UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C.  20549





FORM 20-F


(Mark One)





o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934





OR





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




For the fiscal year ended
December 31, 2011




OR





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


OR


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


Date of the event requiring this shell company report_____________________________________________________





For the transition period from ___________________ to ____________________




Commission file number
000-13391





SAMEX MINING CORP.


(Exact name of Registrant as specified in its charter)





British Columbia, Canada


(Jurisdiction of incorporation or organization)





#301 – 32920 Ventura Avenue, Abbotsford, British Columbia, Canada V2S 6J3
 (Address of principal executive offices)





Larry McLean, Vice President and CFO
 Tel: (604) 870-9920  Facsimile: (604) 870-9930
 SAMEX Mining Corp.  #301 – 32920 Ventura Avenue, Abbotsford, British Columbia, Canada V2S 6J3


(Name, telephone, e-mail and/or facsimile number and address of Company contact person)





Securities registered or to be registered pursuant to Section 12(b) of the Act: None





Securities registered or to be registered pursuant to Section 12(g) of the Act:





Common Shares, without par value


(Title of Class)





Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:





Not Applicable


(Title of Class)










Indicate the number of outstanding shares of each of the Registrant’s classes of capital of common stock as of December 31, 2011: 126,708,719 Common Shares




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


o   Yes                   
 x  No





If this report is an annual report or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.


o   Yes                  
 x   No





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


o  Yes    o    No





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





Large accelerated filer  o                                                    Accelerated filer   x                                       Non-accelerated filer   o




Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:





U.S. GAAP
International Financial Reporting Standards as issued by the International Accounting Standards Board
X
Other




If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.


Item 17
Item 18




If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)


o  Yes     x  No









SAMEX MINING CORP.


FORM 20-F





TABLE OF CONTENTS


PageItem 1. Identity of Directors, Senior Management and Advisers
7Item 2. Offer Statistics and Expected Timetable
7Item 3. Key Information
7Item 4. Information on the Company
21Item 5. Operating And Financial Review And Prospects
40Item 6. Directors, Senior Management And Employees
53Item 7. Major Shareholders And Related Party Transactions
58Item 8. Financial Information
60Item 9. The Offer And Listing.
60Item 10. Additional Information.
62Item 11. Quantitative And Qualitative Disclosures About Market Risk.
74Item 12. Description Of Securities Other Than Equity Securities
74Item 13. Defaults, Dividend Arrearages And Delinquencies.
74Item 14. Material Modifications To The Rights Of Security Holders And Use Of Proceeds.
74Item 15. Controls And Procedures
74Item 16A. Audit Committee Financial Expert.
75Item 16B. Code Of Ethics.
76Item 16C. Principal Accountant Fees And Services
76Item 16D. Exemptions From The Listing Standards For Audit Committees.
76Item 16E. Purchase Of Equity Securities By The Issuer And Affiliated Purchases
76Item 17. Financial Statements
77Item 18. Financial Statements
77Item 19. Exhibits.
112
  3





SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS




This Annual Report on Form 20-F and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future.  These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.  Statements concerning reserves and mineral resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered if the property is developed, and in the case of mineral reserves, such statements reflect the conclusion based on certain assumptions that the mineral deposit can be economically exploited.  Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” (or the negative and grammatical variations of any of these terms and similar expressions) be taken, occur or be achieved,) are not statements of historical fact and may be forward-looking statements.  Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:





●
risks related to our status as a passive foreign investment company for U.S. tax purposes;


●
risks related to our history of operating losses;


●
risks related to our lack of production history;


●
risks related to our limited financial resources;


●
risks related to our need for additional financing;


●
risks related to competition in the mining industry;


●
risks related to increased costs;


●
risks related to possible shortages in equipment;


●
risks related to mineral exploration activities;


●
risks related to our lack of insurance for certain activities;


●
risks related to all our properties being in the exploration stage;


●
risks related to uncertainty that our properties will ultimately be developed;


●
risks related to fluctuations in precious and base metal prices;


●
risks related to the possible loss of key management personnel;


●
risks related to our mineral properties being subject to prior unregistered agreements, transfers, or claims and other defects in title;


●
risks related to governmental and environmental regulations;


●
risks related to our ability to obtain necessary permits;


●
risks related our status as a foreign corporation;


●
risks related to current economic conditions; and


●
other risks related to our securities.





This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further in the sections entitled “Risk Factors”, “Information on the Company” and “Operating and Financial Review and Prospects” and in the exhibits attached to this Annual Report on Form 20-F.  Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the forward-looking statements.  The Company’s forward-looking statements are based on beliefs, expectations and opinions of management on the date the statements are made and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.





