Epidote occurs in veins and in blotchy masses throughout the intrusive.  Much of the mafic minerals have been altered partially or completely to chlorite.  In the vicinity of intense shearing, granodiorite has been further altered by potassic alteration, usually displayed by addition of sericite in the shear zones, occasional to common k-spar flooding in the equigranular matrix, and locally the introduction of secondary biotite.  The potassic alteration effects appear to be confined or controlled by the northwest shears.





Geologic mapping to date has been limited to location of dikes and plugs of various compositions within the granodiorite mass.





Deposit Types




The principal focus of exploration on the property is gold in shear zones.  The shear zones trend northwest, and serve to localize multiple phases of quartz infusion.  Shearing and mineralization appear to have been concomitant, as numerous examples of sheared quartz cut by later quartz veins. Numerous iron oxide veinlets are found in nearly all the shear zones visited by Mr. Hiner.  Gold is easily panned from ground quartz, iron oxide veinlets, and sheared granodiorite taken within the shear zones.





The type of deposit under consideration at Yura is a shear-hosted mesothermal gold deposit.














37





ITEM 1.                        BUSINESS - continued




Mineralization





Gold occurs as grains entrained in quartz, as smears on fracture faces, and in the numerous iron-oxide veinlets that occur in shear zones where quartz and sericite are present.  Assays for samples taken by Mr. Hiner suggest that gold additionally resides in the sheared granodiorite within the shear zone, but work to date is insufficient to quantify this type of occurrence. Rarely, relic pyrite can be found in massive quartz veins.





The gold in shear zones is almost always associated with quartz veins and veinlets, and there is a common association of iron oxide veinlets in the shear zones.  In every prospect visited by Mr. Hiner, potassic alteration as an overprint on the propylitically-altered granodiorite was visible, and is exemplified by the presence of sericite and occasionally by k-spar flooding in the matrices of the intrusive host rocks.





As a function of topography, oxidized vein material is visible along the strike of several veins over a vertical distance of 400m.  The shear zones are continuous, but the mineralized portions are not.  The depth of oxidation in the shear zones is not known, however.





Exploration





Zoro personnel have conducted surface prospecting and minimal local trenching.  From satellite imagery and airphotos, plus minimal confirmatory reconnaissance work, in excess of 30 individual mineralized shears have been identified in the district. Most of the identified zones are located outside the boundaries of the property optioned by Zoro.





Zoro geologists describe their findings as follows:





“More than 30 veins have been located, about half of which have been sampled in outcrops and workings.  100% of the samples assayed returned gold values, from a few grams average near or on the surface, to over 200 grams at 30 meters depth on one of the veins.





The hosted veins are largely found between 1200 to 2400 meters above sea level, and weather is favourable for all year mining.  The Chili and Yura Rivers converge on the southern portion of the properties, forming the Vitor River.  These rivers drain along deep faults which expose the batholith to depths of 300 meters, and up to 600 meters on the southwestern portion of the property.  Some of the veins are traceable down strike at or near the river bottom.  Taken together, the horizontal and vertical relief presents a rough 3 dimensional view.


The veins along strike occasionally form either the footwall, headwall, or even center of shear zoned hostrock.  These shear zones vary in width of 2 to 15 meters, with strike lengths up to 100 meters or more.”





Mr. Hiner’s observations generally are in agreement with the Zoro geologists’ statements as regards strike lengths, vertical persistence, and shear widths in the areas Mr. Hiner visited, but work to date has been insufficient to assess the mineral potential of individual zones. The ability to make more precise assessments is restricted by the reconnaissance level of work completed to date, the limited access available, and a paucity of reliable outcrop to ascertain the strength and persistence of shear zones and associated mineralized zones.  Of the prospects within the property, only four have been examined and sampled by Mr. Hiner: the Fortuna, the Dolores, Charlie, and the Suzi zones.  The Alma prospect is situated north of the Charlie occurrence on the same shear structure.  It was visited but not sampled as part of a traverse to examine the Charlie shear zone along strike. The Alma prospect consists of two small artisanal diggings on small quartz veins. The Iris and Eliana zones were visited briefly, and determined to be narrow quartz veins within northwest-trending shears.  Due to lack of exposure, no sampling was done.  The other zones both on and off the property were not visited by Mr. Hiner, due to the fact that they are remote and accessible only on foot. According to Zoro personnel, the prospects named but not visited or sampled consist largely of minimal prospect pits and artisanal workings that are of the same geologic mode, being narrow quartz veins in anastamosing shear zones that trend northwesterly.





Zoro commissioned a limited geophysical program in 2008.  The object of the program was to resolve whether or not IP could detect the limited sulfides present in mineralized zones at Yura.  A simple test of one line at the Marylin prospect confirmed that IP showed no useful response.





It is readily apparent in the field that boulder scree, talus, and alluvium cover large parts of the property.  Mapping and sampling without access to reliable bedrock exposure hampers the evaluation of the project.  Adequate mapping and determination of project level geology will depend upon access to bedrock exposure via additional roadcuts or trenching.





Zoro geologists completed a district-wide sampling program in 2007 and 2008.  Many of the known prospects were visited on a limited basis due to difficult access and the remote location of the prospects.  Rocks sampled included vein material, muck and dump piles, altered rocks in shear zones, and surface grab samples of altered and unaltered rock.  The locations were noted by prospect name and UTM coordinates.  Samples were fire assayed.  Because the geologists anticipated coarse gold and sample reproducibility issues, they also instituted a panning program as a comparison.  Results of both the assay results and the panning results were reviewed by Mr. Hiner.





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ITEM 1.                        BUSINESS - continued





More recently, Zoro personnel constructed approximately 30km of roads in order to gain access to various prospects deemed to be worthy of additional exploration.  These roads allowed Zoro workers to move equipment in to three prospect areas in particular, the Fortuna, the Charlie, and the Dolores zones.  Although the Suzi zone is accessible via bulldozer track, no work has been conducted.  Zoro considers the Fortuna, Charlie, and Dolores zones to be the principal targets and material mineral occurrences on the property, given the limited and reconnaissance level of information available elsewhere on the property.





Mr. Hiner visited, from north to south, the Upper and Lower Fortuna zones, the Dolores zone, the Suzi zone, and the Charlie zone.  Samples were taken at each of the four locations.  The Iliana and Iris zones were visited but not sampled due to caving and scree cover of artisanal workings.  Descriptions of the zones visited are set out below.





Fortuna Zone





At the Fortuna zone, bulldozer work cleared an area at a location called the Upper Fortuna zone, and exposed shearing that is in excess of 100m in width.  Drilling and blasting in the main part of the shear zone exposed a quartz-mineralized shear zone that is in excess of 10 m wide.  For safety reasons, Mr. Hiner could not gain access to the face of the cut for sampling.  However, Mr. Hiner did conduct chip sampling across the zone south of the open cut.  The Fortuna zone is visible over 0.6 km to the southeast, where the Lower Fortuna workings are visible.  The Fortuna zone is traceable on the ground and in airphotos, and is clearly evident in the hillside above the Lower Fortuna adit.





Zoro geologists did not conduct sampling at the Fortuna zone.





Charlie Zone





At the Charlie zone, a shaft was sunk to 30 m, and a drift begun down hill to access the shaft.  Broken ground in excess of 15m in width required concreting the entire zone and the drift has not been completed.  The entire zone has been rock bolted and screened for protection.  The main adit entrance has been concreted for stability.





In the hanging wall of the Charlie zone, Mr. Hiner took a sample, and also panned a sample from the same cut. The sample assayed 0.29ppm Au, and the pan showed substantially more visible gold than the assay indicated.





Five samples were taken by Zoro geologists at the Charlie prospect.  Four contained gold, but silver was not detected.  A sample of country rock reported no gold or silver.  Of the four samples, samples YEO 286 and YEO 309 appear to be high-grade select samples, whereas YEO 308, 310, and 393 appear to be representative of vein and wallrock.





Charlie zone samples- Zoro





Suzi Zone





The Suzi zone comprises an area of numerous prospect pits and dogholes that expose sheared granodiorite.  Alteration of sheared granodiorite is locally intense, resulting in a subdued topography in comparison to the surrounding terrain.  Shear zones vary in thickness from thin shear selvages to zones in excess of 3m wide.  There is no dominant shear trend, and Mr. Hiner noted shear trends ranging from E-W to N45E.  Samples taken by Zoro geologists contained gold and silver ranging from no detectable to15.05g/t and 5.1g/t respectively (table below).





Suzi zone samples- Zoro





Dolores Zone





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The Dolores zone is situated on a large, N75W-trending anastamosing shear zone that varies in thickness from 1m to 15m where visited.  A small shaft has been developed at the top of the hill where the mineralized shear crops out.  Away from the top of the hill, outcrop is sparse and the shear can be traced only by float, occasional small prospect pits, and topographic lows.





Numerous samples were taken at Dolores by Stiles and later by Zoro geologists.  Stiles developed a 20m shaft and drifted 45m into the shaft from 20 m below to the southeast.  Because of this limited development work, and because the zone was exposed, grab samples were taken of dump material and stockpiles from Stiles work, and numerous channels were cut on thin quartz veins within a 15m wide shear zone.  Several samples were high-grade select samples taken to ascertain the habit of the gold occurrence, and are not representative of the grade or tenor of the mineralized shear zone.





Drilling




The property is at an early stage of exploration and no drilling has been conducted.





Sampling Method and Approach





Zoro sample programs





In discussions with Zoro personnel, sampling conducted in 2007 and 2008 was directed at available outcrops, prospect pits, quartz veins and mineralized shear zones, artisanal dumps, mineralized float, and visibly unmineralized granodiorite.  Mineralized material was sampled where accessible to determine grades of gold and silver.  Sampling of mineralized zones included rock chip samples and channel samples across visible mineralized zones. Dump piles were sampled to gain an understanding of what artisanal miners may have been mining.  The vendors to Zoro attempted sporadically to mine at the Mercedes, Charlie, and Fortuna prospects, and several samples were taken of residual dumps, muck piles, and rock in place where accessible.





Dependent upon the size of the individual prospect, sampling covered areas as small as individual outcrops, as in the case of Eliana and Iris.  The other prospects cover areas ranging up to 50m in width, with strike lengths along shear zones up to 500m.  Sample coverage was adequate to determine whether or not precious metal mineralization was present, but not systematic.  At each of the prospects sampling is insufficient to reliably determine grade or tenor of any mineralized zone.  At each of the prospects, alluvial and scree cover severely hampers orderly or uniform sample coverage.





Most of the samples were taken to accentuate gold and silver grades.  As such, the results are indicative of high-grade mineralization, and are not representative of overall grade and tenor of individual mineralized zones.  Samples taken of visibly unaltered granodiorite host rock at Mercedes and Dolores prospects returned low gold grades.  Inspection by Mr. Hiner indicates that anomalous gold is likely contained in iron oxide veinlets that cut the unmineralized granodiorite, and the samples are therefore not representative of the granodiorite itself.





Yura Technical Report Author’s sampling





Mr. Hiner took fifteen 1kg to 3kg rock samples of sheared and mineralized material from several zones on the property.  Particular focus was paid to the Fortuna zone and to a lesser extent the Dolores and Suzie zones. At Fortuna, the samples are chip channel samples across the altered zone, and cover an area of approximately 50m.  Samples at Suzie and Dolores are chip samples of altered zones and veins exposed in prospect pits. At Suzie, the samples were taken in an area of approximately 200 square meters. The samples were collected in 10 mil plastic bags, placed inside Hubco cotton standard sample bags, noted by sample tag and felt marker, and sealed with plastic zip ties. The sample locations were noted by GPS location, and photographs of the sample area were taken.





The fifteen samples taken by Mr. Hiner are representative of silicification, iron-stained, and mineralized zones found in sheared and altered intrusive rocks.  Mr. Hiner attempted to sample obviously altered rocks in order to determine the precious metal content of mineralized or altered rocks.  Because gold is visible and coarse, Mr. Hiner consulted with ALS Chemex personnel as to an appropriate analysis technique.  The lab recommended, and Mr. Hiner concurred, that it was appropriate to analyze all the Yura samples utilizing the largest sample size available and by employing metallics screening techniques.  The samples are visually biased toward mineralized material, and are not representative of either the country rock in the area, and may not be representative of mineralization, if any, which may occur at depth in the area.  Mr. Hiner’s sample locations by prospect are set forth in the table below. Brief descriptions of Mr. Hiner’s samples and assay results are shown in the second table below.





Samples by Author of Yura Technical Report


Sample #
Prospect
UTM E
UTM N0610001
L. Fortuna
201,476E
8,194,491N0610002
Dolores
198,853E
8,190,578N07021001
Charli
200,960E
8,189,820N07021002
Susi
199,978E
8,190,198N07021003
Susi
199,970E
8,190,250N07021004
Susi
199,934E
8,190,261N07021005
Dolores
198,839E
8,190,616N07021006
Dolores
198,827E
8,190,605N07021007
Dolores
198,810E
8,190,600N07021008
U. Fortuna
201,057E
8,194,868N07021009
U. Fortuna
201,034E
8,194,860N07021010
U. Fortuna
201,035E
8,194,855N07021011
U. Fortuna
201,045E
8,194,854N07021012
U. Fortuna
201,047E
8,194,868N07021013
U. Fortuna
201,010E
8,194,836N








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Samples and Assay Results of Author of Yura Technical Report











As with most projects involving coarse gold or free gold mineralized zones, sample size and assay method is a constant problem.  In spite of attempts to isolate and identify coarse gold or nugget variances, there remains the issue of underreported gold in samples.  For instance, samples 07012008 through 07021013 were taken across the Fortuna shear where exposed by bulldozer cuts.  Only one of these samples reported gold in the ALS Chemex metallics assays (07021012). However, each of these samples 07021008 through 07021011 and sample 07021013 were panned at the time, and each produced a small gold tail in the pan.





Mr. Hiner did not attempt to sample unmineralized rocks.


Sample Preparation, Analyses and Security





Zoro sampling programs





Samples taken by Zoro geologists were bagged, transported to Arequipa, and sent to Jacobs Assay Office in Tucson.  Jacobs prepared the samples as follows:


1.
Samples were dried and crushed to 90% -100m.


2.
Samples were blended in a rolling cloth and mixed a minimum of 24 times.


3.
Standard fire assay procedures were performed using 1⁄2 assay ton charges.


4.
Gold and silver were determined gravimetrically and reported in grams per metric ton.


5.
Jacobs inserted internal standards and blanks randomly throughout the sample stream to maintain precision and accuracy.





In Mr. Hiner’s opinion, sample preparation and analyses were conducted to industry standards.  Although Mr. Hiner cannot comment on the level of security utilized by Zoro’s geologists, the variability of gold and silver values reported, including a large number of samples that returned no detectable gold values, suggests that security was adequate, and no attempt was made to alter the content of any of the samples taken.





Yura Technical Report Author’s sampling





No employee, officer, director, or associate of Zoro Mining Corporation was involved in the selection of samples to be taken by Mr. Hiner, involved with the collection of the samples taken by Mr. Hiner, or the preparation of the samples.





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The samples were sealed at the sample site and remained in Mr. Hiner’s possession.  The samples were stored in Mr. Hiner’s hotel room until they were sealed and taken by pickup truck to the Stiles office in Arequipa.  ALS Chemex personnel picked up the samples, packed and sealed the samples in a Chemex container, and delivered the samples to ALS Chemex in Lima. ALS Chemex is a certified assay laboratory under ISO 9001-2000.





ALS Chemex at Lima prepared the samples as follows:


1.
Dried the samples as necessary and crushed the samples to greater than 70% -2mm using a jaw crusher.


2.
A 500 gram split is obtained using a Jones Riffle Splitter and pulverized to greater than 85% -75 microns using standard ring and puck style pulverizing equipment.


3.
The sample is screened to separate -100mesh and +100mesh fractions.  Duplicate 50 gram fire assays analyses are done on undersize and oversize fractions.  Individual assays, calculated total weight, weight fractions, and total gold are reported.





Quality control procedures were employed by Mr. Hiner in the field for the samples collected to ensure that samples are representative of the material sampled.  ALS Chemex maintains a program of internal quality assurance and quality control to maintain and control precision, accuracy, and contamination.  These include the insertion of ALS geochemical standards and blanks into the sample analysis stream and duplicate analyses of both standards and client samples. Mr. Hiner relied on the laboratory’s quality control program to manage precision, reliability, and reproducibility.





It is Mr. Hiner’s opinion that sample preparation, security, and analytical procedures are adequate for this level of evaluation, but not for continuing exploration and resource evaluation.





Because sample size and nugget effect is probably going to be an ongoing laboratory issue, Mr. Hiner recommends taking as large a sample as is practical, and developing an analysis procedure with the selected lab to accommodate nugget gold problems.  Mr. Hiner has held additional discussions with ALS Chemex personnel in Lima and Vancouver regarding alternative procedures, as well as with metallurgical consultants in Reno, Nevada.  The general consensus, with no decision reached, is that other methods may work depending on the mode of gold occurrence.  Alternative methods suggested for consideration include bottle roll testing, column leaching, and utilization of gravity circuits to concentrate large samples prior to independent analysis.  Any method subsequently selected will depend on additional work to determine the habit and mode of occurrence of gold in the oxidized and mineralized zones of the Yura project.





Future programs to evaluate the Yura property should include development of a company-held geochemical standard, and utilization of blanks (geochemically inert material such as silica sand) inserted into the sample stream for submission to the laboratory to ensure and verify the precision and accuracy of the assay results, and to enable detection of contamination.





Data Verification





Geological information for the Yura property has been compiled from public and private sources and is dominantly of a geological and reconnaissance nature.





Mr. Hiner is not aware of any quality control measures that may have been used by Zoro geologists in their sampling programs, and none of the contract geologists used by Zoro in the prior programs were available for discussion.  Because pulps and rejects from the Zoro programs were not available, Mr. Hiner did not attempt to verify prior sample results using prior sample material.  Mr. Hiner conducted a check sample analysis at two sample locations at the Dolores prospect that were pointed out by one of the private vendors.  Mr. Hiner’s sample number and assay value are compared below with the Zoro assay number and result.




Check Sample Results


Author’s sample check
Au (g/t)
Zoro sample
Au (g/t)7021005
0.05
YEO 182
0.49610002
3.53
YEO 181
2.47





Check sample 7021005 was taken in a channel sample cut by Zoro geologists. The variability of grade is likely a function of the presence iron oxides and silicification, and variations in gold grade are suspected to be relative to the amount of iron oxide taken in the sample.





Check sample 61002 was taken in a small cut in the wall of the Dolores zone.  The granodiorite was not visibly altered, but the rock was shattered and iron oxide veinlets were numerous.  It is Mr. Hiner’s opinion that the variability in gold values is related to the density of iron oxide veinlets and the amount of iron oxides preferentially sampled.





At the Suzi prospect, Mr. Hiner attempted to reproduce a Zoro sample on the basis of matching UTM coordinates.  Sample 7021004 was taken at 199,934E 8,190,261N, which matches the coordinates of Zoro sample YEO 125. Mr. Hiner’s results for gold were 3.08 ppm, whereas Zoro sample reported 8.23 g/t.  Mr. Hiner’s sample was a 1m chip across a vein structure in a prospect pit, whereas the





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Zoro sample was a dump grab.  Mr. Hiner notes that his sample weight was 1.6kg versus Zoro’s sample weight of 10.26 kg.  The sample cannot be considered a duplicate, but both samples reported gold, and Mr. Hiner believes that large sample sizes are more reliable in coarse gold settings.  Whether or not the Zoro geologist selectively sampled the dump is unknown.





Mr. Hiner’s assay data was checked against field notes to ensure that there were no unusual inconsistencies between Mr. Hiner’s reported results and field observations.  Mr. Hiner is satisfied as to the adequacy of sample collection, handling, security, preparation and analytical procedures that have been carried out.





Mr. Hiner notes that gold in assays and gold in pans in his sample results indicates a high degree of variability.  In Mr. Hiner’s experience, it is common to have a high degree of variability in the reproducibility of gold assays, particularly where coarse gold is known to exist.





Mineral Processing and Metallurgical Testing





The property is at an early stage of exploration and no Mineral Processing or Metallurgical testing has been carried out.





Mineral Resource and Mineral Reserve Estimate





The property is at an early stage of exploration and no Mineral Resource or Mineral Reserve Estimates have been carried out.





Other Relevant Data and information





Mr. Hiner is not aware of any other relevant data or information on the Property other than as described in this report.





Interpretation and Conclusions





Regional-scale northwest-trending shear zones have been locally altered and mineralized.  Gold is hosted in quartz veins, veinlets, iron-oxide veinlets, and in potassically-altered and sheared granodiorite.  Shear zone widths and strike lengths are locally substantial and represent suitable targets for the discovery and development of gold mineralization.  Substantial boulder scree, talus and alluvium effectively mask the shear zones, rendering surface exploration difficult without mechanical explosure for evaluation purposes.  Thus, insufficient work has been done to determine size and grade potential of known zones, and additional work is required to determine the existence, if any, of additional zones with potential for hosting gold mineralization.





It is Mr. Hiner’s opinion that the Yura property merits additional evaluation of known zones, and continued exploration to determine the mineralization potential elsewhere on the property, for the following reasons:


·
Widespread prospecting activities have been restricted to areas of quartz vein outcrop or quartz vein surface debris, leaving substantial strike lengths that do no display quartz-veining unexplored


·
Widespread gold in multiple prospects suggests a substantial gold mineralizing event


·
Lengthy shear zones with widths from 1m to 50m or more represent sizeable targets


·
Significant boulder scree, talus, and alluvium cover that is largely unaltered does not reflect the underlying bedrock geology, shear zone locations and size, and mineral potential


·
Exploration to date by Zoro has concentrated on areas with known gold prospects


·
Property is situated in mining-friendly jurisdiction and title is secure


·
Access and infrastructure are good.  Climate and elevations are conducive to year-round operations


·
The association of gold with potassic alteration allows usage of geologic, geochemical, and remote sensing tools to guide exploration and target delineation.





It is evident from discussions with Zoro personnel and from Mr. Hiner’s results that the presence of coarse gold at Yura affects lab analyses and gold reproducibility.  Both Zoro geologists and Mr. Hiner encountered reproducibility variations, whereby gold seen in pan samples was not replicated in lab analyses.  In Mr. Hiner’s experience, high variability in gold analyses is common, but exacerbated by the presence and erratic distribution of coarse gold.  It is Mr. Hiner’s interpretation that this situation is likely to occur on a property-wide basis within the oxidized zones of mineralized shears.  Data are insufficient to predict variability of mineralization, if any, in unoxidized parts of mineralized shears.  Although nearly impossible to remove the effects of this variability, the statistical variance can be partially mitigated by taking large samples in the field, and by utilizing large sample charges in the lab.  A combination of metallics screening, bottle roll analysis, or column leaching using larger sizes may be necessary to improve analysis reproducibility.








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Recommendations





To develop existing targets and identify new zones, significantly more geologic and geochemical information is necessary.  The acquisition of sufficient information requires a multi-disciplinary approach involving the following actions:


1.      Geologic mapping and sampling of existing exposures, principally roadcuts and prospect pits


2.      Property-wide geochemical sampling to characterize the size and disposition of gold anomalies


3.      Structural and alteration analysis utilizing landsat and thematic imagery


4.      Trenching and new road construction in concert with additional geochemical sampling


5.      Structural analysis and geologic mapping in secondary detail using aerial photography


6.      Thin and polished section analysis of mineralized samples to determine mode of gold occurrence


7.      Collection of a sizeable sample (approximately 500kg) of mineralized material to determine a suitable analysis methodology for exploration samples





A budget for this phase 1 program is set out below.





If the integrated approach successfully indicates suitable and defensible drill targets, a second phase program of drilling is recommended.





Budget Estimate





The recommended exploration program at the Yura property is estimated at $384,450 for Phase 1 and $760,650 for Phase 2. The table below provides a breakdown of projected expenditures for the proposed geochemical and geophysical surveys, along with follow-up drilling.





Phase 1 Proposed Budget


Activity

Description
TotalGeologyGeologic Mapping

60days @ $700/day
$ 42,000Aerial photography detailed mapping

15days@$700/day
$ 10,500Landsite & thematic imagery analysis

Acq., analysis
$ 32,500Geochemistrycollection

2geos-120days@ $500
$ 60,000analysis

1500smpls@$50ea
$ 75,000Trenching & RoadsTrenching

30days@$125/hr
$ 30,000Roads

30days@$125/hr
$ 30,000Bulk SampleCollection

500kg est
$   2,500Analysis

Mult testwork est
$ 15,000LogisticsVehicles

Assume 3, 1500/mo*3
$ 13,500Food & Lodging

90days, 2geos, $125/day
$ 22,500Field Supplies

Estimate
$   5,500Office- report & target defin.

15days@$700/day
$ 10,500Subtotal


$349,50010%contingency


$  34,950Phase 1 total


$384,450





Phase 2 Proposed Budget


Activity

Description
TotalDrill ProgramDrill Mobilization Costs


$  25,000Core Drilling

5000 m’s x $100/m
$500,000Geological & supervision

60 days @ $700
$   42,000Analyses – rock

2,500 samples at $35/sample
$   87,500SupportMisc. supplies & materials

Estimate
$    5,000Food & Lodging, 2 personnel

Estimate 60 days @ $300/day
$  18,000Vehicles

Estimate 70 days @ $200/day
$  14,000Subtotal
$691,500Contingency @ 10%


$  69,150Total


$760,650








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Sierra Fritis Project, Atacama Region III, Chile.





Effective December 2, 2009, the Company exercised an Option for the acquisition from Sociedad Gareste Limitada (“Gareste”) of a 100% legal and beneficial interest in and to the Sierra Fritis Project, Harold Gardner, an officer and Director of the Company, is co-managing partner of Gareste.Under the Option (which also included the Piedra Parada project), we (i) issued an aggregate of 19,400,000 restricted shares of our common stock to the vending parties; (ii) agreed to pay or cause to be paid all underlying regulatory and governmental payments and assessment work required to keep the mineral property interests in good standing; and (iii) granted to Gareste a 2% net smelter return (“NSR”) royalty on the proceeds of any production from the Fritis property, capped at $6,000,000, one-half of which can be repurchased by the Company at any time before commencement of any production for the sum of $2,000,000.  The Fritis titles remain in Gareste currently pending completion of title transfers and notifications at the mining registry.





The Fritis property consists of 8 mineral exploration concessions covering approximately 2,400 hectares (5,930 acres), located roughly 40 kilometers to the south of Copiapó, Chile, via paved highway and improved roads, and at an elevation of 500 meters. These concessions appear to contain epithermal precious metals targets. The property was previously controlled by Teck-Cominco until mid-2009 when the concessions lapsed and were acquired by Gareste, who conducted a surface sampling program in late 2009.  Zoro has identified several areas at the concessions which could be the targets of future exploration efforts. However, the Company has no current exploration plans for the remainder of 2012 for the Sierra Fritis property.




Piedra Parada Project, Atacama Region III, Chile


Effective December 2, 2009, the Company exercised an Option for the acquisition from Gareste of interests in and to the Piedra Parada salar Project, Harold Gardner, an officer and Director of the Company, is co-managing partner of Gareste.Under the Option (which also included the Sierra Fritis project), we (i) issued an aggregate of 19,400,000 restricted shares of our common stock to the vending parties; (ii) agreed to pay or cause to be paid all underlying regulatory and governmental payments and assessment work required to keep the mineral property interests in good standing; and (iii) granted to Gareste a 2% net smelter return (“NSR”) royalty on the proceeds of any production from the Piedra Parada property, capped at $6,000,000, one-half of which can be repurchased by us at any time before commencement of any production for the sum of $2,000,000.  The Piedra Parada titles remain in Gareste currently pending completion of title transfers and notifications at the mining registry.





The project lies roughly 310 kilometers to the northeast of Copiapó, the capital of Region III, via paved highway and improved roads, and is at an elevation of over 4,000 meters. The 19 Piedra Parada property mineral exploration concessions cover a total of 3,600 hectares (8,895 acres) in a prototypical salar — a dry lake bed with inflow waters and subsurface brines. However, Gareste,the vendor at Piedra Parada, owned and conveyed to Zoro senior concession rights on only 2,100 hectares (5,189 acres), and also conveyed overstaked concessions on 1,500 additional hectares (3,706 acres) which are subject to the senior rights of a third party.





The rights to lithium, light metals and commercial salts (collectively, the “Lithium Materials”) in these concessions have been previously conveyed to a third-party, with Gareste retaining a 2% NSR royalty on Lithium Materials. In addition, this third partyis obligated to remit a payment of US$2,000 per month as a lease and rental remittance fee to maintain the Piedra Parada concessions through the exploration stage, which payments will increase to US$5,000 per month at such time as these concessions are converted to exploitation status.  In connection with the acquisition by Zoro, Gareste has conveyed the NSR and the rights to receive payments at Piedra Parada, and other attendant rights to Zoro.





Previous work by Gareste at the project in the 1990’s included surface and auger drill field testing and sampling of the sediments and inflow streams.  Zoro has targeted possible precious metals and platinum group metals exploration efforts relating to the inflow waters and the uplifted dry lake bed surface sediments. However, we have no current exploration plans for the remainder of 2012 for the Piedra Parada property.




PROPOSED FUTURE BUSINESS OPERATIONS





Our current strategy is to obtain sufficient funding to re-commence exploration activities on our core properties. We may consider further acquisitions of additional mineral opportunities which fall within the criteria of providing a geological basis for development of mining initiatives that can provide near term revenue potential and capital repatriation from production cash flows to create expanding reserves. We anticipate that our principal ongoing efforts, subject to adequate funding being available, will be focused on advancing the exploration status of several of our core projects to the level of development of legally reportable reserves.








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MATERIAL AGREEMENTS





Lease Agreement Guarantor





We have guaranteed the remaining lease term at previous premises previously occupied in Tucson. We are a guarantor of a lease agreement effective September, 1, 2007 that obligates us under conditions of default by a previously related party lessee (a company which had two directors in common with us), to pay for the entire lease relating the company’s Tucson office until the end of the lease term through January 31, 2011 or as amended or renewed. As at April 30, 2012, the gross value of the guarantee was $212,774. The lessee has defaulted on the lease and the lessee subsequently moved offices. The potential liability, if any, as a result of the lessee’s default due to joint and severable provisions relating to the lease guarantee is presently not determinable, and we have not been advised of the results, if any of negotiations by the lessee to settle this potential liability with the landlord.





Advisory and Capital Raise Services Agreements





On January 20, 2010 a vendor entered into a non-exclusive contract with Zoro to provide financing and capital markets advisory services with the goal of raising equity funding for Zoro. The term of the contract is from signing until January 31, 2011 and automatically renews in 90 day increments unless and until cancelled by either party. In consideration we agreed to pay the vendor a retainer fee of $10,000 plus 8% of any equity financing secured by the vendor. In the event the equity financing occurs with an entity introduced by certain excluded entities, the fee is reduced to 3%. In addition, we have agreed to issue the vendor share purchase warrants equal to 10% of the securities sold in such equity financing at a price of $0.70 and having an expiry date which is 3 years from the issue date. In the event the vendor secures debt financing, the fees paid to the vendor are as follows; 8% of the first $2,000,000, plus 6% of proceeds between, $2,000,001 and $7,000,000 if any, plus 4% of proceeds in excess of $7,000,000 if any. On March 10, 2011, we formally terminated this contract.





We have entered into an agreement dated October 11, 2010 with a consultant who will provide strategic planning, fund raising, and capital structuring advisory services for a term of nine months. In consideration for the services we will issue 200,000 shares of our common stock to the consultant, 100,000 of which will be delivered at the end of four months, and 100,000 of which will be delivered at the end of nine months. In addition, we will issue 200,000 options to the consultant to purchase our shares at such time as we have closed on at least $2 million in net proceeds attributable to the efforts of the consultant. In addition and subject to certain conditions, we will issue to the consultant 100,000 options to purchase our shares for every $1 million in additional net proceeds attributable to the efforts of the consultant. The shares were not issued as at April 30, 2012 due to a delay in starting the program.





On February 3, 2011, we entered into a non-exclusive contract with a different vendor to provide financing and share placement efforts with the goal of raising equity funding for us. The vendor was paid a retainer fee of $15,000, and for funds raised for us, was to receive a fee of 10% of cash raised, plus share purchase warrants equal to 10% of the securities sold in any equity financing.  On May 17, 2011, we formally terminated this contract.





On June 7, 2011, we entered into an exclusive contract with a different vendor, terminable on two month’s notice, to provide financing and share placement efforts with the goal of raising equity funding for us. In consideration we agreed to pay the vendor a retainer fee of $12,500, a monthly retainer of $7,000, plus 10% of the aggregate gross proceeds of any financing secured by the vendor. In addition, we agreed to issue the vendor share purchase warrants equal to 10% of the securities sold in such financing, on the same terms as the financing. On October 1, 2011, we provided notice of termination of this agreement to the vendor.





Investor Relations Consulting Agreement





Effective on August 23, 2010, our Board of Directors authorized August 17, 2010 as the Commencement Date and effectiveness of activities under an Investor Relations Consulting Agreement with Bravo International Services (“Bravo”.) Bravo’s services included the building our Company’s investment audience through the dissemination of corporate data packages, broker presentations, broker communications, mining analyst communications, attending trade shows and handling shareholder enquiries regarding the Company.  Under the Investor Relations Consulting Agreement, our Company was obligated to compensate Bravo $7,500 per month for nine (9) months from the Commencement Date and deliver Bravo Two Hundred Thousand (200,000) shares of the Company’s common stock.  On February 11, 2011, the Company terminated the Bravo contract for cause and has since commenced an arbitration under the rules of the American Arbitration Association against Bravo for breach of contract and fiduciary duties. On March 29, 2012 the arbitrator awarded the Company $80,000 in damages.





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ITEM 1.                        BUSINESS - continued
 
 Consulting Agreement
 
 On December 22, 2011, but having an effective date of September 26, 2011, we entered into a consulting agreement with Minex Ventures II, LLC (“Minex”), a Colorado limited liability company, whereby Minex will provide and perform for our benefit the following services: (i) assisting in the negotiation and facilitating the arrangements necessary to assemble the Yura Yebecahas Mining Project located in Arequipa, Peru (the “Yura Project”); (ii) assisting in the negotiation and facilitating a letter of intent with FormacionYura Exploracion S.A.C., Donald Stiles and South American Immobiliara S.A.C. for a joint venture on the Yura Project; (iii) assisting in the negotiation with the owners of the approximately 1,500 hectares of exploration concessions (specifically known as the “Fortuna Properties”) to have the Fortuna Properties placed into the Yura Project; (iv) assisting us with engaging qualified and experienced geologists and other experienced exploration personnel required for any exploration programs on the Yura Project; (v) assisting us with raising equity capital on terms acceptable to us and Minex; (vi) assisting in the identification of gold exploration projects in Peru which may enhance shareholder value for us; (vii) assisting in the negotiation of all proposed or potential joint venture and/or financing arrangements in connection with the ongoing development of our business; and (viii) assisting in and facilitating in the setting up of corporate alliances in Peru for us, or for any of our subsidiaries, as the case may be and as may be determined by us in our sole and absolute discretion, with potential and strategic business and financial partners for the purposes of our ongoing development and financing. In consideration for the services we will pay a consulting fee of $200,000 of which an initial $100,000 of the fee has already been paid to Minex prior to execution of the consulting agreement and a further $100,000 is to be paid to Minex on or before March 31, 2012 . As at April 30, 2012 $25,000 of this amount was owing to the consultant. The services to be provided under the consulting agreement have been substantially completed by December 31, 2011. A copy of the consulting agreement was attached as an Exhibit to our Form 10-Q filed with the SEC on March 21, 2012.





Corporate Services Agreement





On November 1, 2011, the Company entered into an agreement with West Peak Capital Corp. to provide administrative and investor relations services to the Company for a period of twelve (12) months. The Company agree to reimburse the party CAD$17,000per month. The agreement is cancellable by the Company with sixty (60) days written notice and by West Peak with ninety (90) days written notice.


COMPETITION




We operate in a highly competitive industry, competing with other mining and exploration mineral companies, and institutional and individual investors, which are actively seeking metal and mineral based exploration properties throughout the world together with the equipment, labor and materials required to exploit such properties. Many of our competitors have financial resources, staff and facilities substantially greater than ours. The principal area of competition is encountered in the financial ability to cost effectively acquire prime metal and minerals exploration prospects and then exploit such prospects. Competition for the acquisition of metal and minerals exploration properties is intense, with many properties available in a competitive bidding process in which we may lack technological information or expertise available to other bidders. Therefore, we may not be successful in acquiring and developing profitable properties in the face of this competition. No assurance can be given that a sufficient number of suitable metal and minerals exploration properties will be available for acquisition and development.




MINERAL EXPLORATION REGULATION




Our mineral exploration activities are, or will be, subject to extensive foreign laws and regulations governing prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, mine safety, toxic substances and other matters. Mineral exploration is also subject to risks and liabilities associated with pollution of the environment and disposal of waste products occurring as a result of mineral exploration and production. Compliance with these laws and regulations may impose substantial costs on us and will subject us to significant potential liabilities. Changes in these regulations could require us to expend significant resources to comply with new laws or regulations or changes to current requirements and could have a material adverse effect on our business operations.





Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations. Our activities may be subject to certain federal, state and local laws and regulations, relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations does not appear to have a future material effect on our operations or financial condition to date. Specifically, we may be subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. However, such laws and regulations, whether national or local, are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry and our current operations have not expanded to a point where either compliance or cost of compliance with environmental regulation is a significant issue for us. Costs have not been incurred to date with respect to compliance with environmental laws but such costs may be expected to increase with an increase in scale and scope of exploration.





47





ITEM 1.                        BUSINESS - continued
 
 Mineral exploration operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our business operations. Mineral exploration operations are subject to foreign, federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Mineral exploration operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use ofmining methods and equipment. Various permits from government bodies are required for mining operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, state, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may elect not to insure against due to prohibitive premium costs and other reasons. As of the date of this Annual Report, we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.





RESEARCH AND DEVELOPMENT ACTIVITIES





No research and development expenditures have been incurred, either on our account or sponsored by customers, during the past three years.





EMPLOYEES





Dr. David Hackman, our Vice President of Exploration, Frank Garcia, our Chief Financial Officer, and Harold Gardner, our interim CEO and President, Chief Operating Officer/Vice President of Business Development are primarily responsible for all of our day-to-day operations.  All services are provided by outsourcing, consultant and special purpose contracts.





ITEM 1A.                     RISK FACTORS





An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in evaluating our company and its business before purchasing shares of our common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are all of the material risks that we are currently aware of that are facing our company. Additional risks not presently known to us may also impair our business operations. You could lose all or part of your investment due to any of these risks.





Risks Related to Our Business





We will need to raise additional financing to complete further exploration.





We will require significant additional financing in order to continue our exploration activities and our assessment of the commercial viability of our mineral properties. Furthermore, if the costs of our planned exploration programs are greater than anticipated, we may have to seek additional funds through public or private share offerings or arrangements with corporate partners. There can be no assurance that we will be successful in our efforts to raise these require funds, or on terms satisfactory to us. The continued exploration of current and future mineral properties and the development of our business will depend upon our ability to establish the commercial viability of our mineral properties and to ultimately develop cash flow from operations and reach profitable operations. We currently are in the exploration stage and we have no revenue from operations and we are experiencing significant negative cash flow. Accordingly, the only other sources of funds presently available to us are through the sale of equity and debt instruments. Alternatively, we may finance our business by offering an interest in any of our future mineral properties to be earned by another party or parties carrying out further exploration and development thereof or to obtain project or operating financing from financial institutions, neither of which is presently intended. If we are unable to obtain this additional financing, we will not be able to continue our exploration activities and our assessment of the commercial viability of our mineral properties. Further, if we are able to establish that development of our mineral properties is commercially viable, our inability to raise additional financing at this stage would result in our inability to place our mineral properties into production and recover our investment. We may not discover commercially exploitable quantities of mineral on our properties that would enable us to enter into commercial production, and achieve revenues and recover the money we spend on exploration.





Our properties do not contain any known body of economic mineralization and there is no assurance that any exploration programs that we engage in will establish any economic mineralization, or resources or reserves.





Our mineral properties are in the exploration stage as opposed to the development stage. The known mineralization at these projects has not yet been determined, and may never be determined to be economic. We plan to conduct further exploration activities on our mineral properties, which future exploration may include the completion of feasibility studies necessary to evaluate whether commercial mineable mineral exists on any of our properties. There is a substantial risk that these exploration activities will not result in discoveries of commercially recoverable quantities of mineral. Any determination that our properties contain commercially recoverable quantities of mineral may not be reached until such time that final comprehensive feasibility studies have been concluded that establish that a potential mine is likely to be economical. There is a substantial risk that any preliminary or final feasibility studies carried out by us will not result in a positive determination that our mineral properties can be commercially developed.





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ITEM 1A.                     RISK FACTORS - continued





Our exploration activities on our mineral properties may not be commercially successful, which could lead us to abandon our plans to develop the property and our investments in exploration.





Our long-term success depends on our ability to establish commercially recoverable quantities of mineral on our properties that can then be developed into commercially viable mining operations. Mineral exploration is highly speculative in nature, involves many risks and is frequently non-productive. These risks include unusual or unexpected geologic formations, and the inability to obtain suitable or adequate machinery, equipment or labor. The success of mineral exploration is determined in part by the following factors:





·
identification of potential mineralization based on superficial analysis;




·
availability of government-granted exploration permits;




·
the quality of management and geological and technical expertise; and





·
the capital available for exploration.





Substantial expenditures are required to establish proven and probable reserves through drilling and analysis, to develop processes to extract the mineral, and to develop the mining and processing facilities and infrastructure at any chosen site. Whether a mineral deposit will be commercially viable depends on a number of factors, which include, without limitation, the particular attributes of the deposit, such as size, grade and proximity to infrastructure; mineral prices, which fluctuate widely; and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of mineral and environmental protection. We may invest significant capital and resources in exploration activities and abandon such investments if it is unable to identify commercially exploitable mineral reserves. The decision to abandon a project may reduce the trading price of our common stock and impair our ability to raise future financing. We cannot provide any assurance to investors that we will discover or acquire any mineralized mineral in sufficient quantities on any of our properties to justify commercial operations. Further, we will not be able to recover the funds that we spend on exploration if we are not able to establish commercially recoverable quantities of mineral on our properties.





Mineral prices may not support corporate profit.





Prices for certain minerals have been highly volatile, and are affected by numerous international economic and political factors over which we have no control. The prices of certain minerals have varied over the last four years. The prices of minerals are affected by numerous factors beyond our control, including the demand, increased supplies from both existing and new mines, sales of minerals from existing stockpiles, and political and economic conditions. Our long-term success is highly dependent upon the prices of certain minerals, as the economic feasibility of any ore body discovered on our properties would in large part be determined by the prevailing market price of mineral. If a profitable market does not exist, we could have to cease operations.





Our business is difficult to evaluate because we have a limited operating history.




In considering whether to invest in our common stock, you should consider that our inception was April 20, 2004, and, as a result, there is only limited historical financial and operating information available on which to base your evaluation of our performance.  In addition, we have only recently acquired our primary mineral exploration prospects located in South America with limited experience in early stage exploration efforts.





We have a history of operating losses and there can be no assurances we will be profitable in the future.





We have a history of operating losses, expect to continue to incur losses, and may never be profitable, and we must be considered to be in the exploration stage. Further, we have been dependent on sales of our equity securities and debt financing to meet our cash requirements. We have a net loss totaling approximately $24,901,446 from April 20, 2004 (inception) to April 30, 2012.  During the year ended April 30, 2012, we had no revenue and incurred a net loss of approximately $4,092,593.  We do not expect positive cash flow from operations in the near term. There is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that: (i) the costs to acquire additional mineral exploration claims are more than we currently anticipate; (ii) exploration and or future potential mining costs for additional claims increase beyond our expectations; or (iii) we encounter greater costs associated with general and administrative expenses or offering costs.








49






ITEM 1A.                     RISK FACTORS - continued





Future participation in an increased number of mineral exploration prospects will require substantial capital expenditures and possible equity dilution.





The uncertainty and factors described throughout this section may impede our ability to economically discover, acquire, develop and/or exploit mineral prospects. As a result, we may not be able to achieve or sustain profitability or positive cash flows from operating activities in the future.  In addition, acquisitions requiring capital may divert operating capital, necessitate the issuance of debt that may divert exploration budgets available, and or equity issuances that may dilute equity shareholdings.





The financial statements for the fiscal years ended April 30, 2012 and April 30, 2011 have been prepared assuming that the Company will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. Our ability to continue as a going concern is dependent on raising additional capital to fund our operations and ultimately on generating future profitable operations. There can be no assurance that we will be able to raise sufficient additional capital or eventually have positive cash flow from operations to address all of our cash flow needs. If we are not able to find alternative sources of cash or generate positive cash flow from operations, our business and shareholders will be materially and adversely affected.





We will require additional funding in the future. Our current levels of debt are high.




Based upon our historical losses from operations, we will require additional funding in the future. If we cannot obtain capital through financings or otherwise, our ability to execute our exploration programs will be greatly limited.  Historically, we have funded our operations through the issuance of equity and short-term debt financing arrangements. We may not be able to obtain additional financing on favorable terms, if at all. Our future cash flows and the availability of financing will be subject to a number of variables, including potential production and the market prices of mineral. Further, our current debt levels are approximately $2,700,000, which includes liabilities of $1,600,000 payable in capital stock, and existing and further debt financing could lead to a diversion of cash flow to satisfy debt-servicing obligations and create restrictions on business operations. If we are unable to raise additional funds, it would have a material adverse effect upon our operations.  Existing debt may at a future date be settled with equity causing dilution to existing shareholders.





As part of our growth strategy, we intend to acquire additional mineral exploration properties.





Such acquisitions may pose substantial risks to our business, financial condition, and results of operations. In pursuing acquisitions, we will compete with other companies, many of which have greater financial and other resources to acquire attractive properties. Even if we are successful in acquiring additional properties, some of the properties may not produce positive results of exploration, or we may not complete exploration of such prospects within specified time periods may cause the forfeiture of the lease in that prospect. There can be no assurance that we will be able to successfully integrate acquired properties, which could result in substantial costs and delays or other operational, technical, or financial problems. Equity may be issued as consideration for properties acquired and dilute equity holders interest in the Company.  Further, acquisitions could disrupt ongoing business operations and ongoing exploration initiatives. If any of these events occur, it would have a material adverse effect upon our operations and results from operations, and possibly the equity holdings of shareholders.





We are relatively a new entrant into the mineral exploration and development industry without profitable operating history.




Since inception, our activities have been limited to organizational efforts and obtaining working capital. It has only been since 2004 that our business operations and focus is on acquiring and developing a very limited number of properties. The business of mineral exploration and development is subject to many risks and if mineral is found in economic production quantities, the potential profitability of future possible mining ventures depends upon factors beyond our control, including, but not limited to: (i) unanticipated ground and water conditions and adverse claims to water rights; (ii) geological problems; (iii) metallurgical and other processing problems; (iv) the occurrence of unusual weather or operating conditions and other force majeure events; (v) lower than expected grades of mineral; (vi) accidents; (vii) delays in the receipt of or failure to receive necessary government permits; (viii) delays in transportation; (ix) labor disputes; (x) government permit restrictions and regulation restrictions; (xi) unavailability of materials and equipment; and (xii) the failure of equipment or processes to operate in accordance with specifications or expectations.





The risks associated with exploration and development and, if applicable, mining could cause personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability.


We are not currently engaged in mining operations because we are in the exploration phase and have not yet any proven mineral resources or proven mineral reserves. We do not presently carry property and liability insurance. Cost effective insurance contains exclusions and limitations on coverage and may be unavailable in some circumstances. The Company relies on operating arrangements in countries of in which it conducts exploration activities.





50




ITEM 1A.                     RISK FACTORS - continued





The mineral exploration and mining industry is highly competitive and there is no assurance that we will be successful.


The mineral exploration and mining industry is intensely competitive, and we compete with other companies that have greater resources. Many of these companies not only explore for and produce mineral, but also market mineral and other products on aregional, national or worldwide basis. These companies may be able to pay more for productive mineral properties and exploratory prospects or define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. In addition, these companies may have a greater ability to continue exploration activities during periods of low mineral market prices. Our larger competitors may be able to absorb the burden of present and future foreign, federal, state, local and other laws and regulations more easily than we can, which would adversely affect our competitive position. Our ability to acquire additional properties and to discover productive prospects in the future will be dependent upon our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. In addition, because we have fewer financial and human resources than many companies in our industry, we may be at a disadvantage in bidding for exploratory prospects and producing mineral properties.


The marketability of minerals will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.





The marketability of minerals which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include macroeconomic factors, market fluctuations in commodity pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of mineral and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.





Mineral mining operations are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated, causing an adverse effect on our business operations.





If economic quantities of mineral is found by us in sufficient quantities to warrant mining operations, such mining operations are subject to foreign, federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Mineral mining operations are also subject to foreign, federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of mining methods and equipment. Various permits from government bodies are required for mining operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus resulting in an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend material amounts on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.




Mineral exploration and development and mining activities are subject to certain environmental regulations, which may prevent or delay the commencement or continuance of our operations.




Mineral exploration and development and future potential mineral mining operations are or will be subject to stringent federal, state, provincial, and local laws and regulations relating to improving or maintaining environmental quality. Our global operations are also subject to many environmental protection laws. Environmental laws often require parties to pay for remedial action or to pay damages regardless of fault. Environmental laws also often impose liability with respect to divested or terminated operations, even if the operations were terminated or divested of many years ago.





Future potential mineral mining operations and current exploration activities are or will be subject to extensive laws and regulations governing prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, mine safety, toxic substances and other matters. Mineral mining is also subject to risks and liabilities associated with pollution of the environment and disposal of waste products occurring as a result of mineral exploration and production. Compliance with these laws and regulations will impose substantial costs on us and will subject us to significant potential liabilities.








51




ITEM 1A.                     RISK FACTORS - continued





Costs associated with environmental liabilities and compliance may increase with an increase in future scale and scope of operations.





We believe that our operations currently comply, in all material respects, with all applicable environmental regulations. However, we are not insured at the current date against possible environmental risks.





Any change in government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.





The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in any applicable jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter our ability to carry on business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitability.





We may be unable to retain key employees or consultants or recruit additional qualified personnel.





Our extremely limited personnel means that we would be required to spend significant sums of money to locate and train new employees in the event any of our employees resign or terminate their employment with us for any reason. Due to our limited operating history and financial resources, we are entirely dependent on the continued service of David Hackman, our Vice President of Exploration and a director, Frank Garcia, our Chief Financial Officer, and Harold Gardner, our interim Chief Operating Officer and President, and Chief Operating Officer, Vice President of Business Development and a director. Further, we do not have key man life insurance on any of these individuals. We may not have the financial resources to hire a replacement if any of our officers were to die or resign.  The loss of service of any of these employees could therefore significantly and adversely affect our operations.





Our officers and directors may be subject to conflicts of interest.





Our officers and directors serve only part time and may subject to conflicts of interest based on their other business endeavors. Each of our executive officers and directors devotes part of his working time to other business endeavors, including consulting relationships with other corporate entities, and has responsibilities to these other entities.  Because of these relationships, our officers and directors may be subject to conflicts of interest, including deciding how much time to devote to our affairs, as well as what business opportunities should be presented to us.





In particular, we note that the following officers and directors of our Company are also officers and directors of Pacific Copper Corp., another exploration stage mining company with interests in Chile and Peru:  (i) David Hackman, our Vice President of Exploration and a director, is President, Chief Executive Officer and a director of Pacific Copper; and (ii) Harold Gardner, our interim Chief Executive Officer and President, and Chief Operating Officer, Vice President of Business Development and a director, is a director of Pacific Copper.  In addition, the following officers and directors of our Company are also officers and directors of Pan American Lithium Corp., an exploration stage mining company with interests in Chile, and Titan Iron Ore Corp.:  (i) David Hackman is Vice President, Exploration of PanAmerican Lithium and Titan Iron Ore, and (ii) Frank Garcia, our Chief Financial Officer, is also Chief Financial Officer of Pan American Lithium and Titan Iron Ore.  Our Company, Pacific Copper and Pan American Lithium enjoy administrative synergies as these companies share facilities and staff in the United States as well as South America.  Management’s view is that there are minimal, if any, potential conflicts in terms of corporate opportunities between our Company and these other companies because our Company’s focus is gold exploration whereas Pacific Copper’s focus is copper exploration, Pan American Lithium’s focus is lithium exploration and Titan Iron Ore’s focus is iron ore exploration.  As such, we do not have any formal protocols in place to address potential conflicts in terms of corporate opportunities.





Nevada law and our articles of incorporation may protect our directors from certain types of lawsuits.




Nevada law provides that our officers and directors will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as officers and directors. Our Bylaws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances.





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ITEM 1A.                     RISK FACTORS - continued





Risks Related to Our Common Stock




The trading price of our common stock on the OTC Bulletin Board will fluctuate significantly and stockholders may have difficulty reselling their shares.




As of the date of this Annual Report, our common stock trades on the OTCQB operated by OTC Markets Group. There is a volatility associated with OTCQB securities in general and the value of your investment could decline due to the impact of any of the following factors upon the market price of our common stock: (i) disappointing results from our discovery or development efforts; (ii) failure to meet our revenue or profit goals or operating budget; (iii) decline in demand for our common stock; (iv) downward revisions in securities analysts’ estimates or changes in general market conditions; (v) technological innovations by competitors or in competing technologies; (vi) lack of funding generated for operations; (vii) investor perception of our industry or our prospects; and (viii) general economic trends.




In addition, stock markets have experienced price and volume fluctuations and the market prices of securities have been highly volatile. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock.  As a result, investors may be unable to sell their shares at a fair price and you may lose all or part of your investment.





Additional issuance of equity securities may result in dilution to our existing stockholders.





Our Articles of Incorporation authorize the issuance of 180,000,000 shares of common stock.  Common stock is our only authorized class of stock. The board of directors has the authority to issue additional shares of our capital stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price of the outstanding shares of our common stock. If we do issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance could result in a change of control.





Our common stock is classified as a “penny stock” under SEC rules which limits the market for our common stock.





The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for stock that becomes subject to those penny stock rules. If a trading market for our common stock develops, our common stock will probably become subject to the penny stock rules, and shareholders may have difficulty in selling their shares.





A majority of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.





A majority of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on our directors or officers, or enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them. In addition, investors may not be able to commence an action in a Canadian court of the courts of any other relevant country predicated upon the civil liability provisions of the securities laws of the United States.





ITEM 1B.                     UNRESOLVED STAFF COMMENTS





Not applicable because we are not an accelerated filer or a large accelerated filer.





53





ITEM 2.                        PROPERTIES




We occupy and pay an allocable share of principal office space located at 3040 North Campbell Avenue, #110, Tucson, Arizona, 85719. The office space is for corporate staging of South American exploration activities, administration, bookkeeping, mailing, and courier purposes and costs us approximately $1,000 monthly. The offices are shared with Pacific Copper Corp., a Delaware public corporation (“Pacific Copper”), Pan American Lithium Corp. a British Columbia public company (“Pan American”) and Titan Iron Ore Corp., a Nevada public corporation.





Our contractual operator in Chile, Sociedad Gareste Limitada, also occupies operating offices in Chile, the costs of which are shared with Pacific Copper and Pan American in order to decrease overall expenditures in areas of similar operation.  Certain of our directors and management are also officers, directors and management of Pacific Copper, Pan American and Titan Iron Ore.  See “Item 12. Certain Relationships and Related Transactions and Director Independence.”





We have guaranteed the remaining lease term at previous premises previously occupied in Tucson.  The Company is a guarantor of a lease agreement effective September, 1, 2007 that obligates the Company under conditions of default by a previously related party lessee (a company which had two directors in common with the Company), to pay for the entire lease relating to the Company’s Tucson office until the end of the lease term through October 31, 2010 or as amended or renewed.  As at April 30, 2012, the gross value of the guarantee was $212,774.  The lessee has defaulted on the lease and the lessee subsequently moved offices. The potential liability, if any, as a result of the lessee’s default due to joint and severable provisions relating to the lease guarantee is presently not determinable, and the Company has not been advised of the results, if any of negotiations by the lessee to settle this potential liability with the landlord.





For a description of our mineral property interests, please see Item 1 above.





ITEM 3.                        LEGAL PROCEEDINGS





Management is not aware of any legal proceedings contemplated by any governmental authority or any other party involving us or our properties. As of the date of this Annual Report, no director, officer or affiliate is (i) a party adverse to us in any legal proceeding, or (ii) has an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against us or our properties.





ITEM 4.                        MINE SAFETY DISCLOSURES





Not applicable.





PART II




ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES





MARKET FOR COMMON EQUITY





Shares of our common stock commenced trading on the OTC Bulletin Board under the symbol “ZORO:OB” on approximately February 12, 2007. On April 22, 2009, the Company’s trading symbol changed to “ZORM:OB” in connection with a 20:1 reverse share split, and currently trades under the symbol “ZORM.QB” on the OTCQB Exchange.  The market for our common stock is limited, and can be volatile. The following table sets forth the high and low bid prices relating to our common stock on a quarterly basis for the periods indicated as quoted by the OTC Bulletin Board, adjusted to give effect to our April 22, 2009 reverse stock split. These quotations reflect inter-dealer prices without retail mark-up, mark-down, or commissions, and may not reflect actual transactions.


Month Ended
High Bid
Low BidApril 30, 2012
0.24
0.15January 31, 2012
0.39
0.14October 31, 2011
0.28
0.07July 31, 2011
0.29
0.09April 30, 2011
0.35
0.19January 31, 2011
0.37
0.15October 31, 2010
0.55
0.25July 31, 2010
0.70
0.21





As of July 27, 2012, we had 177 shareholders of record, which does not include shareholders whose shares are held in street or nominee names.





54








ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES - continued





DIVIDEND POLICY





No dividends have ever been declared by the Board of Directors on our common stock. Our losses do not currently indicate the ability to pay any cash dividends, and we do not indicate the intention of paying cash dividends either on our common stock in the foreseeable future.





SECURITIES AUTHORIZED FOR ISSUANCE UNDER COMPENSATION PLANS





We have one equity compensation plan, the Zoro Mining Corp. 2008 Stock Incentive Plan (the “2008 Plan”). The table set forth below presents information relating to our equity compensation plans as of the date of April 30, 2012:





Plan Category

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights

(a)


Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights

(b)


Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding column (a))Equity Compensation Plans Approved by Security Holders


-0-



-0-



-0-Equity Compensation Plans Not Approved by Security Holders2008 Stock Option Plan


-0-



n/a



3,646,899
*Total


-0-



--



3,646,899*
Available shares based upon 15% of the total issued and outstanding of 57,645,991 shares of common stock as of April 30, 2012 less the 5,0000,000 restricted stock awards that were issued on August 29, 2011.





2008 Stock Incentive Plan





On February 7, 2008, our Board of Directors authorized and approved the adoption of the 2008 Plan effective February 7, 2008, under which the maximum aggregate number of shares which may be issued pursuant to all awards under the 2008 Plan is 15% of the issued and outstanding common shares and the maximum aggregate number of shares that may be granted in the form of incentive stock options is 10,000,000.





The purpose of the 2008 Plan is to enhance our long-term stockholder value by offering opportunities to our directors, officers, employees and eligible consultants to acquire and maintain stock ownership in order to give these persons the opportunity to participate in our growth and success, and to encourage them to remain in our service.





The 2008 Plan is to be administered by our Board of Directors or a committee appointed by and consisting of one or more members of the Board of Directors, which shall determine (i) the persons to be granted Stock Options under the 2008 Plan; (ii) the number of shares subject to each option, the exercise price of each Stock Option; and (iii) whether the Stock Option shall be exercisable at any time during the option period up to ten (10) years or whether the Stock Option shall be exercisable in installments or by vesting only. The 2008 Plan provides authorization to the Board of Directors to grant Stock Options to purchase a total number of shares of Common Stock of the Company, not to exceed 15% of the issued and outstanding shares of common stock and an aggregate if 10,000,000 shares in the form of incentive stock options. At the time a Stock Option is granted under the 2008 Plan, the Board of Directors shall fix and determine the exercise price at which shares of our common stock may be acquired.


In the event an optionee ceases to be employed by or to provide services to us for reasons other than cause, retirement, disability or death, any Stock Option that is vested and held by such optionee generally may be exercisable within up to ninety (90) calendar days after the effective date that his position ceases, and after such 90-day period any unexercised Stock Option shall expire. In the event an optionee ceases to be employed by or to provide services to us for reasons of retirement, disability or death, any Stock Option that is vested and held by such optionee generally may be exercisable within up to one-year after the effective date that his position ceases, and after such one-year period any unexercised Stock Option shall expire.





55





ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES - continued
 
 No Stock Options granted under the Stock Option Plan will be transferable by the optionee, and each Stock Option will be exercisable during the lifetime of the optionee subject to the option period up to ten (10) years or limitations described above. Any Stock Option held by an optionee at the time of his death may be exercised by his estate within one (1) year of his death or such longer period as the Board of Directors may determine.





The exercise price of a Stock Option granted pursuant to the 2008 Plan shall be paid in full to us by delivery of consideration equal to the product of the Stock Option in accordance with the requirements of the Nevada Revised Statutes. Any Stock Option settlement, including payment deferrals or payments deemed made by way of settlement of pre-existing indebtedness may be subject to such conditions, restrictions and contingencies as may be determined.





Incentive Stock Options




The 2008 Plan further provides that, subject to the provisions of the Stock Option Plan and prior shareholder approval, the Board of Directors may grant to any key individuals who are our employees eligible to receive options, one or more incentive stock options to purchase the number of shares of common stock allotted by the Board of Directors (the “Incentive Stock Options”). The option price per share of common stock deliverable upon the exercise of an Incentive Stock Option shall be at least 100% of the fair market value of the common shares of the Company, and in the case of an Incentive Stock Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of our stock, shall not be less than 100% of the fair market value of our common shares. The option term of each Incentive Stock Option shall be determined by the Board of Directors, which shall not commence sooner than from the date of grant and shall terminate no later than ten (10) years from the date of grant of the Incentive Stock Option, subject to possible early termination as described above.





As of the date of this Annual Report, no Stock Options have been granted under the 2008 Plan.





RECENT SALES OF UNREGISTERED SECURITIES





On August 29, 2011, we issued in aggregate of 5,000,000 shares of our common stock to four of our officers and/or directors under our 2008 Stock Incentive Plan valued at $450,000 based on a closing price of $0.09 per share at the time of the restricted stock agreements. We believe that the issuances are exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, as the offer and sale of securities did not involve a public offering.





On October 5, 2011, we issued 6,543,114 shares of our common stock to three individuals, which are related parties, pursuant to Settlement Agreements with respect to the conversion of outstanding debts owed to such related parties in the aggregate amount of $1,090,737 at a price of $0.10 per share. We believe that the issuances are exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, as the offer and sale of securities did not involve a public offering.





One December 13, 2011, we accepted twelve subscription agreements and issued an aggregate of 7,866,666 units of our company to twelve investors at a price of $0.15 per unit for gross proceeds of $1,180,000. Each unit is comprised of one share of our common stock and one half of one share purchase warrant. One whole share purchase warrant is exercisable into one share of our common stock at an exercise price of $0.25 per share until December 13, 2013.  We issued the securities to six non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in which we relied on the registration exemption provided for in Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended.





On February 9, 2012, we issued 100,000 shares of our common stock to a consultant as settlement related to a cancelled contract whereby an agreed amount owing to the consultant of $22,000 was converted at a price of $0.22 per share. We relied on exemptions from registration under the Securities Act provided by Rule 903 of Regulation S as the shares were issued to non-U.S. persons through an offshore transaction which was negotiated and consummated outside of the United States.


On May 29, 2012, we accepted seven subscription agreements and issued an aggregate of 1,943,334 units of our company to seven investors at a price of $0.15 per unit for gross proceeds of $291,500.05. Each unit is comprised of one share of common stock and one half of one share purchase warrant. One whole share purchase warrant is exercisable into one share of common stock at an exercise price of $0.25 per share until May 29, 2014.  We issued the securities to one non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933, as amended) in which we relied on the registration exemption provided for in Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended.




During the year, the Company issued 1,067,312 shares of the Company’s common stock to the holder of a $42,500 convertible note who exercised the conversion right in four separate conversions.
 
 On February 27, 2012 the Company engaged a consultant to perform certain services in exchange for 98,041 shares of the Company's common stock. The value of the services associated with the stock issuance was valued at the trading price of $0.17 on the date the shares were issued. The Company recorded an investor relations expense of $16,667.





56





ITEM 6.                       SELECTED FINANCIAL DATA




We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.





ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS





The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Annual Report, particularly in the section entitled “Risk Factors”. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.





We are an exploration stage company and have not generated any revenue to date. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.


RESULTS OF OPERATION




Fiscal Year Ended April 30, 2012 Compared to Fiscal Year Ended April 30, 2011.




During fiscal year ended April 30, 2012, we incurred expenses of $4,106,520 compared to $1,944,660 incurred during fiscal year ended April 30, 2011 (an increase of $2,161,860). These operating expenses incurred during fiscal year ended April 30, 2012 consisted of: (i) depreciation of $56,952 (2011: $58,289); (ii) filing and transfer agent fees of $20,976 (2011: $17,075); (iii) interest expense of $70,330 (2011: $95,347); (iv) investor relations costs of $42,200 (2011:  $213,574); (v) management and administration fees of $692,580 (2011: $556,256); (vi) mineral exploration costs of $2,507,779 (2011: $717,553); (vii) office and general costs of $77,291 (2011: $175,283); (viii) professional fees of $188,409 (2011: $111,283); and (ix) salaries and consulting fees of $450,000 (2011: $Nil), impairment of mineral property costs of $3 (2011: $Nil)


Expenses incurred during fiscal year ended April 30, 2012 compared to fiscal year ended April 30, 2011 increased primarily due to the substantial increase in mineral exploration costs, management and administration fees, professional fees, and salaries and consulting fees.





In addition to expenses incurred during fiscal year ended April 30, 2012 of $4,106,520, we recorded a derivative loss of $9,415, a gain on settlement of debt of $47,946 and impairment of mining equipment of $24,604 resulting in a net loss of $4,092,593 (2011 - $1,993,389).





The weighted average number of shares outstanding was 47,165,173 for fiscal year ended April 30, 2012 compared to 28,637,695 for fiscal year ended April 30, 2011.





LIQUIDITY AND CAPITAL RESOURCES





Fiscal Year Ended April 30, 2012





As at fiscal year ended April 30, 2012, our current assets were $15,657 and our current liabilities were $2,726,815, which resulted in a working capital deficit of ($2,711,158). As at fiscal year ended April 30, 2012, current assets were comprised of cash in the amount of $9,181 and $6,476 in other receivables.  As at fiscal year ended April 30, 2012, current liabilities were comprised of: (i) $200,000 in convertible notes, (ii) $717,280 in accounts payable and accrued liabilities; (iii) $24,649 in promissory notes payable; (iv) $1,600,000 in liabilities payable in capital stock; and (v) $184,886 in debt due to related parties.


As at April 30, 2012, our total assets were $15,662 (2011 - $171,137) comprised of: (i) $15,657 in current assets as described above; and (ii) $5 in valuation of mineral properties.





As at April 30, 2012, our total liabilities were $2,726,815 (2011 - $1,941,215) comprised of $2,726,815 in current liabilities as described above. The increase in liabilities during fiscal year ended April 30, 2012 from fiscal year ended April 30, 2011 was primarily due to an increase in liabilities payable in capital stock which substantially offset the decrease in accounts payable and accrued liabilities and amounts due to related parties.





Total Stockholders’ deficiency increased from $1,770,078 for fiscal year ended April 30, 2011 to $2,711,153 for fiscal year ended April 30, 2012.







57




ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS - continued





Net Cash Used in Operating Activities




We have not generated positive cash flows from operating activities. For fiscal year ended April 30, 2012, net cash flows used in operating activities was $1,573,461 compared to $320,378 for fiscal year ended April 30, 2011. Cash flows used in operating activities for fiscal year ended April 30, 2012 consisted primarily of a net loss of ($4,092,593) adjusted by: (i) $24,604 in impairment of equipment; (ii) $9,415 in adjustment to fair value of derivative instruments; (iii) $12,145 in amortization of debt discount; (iv) $56,952 in depreciation; (v) $488,667 in shares issued for services; and (vi) ($47,946) in gain on settlement of debt.  Net cash flows used in operating activities were further changed by: (i) a decrease of $1,937 in other receivables and prepaid expenses; (ii) an increase of $411,116 due to related parties; and (iii) an increase of $1,562,239 in accounts payable and accrued liabilities.


Net Cash Provided by Investing Activities





For fiscal year ended April 30, 2012, net cash flows provided by investing activities was $Nil compared to $Nil for fiscal year ended April 30, 2011.





Net Cash from Financing Activities





We have financed our operations primarily from either advances or the issuance of equity and debt instruments. For fiscal year ended April 30, 2012, net cash flows provided from financing activities was $1,501,481 compared to $366,749 for fiscal year ended April 30, 2011. Cash flows from financing activities for fiscal year ended April 30, 2012 consisted of: (i) $1,501,481 in proceeds from common stock issuances and subscriptions.





We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities, debt instruments, and related party loans. Our working capital requirements are expected to increase in line with our planned growth of our business.





PLAN OF OPERATION AND FUNDING




Our plan of operations for the next twelve months is to focus on the exploration of our Don Beno, Escondida and Yura properties, as described above under Item 1.  In particular, we intend to pursue the recommended Phase I exploration programs. We anticipate that we will require approximately $1,720,000 for our plan of operations over the next twelve months, as follows:




(a)
approximately $720,000 in the aggregate for the Phase I exploration programs at each of the Don Beno, Escondida and Yura properties; and




(b)
approximately $1,000,000 for management and administration fees, professional fees, and other general expenses over the next twelve months.




At April 30, 2012, we had cash of $9,181 and a working capital deficit of $2,711,158. During the twelve month period following the date of this report, we anticipate that we will not generate any revenue. Accordingly, we will be required to obtain additional financing in order to pursue our plan of operations for and beyond the next twelve months.  Management anticipates that further advances and debt instruments, and equity private placements will be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity to third parties, and debt instruments from related and non-related parties.  There are no material covenants or similar provisions in the Company’s existing debt arrangements that would inhibit our ability to raise capital.




We cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or otherwise to fund our exploration program going forward. In the absence of such financing, we will not be able to continue exploration of our mineral claims and our business plan may fail. Even if we are successful in obtaining financing to fund our exploration program, there is no assurance that we will obtain the funding necessary to pursue any advanced exploration of our mineral claims.  If we do not continue to obtain additional financing, we will be forced to abandon our mineral claims and our plan of operations.








58




ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS - continued





MATERIAL COMMITMENTS




As of the date of this Annual Report, and our obligations under the Mineral Property Acquisition Agreements, as discussed above under Item 1. Business – Mineral Property Acquisition Agreements, and the agreements discussed below summarize our material commitments.




Related Party Arrangements





We participated in a cost sharing arrangement with several other public companies.  Pacific Copper Corp. (with two directors in common with us) and Pan American Lithium Corp. (one director and two officers in common) who indirectly share South American operating offices, and in Arizona also with Titan Iron Ore Corp. The expenditures relate to shared exploration staging and administration in similar operating areas of Chile and Peru including shared site offices in each country, and in the United States. During the fiscal year ended April 30, 2009, a total of $430,000 was advanced to us from Pacific Copper Corp. secured by non-interest bearing promissory notes of which $Nil was owing as at April 30, 2012 (April 30, 2011: $79,129).





During the fiscal year ended April 30, 2012, we incurred a total of $90,000 (2011: $90,000) to a director and officer of Zoro for management of South American exploration with such costs recorded as administrative costs.  As of April 30, 2012, an aggregate of $115,420 (April 30, 2011: $405,696) was owed to this director for unpaid fees and reimbursement of expenses.





During the fiscal year ended April 30, 2012, we incurred a total of $114,461 (2011: $141,377) to a director and officer of Zoro for management services with respect to the administration of Zoro.  As if April 30, 2012, an aggregate of $37,837 (April 30, 2011: $134,929) was owed to this director and officer for unpaid services and reimbursement of expenses.





During the fiscal year ended April 30, 2012, we paid an officer of Zoro $25,475 (2011: $47,906) for administrative services.





During the fiscal year ended April 30, 2012, we incurred a total of $225,804 (2011 - $232,464) to a private Chilean company that provides exploration services to us in Chile via an operator agreement, and has a director in common, of which $18,704 was owing at April 30, 2012 (April 30, 2011 - $139,754 ) with such costs recorded as exploration costs in Chile, South America.





During the fiscal year ended April 30, 2012, we paid an officer of Zoro $30,399 (2011: $51,687) for accounting services.





During the fiscal year ended April 30, 2012, we incurred to a company managed by an officer and director $30,000 (2011: $15,000) for administrative services.  As of April 30, 2012, an aggregate of $12,925 (April 30, 2011: $Nil) was owed to this company for unpaid services and unreimbursed expenses.





During the fiscal year ended April 30, 2012, we issued 5,000,000 shares of common stock under restricted share agreements to various officers and directors: 2,000,000 shares were issued to a director and officer; 2,000,000 shares were issued to a former officer and director; and 500,000 shares were issued each to two officers.
 
 During the fiscal year ended April 30, 2012, we issued an aggregate of 6,543,114 shares of common stock to various officers and directors  in exchange for retirement of debts owed by the Company in the aggregate amount of $1,090,736 and at a negotiated price of $0.1667 per share.  At the time of the issuance the common shares of the Company were trading at $0.10 per share and at a market value of $654,311 note 8).  Therefore, the Company recorded a gain in additional paid in capital of $436,425.





$42,500 Convertible Note




On February 14, 2011, the Company for consideration received issued to a third-party a $42,500 8% convertible note with a term to November 16, 2011 (the “Maturity Date”). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock beginning six months after the issuance date, at the holder’s option, at a 58% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the closing date through 60 days thereafter, (ii) 135% if prepaid 61 days following the closing through 90 days following the closing, (iii) 140% if prepaid 91 days following the closing through 120 days following the closing, (iv) 150% if prepaid 121 days following the closing through 180 days following the closing, and (v) 175% if prepaid 181 days following the closing through the maturity date. The terms of the convertible note provide for certain redemption features which include features indexed to equity risks. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest (the “default put”).




Between August 18, 2011 and September 23, 2011, the holder of the $42,500 convertible note converted the entire principal amount into 1,067,312 shares of common stock.




Promissory Notes





During the fiscal year ended April 30, 2012, the Company borrowed $20,000 at 8% interest from an unrelated party.  At April 30, 2012 the balance owing including the interest was $24,649 (April 30, 2011: $21,997).








59





ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS - continued





Lease Agreement Guarantor





We have guaranteed the remaining lease term at previous premises previously occupied in Tucson.  The Company is a guarantor of a lease agreement effective September, 1, 2007 that obligates the Company under conditions of default by a previously related party lessee (a company which had two directors in common with the Company), to pay for the entire lease relating to the Company’s Tucson office until the end of the lease term through January 31, 2011, or as amended or renewed.  As at April 30, 2012, the gross value of the guarantee was $212,774.  The lessee has defaulted on the lease and the lessee subsequently moved offices. The potential liability, if any, as a result of the lessee’s default due to joint and severable provisions relating to the lease guarantee is presently not determinable, and the Company has not been advised of the results, if any of negotiations by the lessee to settle this potential liability with the landlord.




Advisory and Capital Raise Services Agreements




On January 20, 2010 a vendor entered into a non-exclusive contract with the Company to provide financing and capital markets advisory services with the goal of raising equity funding for the Company. The term of the contract is from signing until January 31, 2011 and automatically renews in 90 day increments unless and until cancelled by either party. In consideration the Company agreed to pay the vendor a retainer fee of $10,000 plus 8% of any equity financing secured by the vendor. In the event the equity financing occurs with an entity introduced by certain excluded entities, the fee is reduced to 3%. In addition, the Company has agreed to issue the vendor share purchase warrants equal to 10% of the securities sold in such equity financing at a price of $0.70 and expiry date which is 3 years from the issue date. In the event the vendor secures debt financing, the fees paid to the vendor are as follows; 8% of the first $2,000,000, plus 6% of proceeds between, $2,000,001 and $7,000,000 if any, plus 4% of proceeds in excess of $7,000,000 if any.  On March 10, 2011, the Company formally terminated this contract.




The Company has entered into an agreement dated October 11, 2010 with a consultant who will provide strategic planning, fund raising, and capital structuring advisory services for a term of nine months. In consideration for the services the company will issue 200,000 shares of its commons stock to the consultant, 100,000 of which will be delivered at the end of four months, and 100,000 of which will be delivered at the end of nine months. In addition the Company will issue 200,000 options to the consultant to purchase Company shares at such time as the company has closed on at least $2 million in net proceeds attributable to the efforts of the consultant. In addition and subject to certain conditions, the Company will issue to the consultant 100,000 options to purchase Company shares for every $1 million in additional net proceeds attributable to the efforts of the consultant.  The shares were not issued as at April 30, 2012 due to a delay in starting the program.




On February 3, 2011, the Company entered into a non-exclusive contract with a different vendor to provide financing and share placement efforts with the goal of raising equity funding for the Company. The vendor was paid a retainer fee of $15,000, and for funds raised for the Company, was to receive a fee of 10% of cash raised, plus share purchase warrants equal to 10% of the securities sold in any equity financing, On May 17, 2011, the Company formally terminated this contract.




On June 7, 2011, the Company entered into an exclusive contract with a different vendor, terminable on two month’s notice, to provide financing and share placement efforts with the goal of raising equity funding for the Company. In consideration the Company agreed to pay the vendor a retainer fee of $12,500, a monthly retainer of $7,000, plus 10% of the aggregate gross proceeds of any financing secured by the vendor. In addition, the Company agreed to issue the vendor share purchase warrants equal to 10% of the securities sold in such financing, on the same terms as the financing.  On October 1, 2011, we provided notice of termination of this agreement to the vendor.




Property Acquisition Agreements




On September 23, 2009, the Company entered into a Mineral Assets Option Agreement (the “Option”) with Sociedad Gareste Limitada (“Gareste”) and other vendors, for the proposed acquisition by Zoro of the Piedra Parada and Fritis precious metals projects located in Chile’s Atacama Region III.  Harold Gardner, an officer and Director of the Company, is co-managing partner of Gareste.Effective December 2, 2009, the Company exercised the Option and completed the acquisition of a 100% legal and beneficial interest in and to the Piedra Parada Project and the Fritis Project.  Under the Option, the Company (i) issued 19,400,000 restricted shares of its common stock to the vending parties; (ii) agreed to pay or cause to be paid all underlying regulatory and governmental payments and assessment work required to keep the mineral property interests in good standing; and (iii) granted to Gareste a 2% net smelter return (“NSR”) royalty on the proceeds of any production from each of the Piedra Parada and Fritis properties, capped at $6,000,000 at each property, one-half of which at each property can be repurchased by the Company at any time before commencement of any production at that property for the sum of $2,000,000.  The Piedra Parada and Fritis titles remain in Gareste currently pending completion of title transfers and notifications at the mining registry.





On March 31, 2011 the Company entered into an Earn-In agreement with Llanos de Caldera, S.A. Cerrada, (“Llanos”), a privately-held Chilean corporation, for participation by Llanos in the Escondida project.  The agreement granted Llanos a one-year period during which to act as operator and expend US$500,000 in qualifying expenditures at the project, constituting an initial exploration program and including drilling, sampling analytical and metallurgical test work.  At the end of the period, if it has properly incurred the qualifying expenditures, Llanos can elect to Earn-In and acquire an undivided 70% of the Escondida project.  On Earn-In the parties will form a joint venture and execute a Joint Operating Agreement whereby Llanos will be the Operator, and the parties shall fund their respective shares of expenses going forward. With Zoro’s consent, Llanos subsequently assigned its rights in the earn-in agreement to the Escondida Chile Joint Venture, a partnership between Llanos and the HEI Escondida Joint Venture.As at April 30, 2012, Escondida Chile was still in the process of conducting the exploration and drilling program with the results to be determined in the latter half of 2012. Although the agreement has lapsed, the parties have not formally cancelled it as at April 30, 2012.





60





ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS - continued





We entered into an Asset Purchase Agreement (the “Fortuna Agreement”) dated February 22, 2010, with two vending parties to acquire a 100% interest in three property mineral exploration concessions covering approximately 1,500 hectares as an extension to our existing Yura gold prospect located 30 kilometers west of Arequipa, Peru (the “Fortuna Properties”).





The Fortuna Properties target precious metals and are comprised of three concessions that are accessible year round via paved highway and improved roads. Harold Gardner, an officer and director of Zoro, is an indirect minority shareholder of one of the vending parties. Subject to final due diligence, the lifting of a cease trade order issued by the British Columbia Securiites Commission (which occurred on October 21, 2010), and other customary closing conditions, we planned to (i) issue 6,000,000 restricted shares of its common stock to the vending parties; (ii) pay to the vending parties $100,000 prior to the closing of the acquisition, $125,000 at the closing date, and $100,000 six months from the closing date; and (iii) grant to the vending parties, a 2.5% net smelter return (“NSR”) royalty on the proceeds of any production from the Fortuna Properties capped at $20,000,000, 1.5% of which can be repurchased by us at any time before commencement of any production for the sum of $8,000,000. The NSR also called for an advance minimum yearly payment of $100,000 to the vending parties, which amounts are credited against any royalties ultimately payable. This Fortuna Agreement was never closed and the Fortuna Properties were folded into the Yura Agreement described below.





On October 4, 2011, we announced that we had entered into a binding Letter of Intent with various parties (the “Yura Agreement”), to earn up to a 75% indirect interest in the consolidated Yura Mining District (roughly 7,200 hectares), located approximately 30 km west of Arequipa, Peru. We had also entered into an agreement with Minex Ventures II, LLC (“Minex”), to compensate Minex for consideration furnished to or on behalf of us for both pre-existing and future obligations owed by us in the Yura District (the “Minex Agreement”).





Our holdings (the “Zoro Properties”) in the Yura District consisted of over 2,100 hectares of exploration concessions acquired in 2007 by Zoro Peru S.A.C. (“Zoro Peru”), our 99%-owned subsidiary, in exchange for shares of our common stock.





The Yura Agreement in principal part provides for the following:





·
All of the rights, titles and interests to the Zoro Properties, Fortuna Properties, and related assets, and the balance of the properties in the Yura District, are being conveyed to Formacion Yura Exploracion S.A.C. (“Yura Exploracion”)





·
To earn an undivided 50% indirect interest in the Yura District, Zoro has the responsibility under the Yura Agreement to complete a minimum $5.0 million exploration program within 30 months





·
Provided that the exploration program produces a minimum 600,000 ounce gold measured and indicated resource estimate at Yura, Zoro has the option to purchase an additional undivided 25% indirect interest in the Yura District for a minimum of $30 million





The Minex Agreement recognizes the contributions of Minex and consideration furnished on behalf of Zoro, and provides the following key terms:





·
Minex has contributed or has caused to be contributed US$1.6 million for exploration, and concession and permitting maintenance expenses, and related overhead at the Zoro Properties





·
Minex has absolved Zoro from the shares and monies otherwise payable to the Fortuna Vendors with respect to the acquisition of the Fortuna Properties totalling approximately 1,500 hectares of exploration concessions, which have now been contributed to the Yura Project





·
Minex has agreed to use its best efforts to raise an additional $1.2 million for Zoro, to fund the first phase exploration programs on the consolidated Yura Project





·
Zoro and Minex agreed that the value of the Minex contributions is US$3 million and Zoro has agreed to issue 18 million shares of its common stock to Minex or to those designated by Minex, subject to satisfying applicable securities law





·
Minex shall have the right to appoint two members to Zoro’s Board of Directors








61





ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS - continued





On March 15, 2012 but having an effective date of September 27, 2011, we entered into an Amendment Agreement with Minex (the “Amendment Agreement”) whereby the parties agreed to amend the Minex Agreement so that the agreed value of the Minex contributions under the original Minex Agreement is US$1.6 million instead of US$3 million and that we agree to issue 10 million shares of common stock instead of 18 million shares of common stock to Minex or to those designated by Minex, subject to satisfying applicable securities laws.





Investor Relations Consulting Agreement





Effective on August 23, 2010, our Board of Directors authorized August 17, 2010 as the Commencement Date and effectiveness of activities under an Investor Relations Consulting Agreement with Bravo International Services (“Bravo”.)





Bravo’s services were to include, building our Company’s investment audience through the dissemination of corporate data packages, broker presentations, broker communications, mining analyst communications, attending trade shows and handling shareholder enquiries regarding the Company.  Under the Investor Relations Consulting Agreement, our Company is obligated to compensate Bravo $7,500 per month for nine (9) months from the Commencement Date and deliver Bravo Two Hundred Thousand (200,000) shares of the Company’s common stock.  On February 11, 2011, the Company terminated the Bravo contract for cause and has since commenced an arbitration under the rules of the American Arbitration Association against Bravo for breach of contract and fiduciary duties.  On March 29, 2012 the arbitrator awarded the Company $80,000 in damages.





Consulting Agreement





On December 22, 2011, but having an effective date of September 26, 2011, we entered into a consulting agreement with Minex Ventures II, LLC (“Minex”), a Colorado limited liability company, whereby Minex will provide and perform for our benefit the following services: (i) assisting in the negotiation and facilitating the arrangements necessary to assemble the Yura Yebecahas Mining Project located in Arequipa, Peru (the “Yura Project”); (ii) assisting in the negotiation and facilitating a letter of intent with Formacion Yura Exploracion S.A.C., Donald Stiles and South American Immobiliara S.A.C. for a joint venture on the Yura Project; (iii) assisting in the negotiation with the owners of the approximately 1,500 hectares of exploration concessions (specifically known as the “Fortuna Properties”) to have the Fortuna Properties placed into the Yura Project; (iv) assisting us with engaging qualified and experienced geologists and other experienced exploration personnel required for any exploration programs on the Yura Project; (v) assisting us with raising equity capital on terms acceptable to us and Minex; (vi) assisting in the identification of gold exploration projects in Peru which may enhance shareholder value for us; (vii) assisting in the negotiation of all proposed or potential joint venture and/or financing arrangements in connection with the ongoing development of our business; and (viii) assisting in and facilitating in the setting up of corporate alliances in Peru for us, or for any of our subsidiaries, as the case may be and as may be determined by us in our sole and absolute discretion, with potential and strategic business and financial partners for the purposes of our ongoing development and financing. In consideration for the services we will pay a consulting fee of $200,000 of which an initial $100,000 of the fee has already been paid to Minex prior to execution of the consulting agreement and a further $100,000 is to be paid to Minex on or before March 31, 2012. As at April 30, 2012 $25,000 of this amount was owing to the consultant.. The services to be provided under the consulting agreement have been substantially completed by December 31, 2011. A copy of the consulting agreement was attached as an Exhibit to our Form 10-Q filed with the SEC on March 21, 2012.





PURCHASE OF SIGNIFICANT EQUIPMENT




We do not intend to purchase any significant equipment during the next twelve months.





OFF-BALANCE SHEET ARRANGEMENTS




As of the date of this Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.


GOING CONCERN





The independent auditors’ report accompanying our April 30, 2012 and 2011 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business.














62





ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS - continued





CRITICAL ACCOUNTING POLICIES





Basis of Presentation and Fiscal Year
 
 These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars.  The Company's fiscal year-end is April 30.
 
 Use of Estimates
 
 The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The most significant estimates with regard to these financial statements relate to carrying values of mineral properties, estimated useful lives of equipment, fair value of stock-based transactions, and the determination of the valuation allowance  for income taxes.
 
 Equipment
 
 Equipment is recorded at cost.  Depreciation is provided using the straight-line method over 5 years for exploration equipment, earth moving equipment, automotive equipment and furniture and fixtures; depreciation is provided using the straight-line method over 3 years for computer equipment. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized.
 
 
 
 
 
 
 63
 
 ITEM 7.                       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS -continued
 
 Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. There were no common equivalent shares outstanding at April 30, 2012 and 2011 that have been included in dilutive loss per share calculation as the effects would have been anti-dilutive.
 
 Comprehensive Loss
 
 The Company reports comprehensive income or loss in a single continuous statement in its consolidated statement of operations and comprehensive loss .
 
 Mineral Property Costs
 
 The Company is an exploration stage mining company and has not yet realized any revenue from its operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property payments are initially capitalized in accordance with the ASC 805-20-55-37, previously referenced as EITF 04-2 when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities - Mining (AS 930) at each fiscal quarter end. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property will be capitalized. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. The Company has previously determined that its mineral properties have been impaired and has recorded an impairment charge of $10,756,203.
 
 Financial Instruments
 
 The fair market value of the Company's financial instruments comprising cash, accounts payable and accrued liabilities, liabilities payable in capital stock,  promissory notes payable, due to related parties and convertible notes,  were estimated to approximate their carrying values due to immediate or short-term maturity of these financial instruments. The Company maintains cash balances at financial institutions. The Company has not experienced any material losses in such accounts.
 
 Income Taxes
 
 Deferred income tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.
 
 
 64
 
 ITEM 7.                       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS -continued
 
 Foreign Currency Translation
 
 The Company's functional and reporting currency is the United States dollar. The financial statements of the subsidiaries are translated to United States dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues and expenses. Foreign currency transaction gains and losses are included in current operations. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
 
 Stock-Based Compensation
 
 The Company records stock-based compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the goods and services received or consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. The Company has  a stock option plan, but no stock options have been granted to date and no  related stock-based compensation has been recorded.
 
 Long-Lived Assets
 
 The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are recognized in the statement of operations  as the excess of the carrying amount of the asset over its estimated fair value.
 
 Recent Accounting Pronouncements
 
 In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, Presentation of Comprehensive Income ("ASU 2011-05"). ASU 2011-05 addresses the presentation of comprehensive income and provides entities with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The provisions of ASU 2011-05 are effective for annual periods beginning after December 15, 2011. Since ASU 2011-05 addresses financial presentation only, its adoption will not impact the Company's consolidated financial position or results of operations.
 
 In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220)—Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Incomein Accounting for Standards Update No. 2011-05 ("ASU 2011-12"). ASU 2011-12 defers changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. ASU 2011-12 is effective for fiscal year beginning after December 15, 2011   . We do not expect the adoption of ASU 2011-12 to have a material impact on the Company's consolidated financial position or results of operations.
 
 Fair Value: In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments toAchieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The newguidance does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within GAAP or International Financial Reporting Standards (“IFRSs”). The new guidance also changes the working used to describe many requirements in GAAP for measuring fair value and for disclosing information about fair value measurements and it clarifies the FASB’s intent about the application of existing fair value measurements. The new guidance applies prospectively and is effective for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.
 
 ITEM 7A.                      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.





65








ITEM 8.                      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   The following  financial statements of Zoro Mining Corp. are included in this Year Ended report on Form 10-K:





PageConsolidated Balance Sheets as at April 30, 2012  and April 30, 2011
68Consolidated Statements of Operations and Comprehensive Loss for the years ended  April 30, 2012 and April 30, 2011 and for the period from inception (April 20, 2004) to April 30, 2012
69Consolidated Statements of Cash Flows for the years ended April 30, 2012 and April 30, 2011 and for the period from inception (April 20, 2004) to April 30, 2012
70Consolidated Statement of Stockholders’ Equity and (Deficiency) for the period from inception (April 20, 2004) to April 30, 2012
7 1 - 72Notes to the  Consolidated Financial Statements
73





























66











67





Zoro Mining Corp.


(An Exploration Stage Company)


Consolidated Balance Sheets as at April 30, 2012 and April 30, 2011


(Expressed in US Dollars)





April 30,

2012

$


April 30,

2011

$CURRENT ASSETSCash


9,181



81,161Other receivables


6,476



8,413Total Current Assets


15,657



89,574EQUIPMENT (Note 5)


-



81,555MINERAL PROPERTIES


5



8TOTAL ASSETS


15,662



171,137LIABILITIES AND STOCKHOLDERS’ DEFICIENCYCurrent LiabilitiesAccounts payable and accrued liabilities


717,280



805,637Promissory notes payable (Note 7)


24,649



21,997Liabilities payable in capital stock (Note  9)


1,600,000



-Convertible and promissory notes (Note 7)


200,000



201,691Derivative Financial Instruments (Note 7)


0



47,382Due to related parties (Note 6)


184,886



864,508Total Current Liabilities


2,726,815



1,941,215Total Liabilities


2,726,815



1,941,215Stockholders’ DeficiencyCapital stock (Note 8)

180,000,000 common shares authorized, $0.00001 par value57,645,991 shares issued and outstanding (April 30, 2011 – 36,971,108)


1,402



1,195Additional paid-in capital


21,820,891



19,003,080Subscriptions received


333,500



-Donated capital


34,500



34,500Deficit accumulated during the exploration stage


(24,901,446
)


(20,808,853
)Total Stockholders’ Deficiency


(2,711,153
)


(1,770,078
)TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY


15,662



171,137


GOING CONCERN  (Note 2)


COMMITMENTS AND CONTINGENCIES (Note 9)


RELATED PARTY TRANSACTIONS (Note 6)







The accompanying notes are an integral part of the consolidated financial statements





68





Zoro Mining Corp.


(An Exploration Stage Company)


Consolidated Statements of Operations and Comprehensive Loss for the years ended April 30, 2012 and April 30, 2011 and for the period from inception (April 20, 2004) to April 30, 2012


(Expressed in US Dollars)






For the Year Ended April 30, 2012


For the Year Ended

April 30, 2011


From April 20, 2004 (Date of Inception) to

April 30, 2012$


$


$ExpensesBad Debt
-



-



136,250Depreciation
56,952



58,289



371,800Donated services
-



-



25,500Filing and transfer agent fees
20,976



17,075



75,554Impairment of mineral property costs
3



-



10,756,203Interest Expense
70,330



95,347



361,348Investor Relations
42,200



213,574



414,691Management and administration fees
692,580



556,256



3,064,715Mineral exploration costs (Note 4)
2,507,779



717,553



7,888,731Office and general
77,291



175,283



806,657Professional fees
188,409



111,283



836,859Salaries and consulting fees
450,000



-



450,000(4,106,520
)


(1,944,660
)


(25,188,308
)Other incomeFederal income tax recovery
-



-



216,208Gain on sale of equipment
-



-



23,891Derivative Gain (Loss)
(9,415
)


(4,001)



103Extinguishment Loss on Debt Modification
-



(126,875)



(126,875
)Gain on settlement of debt
47,946



82,147



130,093Impairment of  equipment
(24,604
)


-



(24,604
)Interest income
-



-



68,046Net loss and comprehensive loss
(4,092,593
)


(1,993,389
)


(24,901,446
)Basic and diluted  loss per common share
(0.09
)


(0.07
)Weighted average number of common shares outstanding - basic and diluted
47,165,173



28,637,695





The accompanying notes are an integral part of the consolidated financial statements








69








Zoro Mining Corp.


(An Exploration Stage Company)


Consolidated Statements of Cash Flows for the years ended April 30, 2012 and April 30, 2011 and for the period from inception (April 20, 2004) to April 30, 2012


(Expressed in US Dollars)


For the Year

Ended April 30,

2012

$


For the Year

Ended April 30, 2011

$

(Revised Note 10)


From

April 20, 2004

(Date of Inception)

to April 30, 2012

$Cash Flows Used In Operating ActivitiesNet loss


(4,092,593
)


(1,993,389
)


(24,901,446
)Adjustments to reconcile net loss to cash used in operating activities:Impairment of equipment


24,604



-



24,604Federal income tax recovery


-



-



(216,208
)Extinguishment loss on debt modification


-



126,875



126,875Adjustment to fair value of derivative instruments


9,415



4,001



(103
)Amortization of debt discount


12,145



1,692



13,837Depreciation


56,952



58,289



371,800Non-cash management fees and investor relations expenses


-



100,000



429,293Accrued interest income


-



-



(11,250
)Shares issued for services


488,667



-



488,667Gain on sale of equipment


-



-



(23,891
)Accretion of interest on convertible note


-



3,700



32,121Bad debt


-



-



136,250Impairment of mineral properties


3



-



10,756,203Gain on  settlement of debt


(47,946
)


(82,147
)


(130,093
)Donated rent


-



-



9,000Donated services


-



-



25,500Change in operating assets and liabilities:Decrease (increase) in other receivables


1,937



(6,085
)


(6,476
)Increase in due to related parties


411,116



886,820



3,454,552Increase  in accounts payable and accrued liabilities


1,562,239



579,866



3,008,777Net Cash Used in Operating Activities


(1,573,461
)


(320,378
)


(6,411,988
)Cash Flows Used In Investing ActivitiesPurchase of equipment


-



-



(518,513
)Proceeds from Sale of Equipment


-



-



146,000Loan receivable


-



-



(125,000
)Net Cash Used In Investing Activities


-



-



(497,513
)Cash Flows From Financing ActivitiesPromissory note payable


-



79,249



927,611Convertible note


-



42,500



242,500Proceeds from common stock issuances and subscriptions


1,501,481



245,000



5,748,571Net Cash From Financing Activities


1,501,481



366,749



6,918,682Increase (Decrease) in Cash


(71,980
)


46,371



9,181Cash – Beginning


81,161



34,790



–Cash – Ending


9,181



81,161



9,181Supplemental DisclosuresInterest paid


–



–



–Income taxes paid


–



–



–Shares issued for services


488,667



143,332



–





The accompanying notes are an integral part of the consolidated financial statements














70





Zoro Mining Corp.


(An Exploration Stage Company)


Consolidated Statement of Stockholders’ Equity (Deficiency)


From April 20, 2004 (Date of Inception) to April 30, 2012


(Expressed in US Dollars)











Additional

Paid-in


Common Stock Subscrip-

Deficit Accumulated During the Exploration

Don-

atedCommon Stock

Capital


tions

Stage

Capital

Total#

$

$


$

$

$

$Balance – April 20, 2004 (Date of Inception)
-

-

-


-

-

-

-Issuance of common shares for cash  at $.0002/share
7,200,000

1,440

(1,400
)

(40
)
-

-

-Net loss for the period
-

-

-


-

(1,858
)
-

(1,858
)Balance – April 30, 2004
7,200,000

1,440

(1,400
)

(40
)
(1,858
)
-

(1,858
)Issuance of common shares for cash  at $.0002/share
1,800,000

360

(350
)

(10
)
-

-

-Share subscriptions received
-

-

-


40

-

-

40Donated rent and services
-

-

-


-

-

10,500

10,500Net loss for the year
-

-

-


-

(32,480
)
-

(32,480
)Balance – April 30, 2005
9,000,000

1,800

(1,750
)

(10
)
(34,338
)
10,500

(23,798
)Share subscriptions received
-

-

-


10

-

-

10Donated rent and services
-

-

-


-

-

12,000

12,000Net loss for the year
-

-

-


-

(12,690
)
-

(12,690
)Balance – April 30, 2006
9,000,000

1,800

(1,750
)

-

(47,028
)
22,500

(24,478
)Issuance of common shares for cash at $0.0544/share
1,822,500

364

100,886


-

-

-

101,250Share subscriptions received
-

-

-


2,600,000

-

-

2,600,000Donated rent and services
-

-

-


-

-

12,000

12,000Net loss for the year
-

-

-


-

(220,450
)
-

(220,450
)Balance – April 30, 2007
10,822,500

2,164

99,136


2,600,000

(267,478
)
34,500

2,468,322Shares and warrants issued for private placement at $25 per unit
157,514

32

3,765,908


(2,600,000
)
-

-

1,165,940Share cancellation
(6,642,500
)
(1,328
)
1,328


-

-

-

-Fair value of warrants issued for mineral properties
-

-

840,000


-

-

-

840,000Fair value of warrants issued for services
-

-

209,293


-

-

-

209,293Net loss
-

-

-


-

(3,539,499
)
-

( 3,539,499
)Balance – April 30, 2008
4,337,514

868

4,915,665


-

(3,806,977
)
34,500

1,144,056Issuance of common shares for services
7,500

1

119,999


-

-

-

120,000Net loss
-

-

-


-

(3,391,459
)
-

(3,391,459
)Balance – April 30, 2009
4,345,014

869

5,035,664


-

(7,198,436
)
34,500

(2,127,403
)








71





Consolidated Statement of Stockholders’ Equity and Deficiency – continued








Shares issued in exchange for retirement of notes and other debt
4,366,522

45

1,746,563


-

-

-

1,746,608Shares issued for private placement at $0.50 per unit
290,000

3

134,847


-

-

-

134,850Shares issued for mineral properties at $.50
19,400,000

193

9,699,807


-

-

-

9,700,000Net loss
-

-

-


-

(11,617,028
)
-

(11,617,028
)Balance – April 30, 2010
28,401,536

1,110

16,616,881


-

(18,815,464
)
34,500

(2,162,973
)Issuance of common shares for services
250,000

2

99,998


-

-

-

100,000Shares issued in exchange for retirement of notes and other debt
7,094,572

71

1,915,463


-

-

-

1,915,534Loss on settlement of related party debt




(1,125
)



-

-

(1,125
)Modification of convertible note
-

-

126,875


-

-

-

126,875Shares issued for private placement at $0.20 per unit
1,225,000

12

244,988


-

-

-

245,000Net loss
-

-

-


-

(1,993,389
)
-

(1,993,389
)Balance – April 30, 2011
36,971,108

1,195

19,003,080




(20,808,853
)
34,500

(1,770,078
)Convertible note converted to shares
1,067,312

11

70,623


-

-

-

70,634Shares issued to officers as compensation
5,000,000

50

449,950


-

-

-

450,000Gain on stock issued on related party debt

settlements (Note 8)




436,425


-

-

-

436,425Shares issued in exchange for retirement of notes and other debt
6,543,114

66

654,245




-

-

654,311Issuance of common shares for services
198,041

2

38,665


-

-

-

38,667Shares issued for private placement at $0.15 per unit
7,866,666

78

1,167,903


-

-

-

1,167,981Share subscriptions received







333,500





333,500Shares cancelled
(250
)
-

-


-

-

-

-Net loss
-

-

-


-

(4,092,593
)
-

(4,092,593
)Balance – April  30, 2012
57,645,991

1,402

21,820,891


333,500

(24,901,446
)
34,500

(2,711,153
)
 All share amounts have been restated to reflect the 36:1 forward share split on February 9, 2007 and a 20:1 reverse share split on April 22, 2009 (refer to Note 1).





The accompanying notes are an integral part of the consolidated financial statements











72





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars








1.
Nature of Operations and Basis of Consolidation





Consolidated Financial Statements





Zoro Mining Corp. (the “Company” or “Zoro”) was incorporated in the State of Nevada on April 20, 2004 as Rochdale Mining Corporation. Effective on March 19, 2007, solely for the purposes of effecting a name change, the Company (as Rochdale Mining Corporation), merged with a new wholly-owned subsidiary, Zoro Mining Corp., pursuant to Articles of Merger that the Company filed with the Nevada Secretary of State. The merger was in the form of a parent/ subsidiary merger, with the Company as the surviving corporation. Upon completion of the merger, the Company’s name was changed to “Zoro Mining Corp.” and the Company’s Articles of Incorporation have been amended to reflect this name change.





The Company’s common shares trade on the United States OTC Bulletin Board and on the Frankfurt Stock Exchange.





Share Splits





On February 9, 2007 the Company increased the number of shares of the Company’s authorized share capital and correspondingly increased the number of its issued and outstanding common shares on a thirty-six (36) new shares for one (1) old share basis.  As a result, the Company’s authorized share capital was increased from 100,000,000 common shares to 3,600,000,000 common shares, and the Company’s issued and outstanding common stock was increased from 6,012,500 common shares to 216,450,000 common shares.





On April 22, 2009, the Company filed a Certificate of Change with the Secretary of State of the state of Nevada to effectuate a reverse stock split of the Company’s authorized share capital on the basis of one new common share for twenty old common shares. As a result, as of April 22, 2009, the Company’s authorized share capital decreased from 3,600,000,000 shares of common stock to 180,000,000 shares of common stock and its issued and outstanding share capital decreased from 86,900,400 shares of common stock to 4,345,020 shares of common stock.





All references to the number of common shares issued and outstanding have been restated to give retroactive effect to the stock splits, unless otherwise noted.





Principles of Consolidation





The Company has incorporated two wholly-owned subsidiaries in each of Peru (Zoro Mining SAC, dba “Zoro Peru”) and Chile (Sociedad Zoro Chile Limitada, dba “Zoro Chile”) to beneficially hold property titles in each country.  These financial statements include the accounts of Zoro Mining Corp., and its wholly-owned subsidiaries Zoro Peru and Zoro Chile, (collectively the “Company”).  All intercompany transactions and balances have been eliminated upon consolidation.








73





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars








2.
Going Concern





These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent on the ability of the Company to obtain necessary equity financing to continue operations, the continued support of related party creditors, to determine the existence, discovery and successful exploitation of economically recoverable reserves in its resource properties, confirmation of the Company’s interests in the underlying properties, and ultimately the attainment of profitable operations. As at April 30, 2012, the Company has accumulated losses of $24,901,446 since inception and has a working capital deficiency of $2,711,158. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to 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. In conjunction with the April 22, 2009 reverse share consolidation, the Company plans to finance its activities utilizing debt and equity instruments that should be more favorably received by the investment community due to the corporate restructuring. On August 17, 2009 and April 26, 2011 the Company settled some of its existing debts with equity in order to reduce current liabilities and improve the overall financial condition of the Company. During the year ended April 30, 2012 the company raised net proceeds of $1,501,481 from the sale of shares through a private placement. Subsequent to the year end an additional $291,500 was raised  (see note 13 Subsequent Events).








3.
Summary of Significant Accounting Policies







a)Basis of Presentation and Fiscal Year




These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars.  The Company's fiscal year-end is April 30.






b)Use of Estimates




The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  The most significant estimates with regard to these financial statements relate to carrying values of mineral properties, estimated useful lives of equipment, fair value of stock-based transactions, and the determination of the valuation allowance  for income taxes.






c)Equipment




Equipment is recorded at cost.  Depreciation is provided using the straight-line method over 5 years for exploration equipment, earth moving equipment, automotive equipment and furniture and fixtures; depreciation is provided using the straight-line method over 3 years for computer equipment. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized.






d)Basic and Diluted Net Loss Per Share




Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. There were no common equivalent shares outstanding at April 30, 2012 and 2011 that have been included in dilutive loss per share calculation as the effects would have been anti-dilutive.


















74




Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2012


(Expressed in US Dollars)




3.
Summary of Significant Accounting Policies (cont'd)




e)Comprehensive Loss




The Company reports comprehensive income or loss in a single continuous statement in its consolidated statement of operations and comprehensive loss .




f)Mineral Property Costs




The Company is an exploration stage mining company and has not yet realized any revenue from its operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property payments are initially capitalized in accordance with the ASC 805-20-55-37, previously referenced as EITF 04-2 when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities - Mining (AS 930) at each fiscal quarter end. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property will be capitalized. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. The Company has previously determined that its mineral properties have been impaired and has recorded an impairment charge of $10,756,203.






g)     Financial Instruments





The fair market value of the Company's financial instruments comprising cash, accounts payable and accrued liabilities, liabilities payable in capital stock,  promissory notes payable, due to related parties and convertible notes,  were estimated to approximate their carrying values due to immediate or short-term maturity of these financial instruments. The Company maintains cash balances at financial institutions. The Company has not experienced any material losses in such accounts.






h)Income Taxes




Deferred income tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.


















75





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2012


(Expressed in US Dollars)




3.
Summary of Significant Accounting Policies (cont'd)




i)Foreign Currency Translation




The Company's functional and reporting currency is the United States dollar. The financial statements of the subsidiaries are translated to United States dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues and expenses. Foreign currency transaction gains and losses are included in current operations. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.






j)Stock-Based Compensation




The Company records stock-based compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the goods and services received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued. The Company has  a stock option plan, but no stock options have been granted to date and no  related stock-based compensation has been recorded.




k)Long-Lived Assets




The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are recognized in the statement of operations  as the excess of the carrying amount of the asset over its estimated fair value.






l)Recent Accounting Pronouncements




In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, Presentation of Comprehensive Income ("ASU 2011-05"). ASU 2011-05 addresses the presentation of comprehensive income and provides entities with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The provisions of ASU 2011-05 are effective for annual periods beginning after December 15, 2011. Since ASU 2011-05 addresses financial presentation only, its adoption will not impact the Company's consolidated financial position or results of operations.




In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220)—Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Incomein Accounting for Standards Update No. 2011-05 ("ASU 2011-12"). ASU 2011-12 defers changes in ASU 2011-05 that relate to the presentation of reclassification adjustments. ASU 2011-12 is effective for fiscal year beginning after December 15, 2011   . We do not expect the adoption of ASU 2011-12 to have a material impact on the Company's consolidated financial position or results of operations.




Fair Value: In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments toAchieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The newguidance does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within GAAP or International Financial Reporting Standards (“IFRSs”). The new guidance also changes the working used to describe many requirements in GAAP for measuring fair value and for disclosing information about fair value measurements and it clarifies the FASB’s intent about the application of existing fair value measurements. The new guidance applies prospectively and is effective for interim and annual periods beginning after December 15, 2011. We do not expect the adoption of the new provisions to have a material impact on our financial condition or results of operations.










76





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2012


(Expressed in US Dollars)




4.
Mineral Properties
  Expensed mineral exploration costs by area of exploration for the years ended April 30, 2012 and 2011 were as follows


2012


2011ChileField supplies


4,594



5,690Geological, mapping and survey


258,933



97,355Property maintenance


2,841



44,333Site administration


182,379



352,452Travel


61,725



56,190510,474



556,020PeruField supplies


16,677



-Geological, mapping and survey


323,523



-Property maintenance


837



8,581Site administration


1,616,843



162,063Travel


39,425



-1,997,305



170,644MexicoGeological, mapping and survey


-



-Property maintenance


-



(9,111)Site administration


-



--



(9,111)Total

$
2,507,779


$
717,553




The Company shares operating offices in Chile, Peru, and Tucson, AZ with Pacific Copper Corp. (Pacific Copper), a Delaware public company, in Chile and Arizona also with Pan American Lithium Corp. ("Pan American"), and in Arizona with Titan Iron Ore Corp. ("Titan").  Certain directors and management of the Company also act as officers, directors, and management of the other companies (refer to Note 6)







77





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars





5.
Equipment





Equipment is comprised of certain assets located primarily in Peru and Chile relating to exploration activity.





Cost


Accumulated Depreciation


Net Book Value


Net Book Value2012


2012


2012


2011North AmericaComputers

$
7,020


$
7,020


$
-


$
-South AmericaComputers


3,299



3,299



-



17Furniture


11,219



11,219



-



3,873Exploration equipment


12,987



12,987



-



3,753Vehicles


87,801



87,801



-



37,912Earth moving equipment


155,999



155,999



-



36,000271,305



271,305



-



81,555Total

$
278,325


$
278,325


$
-


$
81,555







During the year the company recorded depreciation charge of  $56,952 (2011: $58,289) and an impairment charge of $24,604 ($nil in 2011)





6.        Related Party Transactions





During the year ended on April 30, 2012, the Company incurred the following amounts to officers, directors, and other related parties to the Company in addition to transactions disclosed elsewhere in these financial statements. All unpaid balances due to related parties are non-interest bearing, and unsecured.  Cash advances  will bear interest at stated rates of 8-10% per annum simple interest if formalized into promissory notes.


a)
incurred $90,000 (April 30, 2011: $90,000) to a director and officer of the Company for geological services rendered.  An aggregate of $0 (April 30, 2011: $105,000) was owed this director at April 30, 2012 for unpaid services and reimbursement of expenses,


b)
incurred to a director and officer of the Company $90,000 (April 30, 2011: $90,000) for management of South American exploration with such costs recorded as administrative costs.  An aggregate of $115,420 (April 30, 2011: $405,696) was owed to this director for unpaid fees and reimbursement of expenses;


c)
incurred to a former director and officer of the Company $114,461 (April 30, 2011: $141,377) for management services with respect to the administration of the Company.  An aggregate of $37,837 (April 30, 2011: $134,929) was owed to this officer at April 30, 2012 for unpaid services and reimbursement of expenses;


d)
paid an officer of the Company $25,475 (April 30, 2011: $47,906) for administrative services;


e)
the Company incurred a total of $225,804 (April 30, 2011: $232,464) to a private Chilean company with a director in common that provides exploration services to the Company in Chile, with such costs recorded as exploration costs in Chile, South America.  An aggregate of $18,704 (April 30, 2011: $139,754) was owing at April 30, 2012.


f)
paid an officer of the Company $30,399 (2011: $51,687) for accounting services;


g)
incurred to a company managed by an officer and director $30,000 (2011: $15,000) for administrative services. An aggregate of $12,925 (April 30, 2011: $Nil) was owed to this company at April 30, 2011 for unpaid services and unreimbursed expenses;


h)
issued 5,000,000 shares of common stock under restricted share agreements to various officers and directors: 2,000,000 shares were issued to a director and officer; 2,000,000 shares were issued to a former officer and director; and 500,000 shares were issued each to two officers. (Note 8)


i)
issued an aggregate of 6,543,114 shares of common stock to various officers and directors  in exchange for retirement of debts owed by the Company in the aggregate amount of $1,090,736 and at a negotiated price of $0.1667 per share.  At the time of the issuance the common shares of the Company were trading at $0.10 per share and at a market value of $654,311 (note 8).  Therefore, the Company recorded a  gain in additional paid in capital of $436,425.

















78





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars








6.        Related Party Transactions – continued





The Company participates in a cost sharing arrangement with another public company, Pacific Copper that has two directors in common with the Company and shares South American operating offices. The expenditures relate to shared exploration in similar operating areas of Chile and Peru including shared site offices in each country. During the year ended April 30, 2009 Pacific Copper loaned the Company $430,000 secured by non-interest bearing promissory notes of which $Nil was owing as at at April 30, 2012 (April 30, 2011: $79,129).





During the year ended April 30, 2010 the Company acquired the right to receive $2,000 per month in lease payments from Pan American Lithium Corp. (Pan American) in connection with the Piedra Parada concessions. Pan American has one director and two officers in common with the Company. During the year ended April 30, 2012 the Company received payments totaling $28,000(April 30, 2011: $11,000) from Pan American.


As of April 30, 2012 the Company had a balance of $Nil (2011: $nil) owing to Pan American.


All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.





7.
Convertible and Promissory Notes and Derivative Financial Instruments





Convertible Notes





The carrying values of the Company’s convertible notes consist of the following as of April 30, 2012 and April 30, 2011:


Convertible Notes

April 30, 2012
April 30, 2011$200,000 face value convertible note due October  31, 2010

$          (200,000)
$          (200,000)$  42,500 face value convertible note due November 16, 2011

--
(1,691)$          (200,000)
$          (201,691)





$200,000 Convertible Note




On October 31, 2008, the Company issued a $200,000 6% convertible note with a term to October 31, 2010 (the “Maturity Date”). The principal amount of the note and interest is payable on the maturity date. While the note is outstanding, the holder has the option to convert the principal balance and interest, into conversion units at a conversion price of $3.20 per unit for a period of two years.  Each unit is comprised of one common share and one share purchase warrant exercisable at $5 per share for a two year term from the date of conversion. Further, the terms of the convertible note provide for certain redemption features. If, in the event of certain defaults on the terms of the note, certain of which are indexed to equity risks, the holder can accelerate the payment of outstanding principal and interest.




The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 480 and ASC 815. The common stock component of the unit conversion feature does meet all of the eight conditions for equity classification provided in ASC 815. However, the warrant component of the unit conversion feature falls within the scope of ASC 480 because it contains a fundamental transaction which provides that the warrants are contingently redeemable for assets. Since the embedded warrant falls under the scope of ASC 480, it requires liability classification. The redemption features (the “default put”) are indexed to risks that are not associated with credit or interest risk and, therefore, require bifurcation. Accordingly, a compound embedded derivative, which comprises of (i) the warrant component of the unit conversion feature and (i) the default put was bifurcated from the contract and has been recorded as a derivative liability.





October 31, 2010 Modification  of $200,000 Convertible Note





On October 31, 2010, the Company and the holder of the $200,000 convertible note changed the conversion rights of accrued interest and principal to enable conversion by the holder at the rate of $0.40 per post consolidation share without the requirement for issuance of warrants on conversion. The modification gave rise to an extinguishment. As a result of the modification, the Company recorded a loss on extinguishment in the amount of $126,875.




On October 31, 2010, the Company and the holder of the $200,000 convertible note changed the conversion rights of accrued interest and principal to enable conversion by the holder at the rate of $0.40 per post consolidation share without the requirement for issuance of warrants on conversion. The modification gave rise to an extinguishment. As a result of the modification, the Company recorded a loss on extinguishment in the amount of $126,875.  Following maturity the note is in default and no longer considered to be convertible.  The company continues to accrue interest at 6% per annum.





79





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars








7.
Convertible and Promissory Notes and Derivative Financial Instruments - continued





$42,500 Convertible Note




On February 14, 2011, the Company issued a $42,500 8% convertible note with a term to November 16, 2011 (the “Maturity Date”). The principal amount of the note and interest is payable on the maturity date. The note is convertible into common stock beginning six months after the issuance date, at the holder’s option, at a 58% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 130% if prepaid during the period commencing on the closing date through 60 days thereafter, (ii) 135% if prepaid 61 days following the closing through 90 days following the closing, (iii) 140% if prepaid 91 days following the closing through 120 days following the closing, (iv) 150% if prepaid 121 days following the closing through 180 days following the closing, and (v) 175% if prepaid 181 days following the closing through the maturity date. The terms of the convertible note provide for certain redemption features which include features indexed to equity risks. In the event of default, the amount of principal and interest not paid when due bear interest at the rate of 22% per annum and the note becomes immediately due and payable. Should that occur the Company is liable to pay the holder 150% of the then outstanding principal and interest (the “default put”).




The Company has evaluated the terms and conditions of the convertible note under the guidance of ASC 815. The conversion feature did not meet the definition of “indexed to a company’s own stock” provided for in ASC 815 due to its variable conversion price. Therefore, the conversion feature requires bifurcation and liability classification. Additionally, the default put requires bifurcation because it is indexed to risks that are not associated with credit or interest risk. Accordingly, a compound embedded derivative, which comprises of (i) the embedded conversion feature and (i) the default put was bifurcated from the contract and has been recorded as a derivative liability.





Conversion of $42,500 Convertible Note





Between August 18, 2011 and September 23, 2011, the holder of the $42,500 convertible note converted the entire principal amount into 1,067,312 shares common stock.





The following table reflects the allocation of the purchase on the financing dates:


Convertible Notes

$200,000 Face Value


$42,500 Face ValueProceeds

$
(200,000
)

$
(42,500
)Compound embedded derivative


14,400



54,631Day-one derivative loss


-



(12,131
)Carrying valueat financing dates

$
185,600


$
-








Promissory Note





During the year ended April 30, 2010, the Company borrowed $20,000 at 8% interest, unsecured and due on demand ,from an unrelated party. At April 30, 2012, the balance owing including interest was $24,649 (April 30, 2011: $21,997).








80





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars





8.
Capital Stock




a)
During the year ended April 30, 2012;




the Company issued 5,000,000 shares of the Company’s commons stock under the Company’s 2008 Stock Incentive Plan to various officers and directors valued at $450,000 based on a closing price of $0.09 at the time of the agreements (Note 6(h));




the Company issued 1,067,312 shares of the Company’s common stock to the holder of a $42,500 convertible note who exercised the conversion right in four separate conversions. (Note 7);




the Company issued 6,543,114 shares of the Company’s commons stock to various officers and directors in exchange for retirement of debts owed by the Company in the aggregate amount of $1,090,736 and at a negotiated price of $0.1667 per share. At the time of the issuance the common shares of the Company were trading at $0.10 per share and at a market value of $654,311. Therefore, the Company recorded a gain in Additional Paid in Capital of $436,425; (note 6(i)




the Company issued 7,866,666 shares of the Company’s common stock under the first tranche of a private placement at a price of $0.15 per share for gross proceeds of $1,180,000. Each unit consists of one share of common stock and one half common stock share purchase warrant. The company paid a finders’ fee of $12,020  in cash and issued 80,000 finders warrants.




The fair value of the finders’ warrants of $12,565 was determined using the Black-Scholes option pricing model with the following assumptions: risk-free rate of 0.61%, expected dividend yield of 0%, annualized volatility of 182.41% and expected life of two years.




On February 27, 2012 the Company engaged a consultant to perform certain services in exchange for 98,041 shares of the Company's common stock. The value of the services associated with the stock issuance was valued at the trading price of $0.17 on the date the shares were issued. The Company recorded an investor relations expense of $16,667.




On February 7, 2012 the Company engaged a consultant to perform certain services in exchange for 100,000 shares of the Company's common stock. The value of the services was $22,000. The stock issued was valued at the trading price of $0.22 on the date the shares were issued. The Company recorded an investor relations expense of $22,000..





During the year ended April 30, 2011;




On September 22, 2010 the Company engaged a consultant to perform strategic planning and communications services in exchange for 250,000 shares of the Company's common stock as well as other remuneration. The value of the services associated with the stock issuance was valued at the trading price of $0.40 on the date the shares were issued. The Company recorded an investor relations expense of $100,000.




On April 26, 2011, the Company issued 7,094,572 shares of common stock to various related and unrelated parties in exchange for retirement of promissory notes, advances, services, and other debts in the aggregate amount of $1,996,556 at a price of $0.27 per share, effective March 31, 2011. Of an aggregate of $1,154,561 of the debts settled with related parties, $225,285 was for services rendered, and $929,276 was for direct advances, promissory notes, interest, and out of pocket expenses. Settlements with related parties are summarized as follows:




1.     our President and director settled $150,285 of amounts due for services rendered with 375,712 common shares and settled $12,129 of out of pocket expenses with 48,517 common shares;




2.     our VP Exploration and director settled $75,000 of amounts due for services rendered with 187,500 common shares and $28,304 of out of pocket expenses with 113,216 common shares; and









81




Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars





8.
Capital Stock (cont’d)




3.     our VP Business Development, Chairman and director settled $598,860 in advances and out of pocket expenses for 2,395,440 common shares, and a company with this director in common settled $289,983 in advances, promissory notes, and interest provided to the Company for direct expenditures incurred in Chile for 1,159,930 common shares;




On March 31, 2011, the Company settled debt with non-related parties, in the amount of $841,996, with the issuance of 2,814,257 common shares. The trading price on the settlement date was $0.27 per share. Therefore the company recognized a gain on debt settlement of $82,147.




On April 30, 2011, the Company issued 1,225,000 common shares to unrelated parties in private placements in the aggregate amount of $245,000 at a price of $0.20 per share and 1,225,000 common share purchase warrants at a price of $.30 exercisable within 24 months of the share issue date.






b)      Warrants:




Year ended April 30, 2011




On April 30, 2011 and in connection with a private placement, the Company issued 1,225,000 warrants to purchase common shares at a price of $0.30 until 24 months following the issue date.




The fair value of these warrants at the date of grant of $128,936 was estimated using the Black-Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 0.61%, a dividend yield of 0%, and an expected volatility of 99.59%.




Year ended April 30, 2012




On December 14, 2011and  in connection with a private placement, the Company issued 3,933,333 warrants and 80,000 finders warrants to purchase common shares at a price of $0.25 until 24 months following the issue date.
 
 The fair value of these warrants at the grant date was $580,164 and $12,565 respectively and was estimated using the Black Scholes option pricing model with an expected life of 2 years, a risk free interest rate of 0.61%, a dividend yield of 0% and an expected volatility of 182.41%.





Warrant transactions are summarized as follows:


Number of Warrants


Weighted Average Exercise Price per Share ($)

Weighted Average Contractual Life Remaining (in Years)Balance, April 30, 2007


-



-

-Granted during the year


436,060



21.37

2.00Balance, April 30, 2008


436,060



21.37

1.22Granted during the year


-



-

-Balance, April 30, 2009


436,060



21.37

0.22Granted during the year


306,800



.75

1.58Expired during the year


(436,060
)


14.00

-Balance, April 30, 2010


306,800



.75

0.50Granted during the year


1,225,000



.30

2.00Balance, April 30, 2011


1,531,800



.39

1.25Granted during the period


4,013,333



.25

1.9Expired during the period


(306,800
)


.75

-Balance, April 30, 2012


5,238,333



.26

1.5






c)
Share options:



On February 7, 2008, the Company adopted a stock option plan (the “2008 Stock Incentive Plan”) including both qualified and non-qualified share options not to exceed 15% of the issued and outstanding shares at any date.  No share options have been granted at the date of these financial statements.








82





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars








9.        Commitments and Contingencies





The Company is a guarantor of a lease agreement effective September, 1, 2007 that obligates the Company under conditions of default by a related party lessee (a company which at the time had one director in common with the Company), to pay for the entire lease relating to the Company’s Tucson, Arizona office until the end of the lease term through January 31, 2011 or as amended or renewed.  As at April 30, 2010, the gross value of the guarantee was $212,774.  The lessee has defaulted on the lease and subsequently moved offices. The potential liability, if any, as a result of the lessee’s default due to joint and severable provisions relating to the lease guarantee is presently not determinable, and the Company has not been advised of the results, if any of negotiations by the lessee to settle this potential liability with the landlord.





Effective December 2, 2009, the Company exercised an Option for the acquisition from Sociedad Gareste Limitada (“Gareste”) of a 100% legal and beneficial interest in and to the Sierra Fritis Project.  Harold Gardner, an officer and Director of the Company, is co-managing partner of Gareste. Under the Option (which also included the Piedra Parada project), the Company (i) issued an aggregate of 19,400,000 restricted shares of its common stock to the vending parties; (ii) agreed to pay or cause to be paid all underlying regulatory and governmental payments and assessment work required to keep the mineral property interests in good standing; and (iii) granted to Gareste a 2% net smelter return (“NSR”) royalty on the proceeds of any production from the Fritis property, capped at $6,000,000, one-half of which can be repurchased by the Company at any time before commencement of any production for the sum of $2,000,000. The Fritis titles remain in Gareste currently pending completion of title transfers and notifications at the mining registry.





The Fritis property consists of 8 mineral exploration concessions covering approximately 2,300 hectares (5,683 acres), located roughly 40 kilometers to the south of Copiapó, Chile, via paved highway and improved roads, and at an elevation of 500 meters. These concessions appear to contain epithermal precious metals targets. The property was previously controlled by Teck-Cominco until mid-2009 when the concessions lapsed and were acquired by Gareste, who conducted a surface sampling program in late 2009.  Zoro has identified several areas at the concessions which could be the targets of future exploration efforts. However, the Company has no current exploration plans for the remainder of 2012 for the Sierra Fritis property.





Effective December 2, 2009, the Company exercised an Option for the acquisition from Gareste of interests in and to the Piedra Parada salar Project. Harold Gardner, an officer and Director of the Company, is co-managing partner of Gareste. Under the Option (which also included the Sierra Fritis project), the Company (i) issued an aggregate of 19,400,000 restricted shares of its common stock to the vending parties; (ii) agreed to pay or cause to be paid all underlying regulatory and governmental payments and assessment work required to keep the mineral property interests in good standing; and (iii) granted to Gareste a 2% net smelter return (“NSR”) royalty on the proceeds of any production from the Piedra Parada property, capped at $6,000,000, one-half of which can be repurchased by the Company at any time before commencement of any production for the sum of $2,000,000. The Piedra Parada titles remain in Gareste currently pending completion of title transfers and notifications at the mining registry.





The project lies roughly 310 kilometers to the northeast of Copiapó, the capital of Region III, via paved highway and improved roads, and is at an elevation of over 4,000 meters. The 12 Piedra Parada property mineral exploration concessions cover a total of 3,600 hectares (8,895 acres) in a prototypical salar — a dry lake bed with inflow waters and subsurface brines. However, Gareste, the vendor at Piedra Parada, owned and conveyed to Zoro senior concession rights on only 2,100 hectares (5,189 acres), and also conveyed overstaked concessions on 1,500 additional hectares (3,706 acres) which are subject to the senior rights of a third party.





The rights to lithium, light metals and commercial salts (collectively, the “Lithium Materials”) in these concessions have been previously conveyed to a third-party, with Gareste retaining a 2% NSR royalty on Lithium Materials. In addition, this third party is obligated to remit a payment of US$2,000 per month as a lease and rental remittance fee to maintain the Piedra Parada concessions through the exploration stage, which payments will increase to US$5,000 per month at such time as these concessions are converted to exploitation status.  In connection with the acquisition by Zoro, Gareste has conveyed the NSR and the rights to receive payments at Piedra Parada, and other attendant rights to the Company.





83





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars








9.         Commitments and Contingencies - continued





The Company has entered into an agreement dated October 11, 2010 with a consultant who will provide strategic planning, fund raising, and capital structuring advisory services for a term of nine months. In consideration for the services the company will issue 200,000 shares of its common stock to the consultant, 100,000 of which will be delivered at the end of four months, and 100,000 of which will be delivered at the end of nine months. In addition the Company will issue 200,000 options to the consultant to purchase Company shares at such time as the company has closed on at least $2 million in net proceeds attributable to the efforts of the consultant. In addition and subject to certain conditions, the Company will issue to the consultant 100,000 options to purchase Company shares for every $1 million in additional net proceeds attributable to the efforts of the consultant.  The shares were not issued as at January 31, 2012 due to a delay in starting the program.





On March 31, 2011, Zoro Mining Corp., through its subsidiary Sociedad Zoro Chile, Limitada (collectively, the “Company”) entered into a binding letter of intent (the “LOI”) with Llanos de Caldera, S.A. Cerrada (“LDC”), a privately-held Chilean corporation, whereby LDC can earn an undivided 70% interest in the Company’s Escondida precious metals project located near Copiapo, Chile, and following which the Company and LDS will form a joint venture to govern operations at Escondida, as follows:





1.
Earn-In Requirement. To earn the 70% interest, LDC must commence, pay for and complete qualifying Earn-In Expenditures totaling at least five hundred thousand dollars (US$500,000) within one (1) year of the date of the LOI (“Earn-In Term”). Earn-In Expenditures are defined as all the costs and expenses to complete an initial exploration, drilling, sampling and metallurgical testing program as set forth in the LOI (the “Initial Exploration Program”), and include, in addition, all tax payments and related costs of maintaining the mineral titles to Escondida during the Earn-In Term (“Holding Costs”) and payments for overhead expenses. Harold Gardner, a director of the Company and a principal within LDC, shall have oversight responsibility for the Initial Exploration Program, and LDC shall be the operator under the LOI.


2.
Declaration of Earn-In. At any time prior to or at the end of the Earn-In Term, LDC can elect to give notice in writing to the Company that it has completed the Initial Exploration Program and has successfully incurred the Earn-in Expenditures for Escondida (the “Earn-In”). At such time, to the extent not previously done, LDC shall furnish the Company with copies of all reports, information and data developed during the Initial Exploration Program, and satisfactory evidence of the incurrence and payment of the Earn-In Expenditures, which the Company shall reasonably accept, and LDC shall be deemed to have earned an undivided 70% interest in Escondida. Upon reasonable request from LDC, the Company shall cause the transfer of this 70% interest to LDC, or, alternatively, 100% of the property to the Joint Venture described below.


3.
Joint Venture and Joint Operating Agreement. At the time that Earn-In is achieved, the parties will form a Joint Venture and finalize and execute a Joint Operating Agreement (“JOA”) to govern their interests in Escondida, whereby LDC will be the Operator, and the parties shall fund their respective shares of expenses going forward.





84





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars








9.        Commitments and Contingencies - continued





On June 7, 2011 the Company entered into an agreement with a consultant to perform certain geological and project management services in Arequipa, Peru for a term of one year commencing when and if the Company secures targeted funding. Fees are approximately $12,810 per month based on a daily rate of $610 per day. In addition, the consultant can earn a $10,000 loyalty bonus after one year, or a prorated amount if the contract is terminated sooner. In the event the consultant fulfills the obligation for a full year, the Company will issue to the consultant 500,000 options to purchase Company shares at a price of $0.50 for a period of two years from the date of issue.





On October 4, 2011 the Company announced that it had entered into a binding Letter of Intent with various parties (the “Yura Agreement”), to earn up to a 75% indirect interest in the consolidated Yura Mining District (roughly 7,200 hectares), located approximately 30 km west of Arequipa, Peru. Zoro has also entered into an agreement with Minex Ventures II, LLC (“Minex”), a privately-held US based limited liability company, to compensate Minex for consideration furnished to Zoro in the Yura District (“Minex Agreement”).





Zoro’s holdings (the “Zoro Properties”) in the Yura District consisted of over 2,100 hectares of exploration concessions acquired in 2007 by Zoro Peru S.A.C. (“Zoro Peru”), the Company’s 99%-owned subsidiary, in exchange for Zoro shares. In addition, Zoro in 2010 signed an agreement to acquire roughly 1,500  additional hectares comprising the Fortuna exploration claims, which required Zoro to issue 6 million shares of its restricted common stock and make staged payments totaling $325,000 to the Fortuna Vendors, who also reserved a 2.5% net smelter return royalty. The Fortuna purchase agreement was never closed.





The Yura Agreement in principal part provides for the following:




·
All of the rights, titles and interests to the Zoro Properties, Fortuna claims, and related assets, and the balance of the properties in the Yura District, are being conveyed to Formacion Yura Exploracion S.A.C. (“Yura Exploracion”)




·
To earn an undivided 50% indirect interest in the Yura District, Zoro has the responsibility under the Yura Agreement to complete a minimum $5.0 million exploration program within 30 months




·
Provided that the exploration program produces a minimum 600,000 ounce gold measured and indicated resource estimate at Yura, Zoro has the option to purchase an additional undivided 25% indirect interest in the Yura District for a minimum of $30 million




The Minex Agreement recognizes the contributions of Minex and consideration furnished on behalf of the Company, and provides the following key terms:




·
Minex has contributed or has caused to be contributed US$1.6 million for exploration, and concession and permitting maintenance expenses, and related overhead at the Zoro Properties




·
Minex has absolved the Company from the shares and monies otherwise payable to the Fortuna Vendors with respect to the acquisition of the Fortuna Properties totalling approximately 1,500 hectares of exploration concessions, which have now been contributed to the Yura Project




·
Minex has agreed to use its best efforts to raise an additional $1.2 million for Zoro, to fund the first phase exploration programs on the consolidated Yura Project




·
The Company and Minex agreed that the value of the Minex contributions is US$3 million and the Company has agreed to issue 18 million shares of its common stock to Minex or to those designated by Minex, subject to satisfying applicable securities law




·
Minex shall have the right to appoint two members to the Company’s Board of Directors




With respect to the Minex Agreement, as at April 30, 2012, the Company had amended the Minex Agreement with the following key change:




·
the agreed value of the Minex contributions under the original Minex Agreement is US$1.6 million instead of US$3 million and that the Company agrees to issue 10 million shares of common stock instead of 18 million shares of common stock to Minex or to those designated by Minex, subject to satisfying applicable securities laws.





85








Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the  Consolidated Financial Statements


April 30, 2012


Amounts Expressed in U.S. Dollars





9.        Commitments and Contingencies - continued





On December 22, 2011, but having an effective date of September 26, 2011, the Company entered into a consulting agreement with Minex (the “Consulting Agreement”) whereby Minex agreed to provide certain services related to the Yura Project and operations in Peru in general in exchange for $200,000 of which $175,000 has been paid as at April 30, 2012.





On November 1, 2011, the Company entered into an agreement with a third party to provide administrative and investor relations services to the Company for a period of twelve (12) months. The Company agreed to pay the party CAD$17,000 per month. The agreement is cancellable by the Company with sixty (60) days written notice and by the party with ninety (90) days written notice.





10.
Income Taxes



Except as otherwise noted, there were no temporary differences related to the Company’s assets and liabilities nor other temporary differences that result in deferred tax assets nor liabilities. The Company’s deferred tax assets which may be available to reduce future year’s taxable income include the Company’s net operating loss carry-forwards of approximately $5,349,000  (2011 - $4,327,000 ); tax  deductions for equipment in excess of those for accounting of approximately $105,000 (2010 - $157,000); tax deductions for  mineral property acquisition costs in excess of those for accounting of approximately $9,699,000  (2011 -  $9,699,000 ); and other deductions which may be available to reduce future year’s taxable income of approximately $nil  (2011 -  $136,000). The net operating loss carry-forwards will expire, if not utilized, commencing in 2024.  Management believes that the realization of the benefits from the deferred tax assets is uncertain due to the Company’s limited operating history and continuing losses.  Accordingly, a deferred tax asset valuation allowance has been provided.



The significant components of the Company’s deferred income tax assets and liabilities at April 30 are as follows:    2012


2011Deferred tax assetsNon-capital losses

$
1,818,508


$
1,471,162Equipment


35,916



53,507Mineral property acquisition costs


3,297,933



3,297,933Other





$
46,3255,152,357



4,868,927Less: valuation allowance


(5,152,357
)


(4,868,927
)Net deferred tax assets


-



-
    2012


2011Net loss before income taxes

$
(4,092,593
)

$
(1,993,389
)Statutory tax rate


34
%


34
%Expected tax expense (recovery)


(1,391,482
)


(677,752
)Items not deductible for tax purposes


1,044,135



334,662Change in valuation allowance


347,346



343,090Deferred income tax provision (recovery)

$
-


$
-















86





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2012


(Expressed in US Dollars)







10.
Income Taxes - continuedThe Company has filed income tax returns since inception in the United States.  Inherent uncertainties arise over tax positions taken with respect to transfer pricing, related party transactions, tax credits, tax based incentives and stock based transactions. Management has considered the likelihood and significance of possible penalties associated with its current and intended filing positions and has determined, based on their assessment, to accrue such penalties in the amount of $90,000.



As of April 30, 2012 the Company has non-capital losses available to offset future taxable incomes which expire as follows:



2024                         23

2025                  22,166

2026                       876

2027                155,915

2028             1,114,331

2029             1,100,679

2030                923,867

2031             1,009,089

2032             1,021,607

-----------------

5,348,553

==========







The Company's financial instruments consist of cash, accounts payable and accrued liabilities, liabilities payable in capital stock, promissory notes payable, convertible notes and due to related parties. The carrying amounts of these financial instruments are a reasonable estimate of their fair values because of their current nature.




The following table summarizes information regarding the carrying values of the Company's financial instruments:




2012


2011Held for trading (i)

$
9,181



81,161Other financial liabilities (ii)


2,726,815



1,941,215




(i)   Cash




(ii)  Accounts payable and accrued liabilities, liabilities payable in capital stock, promissory notes payable, and due to related parties




Fair values




The Company classifies its fair value measurements in accordance with an established hierarchy that prioritizes the inputs in valuation techniques used to measure fair value as follows:




Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;




Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices); and












87





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2011


(Expressed in US Dollars)






11.      Financial Instruments - continued




Level 3 - Inputs that are not based on observable market date.




The following table sets forth the Company's financial instruments as of April 30, 2012, measured at fair value by level within the fair value hierarchy:




Level 1


Level 2


Level 3


TotalCash

$
9,181



-



-



9,181Total assets

$
9,181



-



-



9,181





Accounts payable and accrued liabilities

$
-



-



717,280



717,280Promissory notes payable


-



-



24,649



24,649Convertible Notes


-



-



200,000



200,000Liabilities payable in capital stock


-



-



1,600,000



1,600,000Due to related parties


-



-



184,886



184,886Total other financial liabilities

$
-



-



2,726,815



2,726,815




The following table sets forth the Company's financial instruments as of April 30, 2011, measured at fair value by level within the fair value hierarchy:




Level 1


Level 2


Level 3


TotalCash

$
81,161



-



-



81,161Total assets

$
81,161



-



-



81,161





Accounts payable and accrued liabilities

$
-



-



805,637



805,637Promissory notes payable


-



-



21,997



21,997Convertible Notes


-



-



201,691



201,691Derivative Financial Instruments


-



-



47,382



47,382Due to related parties


-



-



864,508



864,508Total other financial liabilities

$
-



-



1,941,215



1,941,215











88





Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2011


(Expressed in US Dollars)






11.      Financial Instruments - continued




The features embedded in the $200,000 face value convertible note were combined into one compound embedded derivative that the Company fair valued using the income valuation technique using the Monte Carlo valuation model. The Monte Carlo model was believed by management to be the best available technique for this compound derivative because, in addition to providing for inputs such as trading market values, volatilities and risk free rates, the Monte Carlo model also embodies assumptions that provide for credit risk, interest risk and redemption behaviors (i.e. assumptions market participants exchanging debt-type instruments would also consider). The Monte Carlo model simulates multiple outcomes over the period to maturity using multiple assumption inputs also over the period to maturity. The following table sets forth (i) the range of inputs for each significant assumption and (ii) the equivalent, or averages, of each significant assumption as of April 30, 2010:




The financings giving rise to derivative

financial instruments

$200,000 Face

ValueConversion price

$
5.24Equivalent volatility


118.42
%Equivalent term (years)


0.504Equivalent credit-risk adjusted yield


15.54
%Equivalent interest risk adjusted rate


5.84
%




The features embedded in the $42,500 face value convertible note were combined into one compound embedded derivative that the Company fair valued using the Binomial Lattice valuation model. The Binomial model was believed by management to be the best available technique for this compound derivative because, in addition to providing for inputs such as trading market values, volatilities and risk free rates, the Binomial Lattice model also embodies an assumption that provides for a vesting date, which is a necessary input for valuing this compound derivative since the compound derivative is not exercisable for six months after the issuance date. The following table sets forth the inputs for each significant assumption as of April 30, 2011:




The financings giving rise to derivative

financial instruments

$42,500 Face ValueConversion price

$ .1102Volatility

118.42%Term (years)

0.75Risk-free rate

0.30%Vesting date

08/14/2011






The following table sets forth a reconciliation of changes in the fair value of financial liabilities classified as Level 3 in the fair valued hierarchy:




11.      Financial Instruments - continued


Derivative Financial Instruments2012


2011Balance as of May 1

$
(47,382
)

$
(881
)Total gains or losses (realized or unrealized):Included in earnings


9,415



8,130Convertible note conversions


37,967



-Convertible note issuances


-



(54,631
)Balance as of April 30

$
(0
)

$
(47,382
)







89




Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2011


(Expressed in US Dollars)







11.      Financial Instruments - continued




Fair value considerations





The features embedded in the $42,500 face value convertible note were combined into one compound embedded derivative that the Company fair valued using the Binomial Lattice valuation model. The Binomial model was believed by management to be the best available technique for this compound derivative because, in addition to providing for inputs such as trading market values, volatilities and risk free rates, the Binomial Lattice model also embodies an assumption that provides for a vesting date, which is a necessary input for valuing this compound derivative since the compound derivative is not exercisable for six months after the issuance date. The following table sets forth the inputs for each significant assumption as of of the conversion dates (August 18, 2011, September 12, 2011, September 19, 2011, and September 23, 2011) and April 30, 2011:





The financings giving rise to derivative financial instruments

August 18, 2011


September 12, 2011


September 19, 2011


September 23, 2011


April 30, 2011Conversion price

$
.0553


$
.0400


$
.0396


$
.0295


$
.1353Volatility


101.92
%


100.52
%


98.67
%


102.01
%


93.75
%Term (years)


0.25



0.18



0.16



0.15



0.55Risk-free rate


0.01
%


0.01
%


0.01
%


0.01
%


0.11
%Vesting date

08/14/2011


08/14/2011


08/14/2011


08/14/2011


08/14/2011





The carrying value of the compound embedded derivatives is on the balance sheet, with changes in the carrying value being recorded as derivative loss on the income statement. The components of the compound embedded derivatives as of April 30, 2012 and April 30, 2011 are as follows:


April 30, 2012


April 30, 2011The financings giving rise to derivative financial instruments

Indexed

Shares


Fair

Values


Indexed

Shares


Fair

Values$200,000 face value convertible note due October 31, 2010


-


$
-



-


$
-$  42,500 face value convertible note due November 16, 2011


-



-



423,055



47,382-


$
-



423,055


$
47,382





The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the  years ended April 30, 2012 and 2011, respectively:


The financings giving rise to derivative financial instruments and the income effects:

April 30, 2012


April 30, 2011$200,000 face value convertible note due October 31, 2010

$
-


$
-$  42,500 face value convertible note due November 16, 2011


-



--



-Day-one derivative loss:$  42,500 face value convertible note due November 16, 2011


-



-Total derivative gain (loss)

$
-


$
-





The financings giving rise to derivative financial instruments and the income effects:

April 30, 2012


April 30, 2011$200,000 face value convertible note due October 31, 2010

$
-


$
881$  42,500 face value convertible note due November 16, 2011


(9,415
)


-(9,415
)


881Day-one derivative loss:$  42,500 face value convertible note due November 16, 2011


-



-Total derivative gain (loss)

$
(9,415
)

$
881














90




Zoro Mining Corp.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


April 30, 2011


(Expressed in US Dollars)




12.
Segmented Information





North America


South America

and Mexico


ConsolidatedApril 30, 2012Segmented revenue

$
-


$
-


$
-Segmented loss

$
1,503,255


$
2,589,338


$
4,092,593Identifiable assets

$
15,657


$
5


$
15,662April 30, 2011Segmented revenue

$
-


$
-


$
-Segmented loss

$
1,222,202


$
771,187


$
1,993,389Identifiable assets

$
89,574


$
81,563


$
171,137





13.     Subsequent event





On May 29, 2012, the Company accepted seven subscription agreements and issued an aggregate of 1,943,334 units of the Company to seven investors at a price of $0.15 per unit for gross proceeds of $291,500.05. Each unit is comprised of one share of common stock and one half of one share purchase warrant. One whole share purchase warrant is exercisable into one share of common stock at an exercise price of $0.25 per share until May 29, 2014.











91








ITEM 9.                        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIA DISCLOSURE





None.


ITEM 9A.                     CONTROLS AND PROCEDURES





Disclosure Controls and Procedures


We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.


As of April 30, 2012, the end of our fiscal year covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer), and our chief financial officer (also our principal financial and accounting officer) of the effectiveness of our disclosure controls and procedures. Based on the foregoing, our president and chief financial officer concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our corporate reporting as of the end of the period covered by this annual report due to certain deficiencies that existed in the design or operation of our internal controls over financial reporting as disclosed below and that may be considered to be material weaknesses.





Internal Control Over Financial Reporting


The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.


As of April  30, 2012, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.  Based on that evaluation, the Company concluded that, during the period covered by this report, such internal controls and procedures were somewhat effective but not by all criteria utilized.  Therefore conclusions were that internal control over financial reporting was not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses. To some degree however, a mitigating factor was the relatively minor scale of operations during the year that did not warrant a more elaborate system to reduce risks further, and a concentration on exploration initiatives in Chile while only maintenance initiatives that were prevalent on the Company’s prospects in Peru and Mexico.


The matters involving internal controls and procedures that the Company’s management considered to be continuing material weaknesses under COSO and SEC rules were:





(1)
inadequate segregation of duties consistent with control objectives;





(2)
insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;




(3)
infrequent ongoing monitoring and a lack of separate evaluations when an effective monitoring and evaluative system is deemed necessary for corporate integrity;




(4)
a lack of country specific controls and written protocols leading to timely reporting of previously budgeted expenditures; and





(5)
ineffective controls over period end financial close and reporting processes.





The aforementioned material weaknesses were identified by the Company’s Chief Executive Officer / Chief Financial Officer in connection with the preparation of our financial statements as of April 30, 2012 and communicated the matters to our management and board of directors.





92





ITEM 9A.                     CONTROLS AND PROCEDURES - continued


Management believes that the material weaknesses set forth in items (1) to (5) above did not have a material affect on the Company’s financial results due to the Company’s current scale and scope of operations.


We are committed to improving our financial organization. As part of this commitment, we intend to create control situations resulting in the segregation of duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to the Company to:




i)
define, document, implement, and monitor written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP , and create country specific controls and protocols,




ii)
prepare and implement sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements, and




iii)
establish proper controls over period end financial close and reporting processes.




In addition, management believes that preparing and implementing sufficient written policies and checklists will remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) these procedures coupled with the appointment of additional outside directors will greatly decrease any control and procedure issues the Company may encounter in the future.


We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.





This Annual Report does not include an attestation report of our registered public accounting firm, regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant toapplicable rules that permit us to provide only management’s report in this Annual Report.


Changes in Internal Control over Financial Reporting


There have been no changes in our internal controls over financial reporting that occurred the last quarter of our fiscal year ended April 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.





ITEM 9B.                     OTHER INFORMATION





Not applicable.








PART III




ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEIDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS





All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.





Our directors and executive officers, their ages, positions held are as follows:





Name
Age
Position with the CompanyFrank Garcia
55
Chief Financial OfficerDavid Hackman
70
Vice President of Exploration and a DirectorHarold Gardner
56
Interim President and Chief Executive Officer, Chief Operating Officer/Vice President of Business Development and a DirectorFederico Diaz
59
DirectorRene Ramirez
60
DirectorAryn Gruneisen
25
Corporate Secretary








93


ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEIDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS - continued
 
 Business Experience





The following is a brief account of the education and business experience of each director, executive officer and key employee during at least the past five years, indicating each person’s principal occupation during the period, and the name and principal business of the organization by which he or she was employed, and including other directorships held in reporting companies.




Frank Garcia. Mr. Garcia has been our Chief Financial Officer since January 1, 2011. Mr. Garcia also served as our corporate secretary from March 30, 2012 to July 5, 2012.  Mr. Garcia has over 20 years of experience in senior financial management with international companies and currently provides accounting services to several mining exploration companies. Prior to joining the Company, Mr. Garcia served as VP of Administration for the US division of CEMEX - a Mexico-based global leader in construction materials and aggregates mining. He has also served as Director of Finance for a division of Misys plc, a British software firm and a world leader in banking and healthcare computing. Mr. Garcia holds a BSBA in Business Administration from the University of Arizona.  He is also an officer of Pan American and Titan.




David Hackman. Dr. Hackman has been our Vice-President of Exploration and a director since May 1, 2007. From January 1996 to June 2000, Dr. Hackman was the vice president of exploration, and the president and a director of Silver Eagle Resources Ltd., an exploration stage mining company. Prior to that, Dr. Hackman worked in the mineral exploration and mine development industry since 1971. Dr. Hackman holds a Bachelor of Science degree in geophysical engineering from Colorado School of Mines (1964), a Master of Science degree in geological engineering from the University of Arizona (1971), and a Doctor of Philosophy degree in geological engineering from the University of Arizona (1982). Dr. Hackman is also a member of the board of directors of Pacific Copper Corp. (a Delaware corporation that is a reporting company trading on the OTCBB) and on December 4, 2009 became the VP of Exploration for Pan American Lithium Corp. (a British Columbia corporation that is listed on the TSX Venture Exchange.) .  Previously, Dr. Hackman served on the board of directors of Snowdon Resources Corp. from March 2006 to December 2009 (a Nevada corporation that is a reporting public company trading on the OTCBB) and War Eagle Mining Company, Inc. from September 2004 to March 2009 (a British Columbia corporation that is listed on the TSX Venture Exchange.  Dr. Hackman is a director and officer of Pacific Copper , and an officer of Pan American and Titan.  The Company’s Board of Directors has determined that Dr. Hackman should serve as a director given his experience in the mining and mineral exploration sector.


Harold Gardner. Mr. Gardner was our prior President/Chief Executive Officer resigning effective February 18, 2008. He continues to serve as Chief Operating Officer and Vice President of Business Development and as a member of our Board of Directors since his appointment May 1, 2007.  Since October 1, 2011, Mr. Gardner has been our interim President and Chief Executive Officer.  Mr. Gardner has over twenty-five years of experience in the mining and mineral exploration industry in both the United States and South America. From 2003 to present, Mr. Gardner has served as an officer and director of Gareste Limitada, a Chilean mineral exploration and development company. From 2004 to present he has served as an officer and director of each of PGM Internacional and Aravena S.A., both of which are Mexican mineral exploration and development companies. From 1999 to present, Mr. Gardner has served as an officer, director and consultant to Boulder Resources S.A., a Peruvian mineral exploration and plant construction company. In addition, Mr. Gardner currently serves as an investment and mining consultant to several privately held U.S. companies: Taggart Industries (a Nevada-based investment fund), ZZYZZX Ltd. (a California-based investment trust) and Chile Gold Ltd. (a private consortium of investors based in Colorado). Dr. Gardner is also a member of the board of directors of Pacific Copper Corp. (a Delaware corporation that is a reporting company trading on the OTCBB). Mr. Gardner is neither a director nor an officer of any other reporting company.  The Company’s Board of Directors has determined that Mr. Gardner should serve as a director given his experience in the mining and mineral exploration sector in the United States and South America.





Rene Ramirez. Mr. Ramirez has been a member of our Board of Directors since February 18, 2008. Mr. Ramirez holds a Masters of Business Administration degree from CETYS University, Mexicali, and a Bachelor of Science degree in Electrical Mechanical Engineering from Universidad de Guadalajara, Mexico.  From 1992 until recently, he was the Plant Manager with Grupo Industrial DIBOGA, a company in Mexico manufacturing roofing products and asphalt emulsions, and has previously served as plant either plant, production, or engineering manager to a number of automotive parts manufactures in Mexico, including Allied Signal Automotive, Kenworth Mexicana, S.A., and Ruedas y Estampados, S.A.  Mr. Ramirez has significant training and experience in plant management, process engineering, and production that is applicable to Zoro’s future intended mining and milling operations.  The Company’s Board of Directors has determined that Mr. Ramirez should serve as a director given his business experience and his specific training and experience in plant management, process engineering and production.





Federico Diaz. Mr. Diaz has been a member of our Board of Directors since February 18, 2008. Mr. Diaz is the owner and president of Industrias Zahori S.A. de C.V., a private-held manufacturer of products for the roofing and waterproofing industries.  With 400 employees, a manufacturing plant in Mexicali, seven warehouses in the U.S. and Mexico, and a full trucking fleet, Industrias Zahori serves markets in the U.S. and Mexico. Mr. Diaz holds both a Masters in Business Administration from Kansas State University and a Bachelor of Business Administration degree from CETUS Universidad in Mexicali, Mexico. He is also an officer in several charitable organizations, has involvement in a range of education, community, and city development organizations from his home in Mexicali, Mexico, and serves as director on several boards, including BANAMEX, and Banco Serfin, two of the leading banks in Mexico.  The Company’s Board of Directors has determined that Mr. Diaz should serve as a director given his business experience.





94








ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEIDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS - continued





Aryn Gruneisen.  Ms. Gruneisen has been the Corporate Secretary since July 7, 2012. Ms. Gruneisen holds a J.D. from the University Of Arizona Rogers School Of Law and a B.A. from Dartmouth College. She has prior work experience from General Electric and CyraCom International as an intern in their legal departments.





Term of Office


All of our directors hold office or until their successors are elected and qualified or until the next annual general meeting of the shareholders. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.


FAMILY RELATIONSHIPS





There are no family relationships among our directors or officers.


INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS




Involvement In Certain Legal Proceedings




To the best of our knowledge and belief, none of our directors or executive officers have been involved in any of the following events during the past ten years that is material to an evaluation of the ability of such person to serve as an executive officer or director of our Company:




1.    a petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;




2.    such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);




3.    such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:




(i)   acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;




(ii)  engaging in any type of business practice; or




(iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;




4.    such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3(i) above, or to be associated with persons engaged in any such activity;




5.    such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;




6.    such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;







95







ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEIDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS - continued




7.    such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:




(i)   any Federal or State securities or commodities law or regulation;




(ii)  any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or




(iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or




8.    such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the United States Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.




The Company is not aware of any material legal proceedings in which any of the following persons is a party adverse to the Company or has a material interest adverse to the Company: (a) any current director, officer, or affiliate of the Company, or any owner of record or beneficial owner of more than five percent of any class of voting securities of the Company; (b) any person proposed for appointment or election as a director or officer of our Company; or (c) any associate of any such person.




COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT





Section 16(a) of the Exchange Act requires our directors and officers, and the persons who beneficially own more than ten percent of our common stock, to file reports of ownership and changes in ownership with the SEC. Copies of all filed reports are required to be furnished to us pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on the reports received by us and on the representations of the reporting persons, we believe that these persons have complied with all applicable filing requirements during the fiscal year ended April 30, 2012.




CODE OF ETHICS




The Company adopted a Code of Business Conduct on February 7, 2008 that incorporates criteria for ethical business practices that applies to our officers, directors and employees.  A copy of our Code of Business Conduct is incorporated by reference as an Exhibit to this Report.




AUDIT COMMITTEE





Our Board of Directors has established an audit committee. The audit committee was organized on February 7, 2008 and operates under a written charter adopted by our Board of Directors.  The members of the audit committee are Federico Diaz and Rene Ramirez All members of the audit committee are deemed as independent.





ITEM 11.                      EXECUTIVE COMPENSATION





The following table sets forth the compensation paid to our Chief Executive Officer and our two most highly compensated executive officers other than our Chief Executive Officer during the years ended April 30, 2012 and 2011 (collectively, the “Named Executive Officers”):





SUMMARY COMPENSATION TABLE


Name and Principal Position
Year ended April 30,
Salary

($)
Bonus

($)
Stock Awards

($)
Option Awards ($)
Non-Equity Incentive Plan Compensation

($)
Non-Qualified Deferred Compensation Earnings

($)

All Other Compensation

($)


Total

($)Andrew Brodkey,Former President and
2012
-0-
-0-
46,800
-0-
-0-
-0-

$
114,461


$
161,261CEO (1)
2011
-0-
-0-
-0-
-0-
-0-
-0-

$
141,377


$
141,377David Hackman,Vice President of
2012
-0-
-0-
46,800
-0-
-0-
-0-

$
90,000


$
136,800Exploration (2)
2011
-0-
-0-
-0-
-0-
-0-
-0-

$
90,000


$
90,000Harold Gardner,Interim President and
2012
-0-
-0-
-0-
-0-
-0-
-0-

$
90,000


$
90,000CEO, Chief Operating

Officer (3)
2011
-0-
-0-
-0-
-0-
-0-
-0-

$
90,000


$
90,000






96




ITEM 11.                      EXECUTIVE COMPENSATION - continued




(1)
During fiscal years ended April 30, 2012 and 2011, an aggregate of $114,461 and $141,377, respectively, was incurred for management services rendered in the United States regarding management of our interests.  As at April 30, 2012, $37,837 (2011: $134,929) remains due and owing to Mr. Brodkey.


(2)
During fiscal years ended April 30, 2012 and 2011, an aggregate of $90,000 and $90,000, respectively, was incurred payable to Dr. Hackman for geological services rendered, of which as at April 30, 2012, an aggregate of $Nil (2011: $105,000) remains due and owing.


(3)
During fiscal years ended April 30, 2012 and 2011, an aggregate of $90,000 and $90,000, respectively, was incurred payable to Mr. Gardner for management of the exploration in South America, of which as at April 30, 2011, an aggregate of $115,420 (2011: $405,696)  remains due and owing to Mr. Gardner.





OUTSTANDING EQUITY AWARDS AT APRIL 30, 2012





The following table sets forth information as at April 30, 2012 relating to outstanding equity awards that have been granted to the Named Executive Officers listed in the table above:





OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-ENDOPTION AWARDS


STOCK AWARDSName

Number of Securities Underlying Unexercised Options

Exercisable

(#)


Number of Securities Underlying Unexercised Options

Unexercisable

(#)


Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

(#)


Option Exercise Price

($)


Option Expiration Date


Number of Shares or Units of Stock That Have Not Vested

(#)


Market Value of Shares or Units of Stock That Have Not Vested

($)


Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

(#)


Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

(#)Andrew Brodkey

-0-


-0-


-0-


-0-


n/a


-0-


-0-


-0-


-0-David Hackman

-0-


-0-


-0-


-0-


n/a


-0-


-0-


-0-


-0-Harold Gardner

-0-


-0-


-0-


-0-


n/a


-0-


-0-


-0-


-0-





The following table sets forth information relating to compensation paid to our directors during fiscal year ended April 30, 2012:





DIRECTOR COMPENSATION TABLE





Name

Fees

Earned or

Paid in

Cash

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive

Plan

Compensation

($)

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)

All

Other

Compensation

($)

Total

($)Andrew Brodkey(1)

-0-

46,800

-0-

-0-

-0-

114,461

161,261David Hackman

-0-

46,800

-0-

-0-

-0-

90,000

136,800Harold Gardner

-0-

-0-

-0-

-0-

-0-

90,000

90,000Paul Brock(2)

-0-

-0-

-0-

-0-

-0-

-0-

-0-Federico Diaz

-0-

-0-

-0-

-0-

-0-

-0-

-0-Rene Ramirez

-0-

-0-

-0-

-0-

-0-

-0-

-0-


(1)
Mr. Brodkey resigned as a director effective October 1, 2011.


(2)
Mr. Brock resigned as a director effective July 14, 2011.





EMPLOYMENT AND CONSULTING AGREEMENTS





As of the date of this Annual Report, we have not entered into any contractual agreements with our executive officers or directors.








97





ITEM 12.                      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS





As of the date of this Annual Report, the following table sets forth certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. As of July 27, 2012 there were 59,589,325 shares of common stock outstanding.




Name and Address of Beneficial Owner

Amount and Nature of Beneficial Ownership (1)

Percentage of Beneficial OwnershipDirectors and Officers (2)Frank Garcia

500,000

*David Hackman

3,346,795

5.6%Harold Gardner

13,535,700 (3)

22.7%Federico Diaz

38,700

*Rene Ramirez

Nil

NilAryn Gruneisen

Nil

NilAll executive officers and directors as a group (6 persons)

17,421,195

29.2%5% or Greater Shareholders:Andrew Brodkey

3040 N Campbell Ave Ste 110

Tucson AZ 85719

3,376,709

5.7%J. Gordon Murphy

c/o Catherine Christopher Building

Wickhams Cay 1

Road Town, Tortola  BVI

3,418,890 (4)

5.7%




*
Less than one percent.


(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding as of the date of July 27, 2012. As of July 27, 2012 there are 59,589,325 shares outstanding.


(2)
Address for officers and directors is the Company’s address:  3040 North Campbell Avenue #110, Tucson, Arizona 85719.


(3)
This figure includes: (i) 12,093,185 shares held directly by Mr. Gardner; (ii) 40,000 shares held by Pro Business Trust, which are deemed to be indirectly owned and controlled by Mr. Gardner; amd (iii) 1,402,515 shares held by Integrity Capital Corp., which are deemed to be indirectly owned and controlled by Mr. Gardner.


(4)
This figure includes: (i) 233,890 shares held directly by Dr. Murphy; and (ii) 3,185,000 shares held by Agosto Corporation Limited, which is deemed to be indirectly owned and controlled by Dr. Murphy.





CHANGES IN CONTROL





We are unaware of any contract, or other arrangement or provision, the operation of which may at a subsequent date result in a change of control of our company.





ITEM 13.                      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE




Other than as disclosed below, there are no transactions during our two most fiscal years ended April 30, 2011 and April 30, 2012, or any currently proposed transaction, in which our Company was or to be a participant and the amount exceeds the lesser of $120,000 or one percent of the average of our Company’s total assets at year end for our last two completed years, in which any of our directors, officers or principal stockholders, or any other related person as defined in Item 404 of Regulation S-K, had or have any direct or indirect material interest.





During the year ended April 30, 2012, the Company incurred the following amounts to officers, directors, and other related parties to the Company:





·
incurred $90,000 (2011: $90,000 ) to Dr. David Hackman, our Vice President of Explorations and a director, for geological services rendered of which $Nil (April 30, 2011: $105,000) was owed this director at April 30, 2012 for unpaid services and reimbursement of expenses, with such costs recorded as mineral exploration costs;





·
incurred to Mr. Harold Gardner, our interim President and CEO, Chief Operating Officer/Vice President of Business Development and a director of the Company, $90,000 (2011: $90,000) for management of South American exploration with such costs recorded as mineral exploration costs.  At April 30, 2012, $115,420 (April 30, 2011: $405,696) was owed to this director for unpaid fees and reimbursement of expenses;





98





ITEM 13.                      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE - continued




·
incurred to Mr. Andrew Brodkey, our former President/Chief Executive Officer and a director of the Company, $114,461 (2011: $141,377 ) for management services with respect to the administration of the Company of which $37,837 (April 30, 2011: $134,929) was owed to this former officer at April 30, 2012 for unpaid services and reimbursement of expenses;





·
paid to Ms. Jodi Henderson, our former Secretary/Treasurer, $25,475 (2011: $47,906) for administrative services;





·
incurred a total of $225,804 (2011: $232,464) to Gareste LTDA, a private Chilean company (“Gareste”), that provides exploration services to the Company in Chile and has a director in common (Mr. Gardner), with such costs recorded as exploration costs in Chile, South America and of which $18,704 (April 30, 2011: $139,754) was owing at April 30, 2012;





·
paid to Mr. Frank Garcia, our Chief Financial Officer, $30,399 (2011: $51,687) for accounting services;





·
incurred to a company managed Mr. Andrew Brodkey, our former President/Chief Executive Officer and a director of the Company $30,000 (2011: $15,000) for administrative services.  An aggregate of $12,925 (April 30, 2011: $Nil) was owed to this company at April 30, 2012 for unpaid services and reimbursement expenses;





·
issued an aggregate of 5,000,000 shares of common stock under restricted share agreements to various officers and directors: 2,000,000 shares were issued to Dr. Hackman; 2,000,000 shares were issued to Mr. Brodkey; 500,000 shares were issued to Ms. Henderson; and 500,000 shares were issued to Mr. Garcia;





·
issued an aggregate of 6,543,114 shares of common stock to various officers and directors  in exchange for retirement of debts owed by the Company in the aggregate amount of $1,090,736 and at a negotiated price of $0.1667 per share. Mr. Brodkey received 908,087 shares in exchange for $151,378 of debt. Mr. Gardner received 4,780,198 shares in exchange for $796,858 of debt. Dr. Hackman received 854,829 shares in exchange for $142,500 of debt.  At the time of the issuance the common shares of the Company were trading at $0.10 per share and at a market value of $654,311.  Therefore, the Company recorded an unrealized gain in additional paid in capital of $436,426





During the year ended April 30, 2012, the Company participated in a cost sharing arrangement with another public company, Pacific Copper Corp., which shares South American operating offices with us and has officers and directors in common with us as follows: (i)  Andrew Brodkey, our former President, Chief Executive Officer and a director, is a director of Pacific Copper; (ii) David Hackman, our Vice President of Exploration and a director, is President, Chief Executive Officer and a director of Pacific Copper; (iii) Harold Gardner, our interim President and CEO, Chief Operating Officer, Vice President of Business Development and a director, is a director of Pacific Copper; and (iv) Jodi Henderson, our former Secretary/Treasurer, is Secretary of Pacific Copper.  The expenditures relate to shared exploration in similar operating areas of Chile and Peru including shared site offices in each country. During the year ended April 30, 2009 Pacific Copper loaned the Company $430,000 secured by non-interest bearing promissory notes of which $Nil was owing at April 30, 2012 (2011:  $79,129).





During the year ended April 30, 2010 the Company acquired the right to receive $2,000 per month in lease payments from Pan American Lithium Corp. (Pan American) in connection with the Piedra Parada concessions.  Pan American Lithium shares South American operation offices with us and has officers and directors in common with us as follows:  (i) David Hackman is Vice President, Exploration of Pan American Lithium, and (ii) Frank Garcia, our Chief Financial Officer, is also Chief Financial Officer of Pan American Lithium.  During the year ended April 30, 2012 the Company received payments totaling $28,000 (2011: $11,000) from Pan American.





ITEM 14.                      PRINCIPAL ACCOUNTING FEES AND SERVICES




Aggregate fees for professional services rendered to us by our auditors for our fiscal years ended April 30, 2010 and April 30, 2009 are set forth below:




Year Ended

April 30, 2012


Year Ended

April 30, 2011Audit Fees

$
19,000


$
19,000Audit-Related Fees


9,000


$
9,000Tax Fees


-



-All Other Fees


-



-Total

$
28,000


$
28,000







99





ITEM 14.                      PRINCIPAL ACCOUNTING FEES AND SERVICES - continued





Pre-Approval of Services by the Independent Auditor




The Audit Committee is responsible for the pre-approval of audit and permitted non-audit services to be performed by the Company's independent auditor.  The Audit Committee will, on an annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by our independent auditor. Thereafter, the Audit Committee will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services by our independent auditor which are not encompassed by the Audit Committee’s annual pre-approval and are not prohibited by law. The Audit Committee has approved all of the audit and permitted non-audit services performed by our independent auditor in the year ended April 30, 2012.




ITEM 15.                      EXHIBITS




The following exhibits are filed as part of this Annual Report.


Exhibit No.
Document3.1
Articles of Incorporation (1)3.1.2
Certificate of Change effective February 9, 2007 (2)3.1.3
Articles of Merger effective March 19, 2007 (2)3.1.4
Certificate of Change effective April 22, 2009 (3)3.2
Bylaws (1)10.1
Mineral Assets Option Agreement dated September 23, 2009 among each of Gareste Limitada, Twaine Assets SA, Agosto Corporation Limited, Yu Cui, Zhao Heng, Ye Bin, Sun Suzhuan, Chen Zou and Zoro Mining Corp. (4)10.2
Asset Purchase Agreement dated February 22, 2010 between Zoro Mining Corp. and South American Inmobilaria S.A.C. and Donald Le Roy Stiles (5)10.3
Binding Letter of Intent for Participation in the Escondida Project dated March 31, 2011(6)10.4
Settlement Agreement between the Company and Andrew Brodkey, dated August 15, 2009(8)10.5
Settlement Agreement between the Company and Harold Gardner, dated August 15, 2009(8)10.6
Settlement Agreement between the Company and Harold Gardner, dated August 15, 2009(8)10.7
Settlement Agreement between the Company and Sage Associates Inc., dated August 15, 2009(8)10.8
Settlement Agreement between the Company and Pro Business Trust, dated August 15, 2009(8)10.9
Debt Assignment Agreement among the Company, Gareste Limitada, and Harold Gardner, dated August 17, 2009(8)10.10
Mineral Property Acquisition Agreement, dated for reference as fully executed on April 12, 2007, as entered into as entered between Zoro Mining Corp. and each of Eduardo Esteffan M., Fresia Sepulveda H., Eduardo Esteffan S., Gretchen Esteffan S., Claudio Esteffan S. and Integrity Capital Group, LLC (7)10.11
Corporate Support Agreement between the Company and Sweetwater Capital Corp., dated May 1, 2007(8)10.12
Convertible Note in the principal amount of $200,000, dated November 7, 2008(8)10.13
Promissory Note between the Company and Sweetwater Capital, dated September 12, 2008(8)10.14
Promissory Note between the Company and Woodburn Holdings Ltd., dated October 2, 2009(8)10.15
Promissory Note from the Company to 1218716 Alberta Ltd., dated September 16, 2009(8)10.16
Promissory Note between the Company and WestPeak Ventures of Canada Ltd., dated September 17, 2008(8)10.17
Promissory Note between the Company and Timothy Brock., dated November 28, 2008(8)10.18
Advisory Services Agreement between the Company and Viewpoint Securities, LLC, dated January 8, 2010(8)10.19
Form of Restricted Stock Agreement, dated August 29, 2011(9)10.20
Form of Settlement Agreement, dated October 11, 2011(9)10.21
Binding Letter of Intent for Participation in Yebecahas Mineral Concessions, dated September 27, 2011(10)10.22
Agreement between the Company and Minex Ventures II, LLC, dated September 27, 2011(10)10.23
Consulting Agreement between the Company and Minex Ventures II, LLC, dated December 22, 2011, but having an effective date of September 26, 2011(10)10.24
Amendment Agreement between the Company and Minex Ventures II, LLC, dated March 15, 2012(10)31.1
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act.*31.2
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act.*32.1
Certification of Chief Executive Officer and Chief Financial Officer Under Section 1350 as Adopted Pursuant to Section 906 of the Securities Exchange Act.*


*           Filed herewith.


(1)           Incorporated by reference from Form SB-2 filed with the SEC on August 10, 2005.


(2)           Incorporated by reference from Form 8-A Registration Statement filed with the SEC on April 5, 2007.


(3)           Incorporated by reference from Form 8-K filed with the SEC on April 22, 2009.


(4)           Incorporated by reference from Form 8-K/A filed with the SEC on October 19, 2009.


(5)           Incorporated by reference from Form 8-K filed with the SEC on February 26, 2010.


(6)           Incorporated by reference from Form 8-K filed with the SEC on April 6, 2011.


(7)           Incorporated by reference from Form 8-K filed with the SEC on April 16, 2007.


(8)           Incorporated by reference from Form 10-K filed with the SEC on August 17, 2011.


(9)           Incorporated by reference from Form 10-Q filed with the SEC on December 20, 2011.


(10)           Incorporated by reference from Form 10-Q filed with the SEC on March 21, 2012





100





SIGNATURES





Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


ZORO MINING CORP.Dated:  August 14, 2012
By:
/s/ Harold GardnerHarold Gardner, Interim President and ChiefExecutive Officer

(Principal Executive Officer)Dated: August 14, 2012
By:
/s/ Frank GarciaFrank Garcia, Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.





Dated: August 14, 2012
By:
/s/ David HackmanDavid Hackman

Director




Dated: August 14, 2012
By:
/s/ Harold GardnerHarold Gardner

DirectorDated: August 14, 2012
By:
/s/ Federico DiazFederico Diaz

DirectorDated: August 14, 2012
By:
/s/ Rene RamirezRene Ramirez

Director











101