All references in this Report on Form 20-F to the terms “we”, “our”, “us”, “the Company” and “SAMEX” refer to SAMEX Mining Corp. and its subsidiaries.




4





CONVERSION TABLE




In this Annual Report a combination of Imperial and metric measures are used.  Conversions from Imperial measure to metric and from metric to Imperial are provided below:





Imperial Measure          =
Metric Unit
Metric Measure       =
Imperial Unit2.47 acres
1 hectare
0.4047 hectares
1 acre3.28 feet
1 meter
0.3048 meters
1 foot0.62 miles
1 kilometer
1.609 kilometers
1 mile0.032 ounces (troy)
1 gram
31.1 grams
1 ounce (troy)1.102 tons (short)
1 tonne
0.907 tonnes
1 ton0.029 ounces (troy)/ton
1 gram/tonne
34.28 grams/tonne
1 ounce (troy/ton)




5





CURRENCY AND EXCHANGE RATES




Canadian Dollars Per U.S. Dollar





The following table sets out the exchange rates for one United States dollar (“US$”) expressed in terms of Canadian dollars (“Cdn$”) in effect at the end of the following periods, and the high, low and average values for such periods.  Exchange rates are based upon the daily noon rate reported by the Bank of Canada.




Canadian Dollars Per U.S. Dollar3-Month Period Ended

December 31,2011
2010
2009
2008
2007
2011
2010End of period
1.0170
0.9946
1.0466
1.2246
0.9881
1.0170
0.9946Average for the period
0.9891
1.0299
1.1420
1.0660
1.0748
1.0232
1.0128High for the period
1.0604
1.0778
1.3000
1.2969
1.1853
1.0604
1.0320Low for the period
0.9449
0.9946
1.0292
0.9719
0.9170
0.9935
0.9946




The following table sets out the high and low exchange rates for one United States dollar (“US$”) expressed in terms of  Canadian dollars (“Cdn$”) during the months from November 2011 to April 2012.  Exchange rates are based upon the daily noon rate reported by the Bank of Canada.




For the month of:
November

2011
December

2011
January

2012
February

2012
March

2012
April

2012High for the period
1.0487
1.0406
1.0272
1.0016
1.0015
1.0039Low for the period
1.0126
1.0105
0.9986
0.9866
0.9849
0.9807





The noon rate of exchange on May 23, 2012 as reported by the Bank of Canada for the conversion of United States dollars into Canadian dollars was US$1.00 = Cdn$1.0275.  Unless otherwise indicated, in this Annual Report on Form 20-F (the “Annual Report” or “Form 20-F”), all references herein are to Canadian Dollars.





Chilean Pesos Per US Dollar





The tables below set out the average of the Observed US Dollar Exchange Rate expressed in terms of the number of Chilean Pesos per US dollar for the following periods, reported by the Central Bank of Chile:





Yearly Average of Chilean Pesos Per U.S. Dollar





Calendar Year
Average For Year2007
1 US$ = 522.69 pesos2008
1 US$ = 521.79 pesos2009
1 US$ = 559.61 pesos2010
1 US$ = 510.25 pesos2011
1 US$ = 483.36 pesos





Monthly Average of Observed US Dollar Exchange Rate expressed in terms of Chilean Pesos Per U.S. Dollar for Year 2011





Month
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
DecPesos
489.44
475.69
479.65
471.32
467.73
469.41
462.94
466.79
483.69
511.74
508.44
517.17





Monthly Average of Observed US Dollar Exchange Rate expressed in terms of Chilean Pesos Per U.S. Dollar for Year 2012





Month
Jan
Feb
Mar
AprPesos
501.34
481.49
485.40
486.00




6





PART I




ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS




Not Applicable.




ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE




Not Applicable.




ITEM 3. KEY INFORMATION




We were incorporated as Silver Duke Mines Ltd. (N.P.L.) on December 15, 1967 under the Company Actof British Columbia (the “Company Act”).  We changed our name to Totem Resources Ltd. (N.P.L.) on February 3, 1976 and subsequently to Paragon Resources Ltd. (N.P.L.) on June 9, 1978.  On May 13, 1981, we became a limited company instead of a specially limited company and our name became Paragon Resources Ltd.  We changed our name to SAMEX Mining Corp. on September 11, 1995.  On March 29, 2004, the Company Act was repealed and was replaced by the Business Corporations Act (British Columbia).  Because of this change, we replaced our former Memorandum of Incorporation with new Notice of Articles on February 11, 2005.  We also amended our Articles to conform to the new legislation and changed our authorized share capital by eliminating the maximum number of common shares and preferred shares that the Company is authorized to issue, effective June 13, 2005.  Also during 2005, the Company changed its fiscal year-end from November 30th to December 31st.  (see Item 4 “Information on the Company - History and Development of the Company”).





SAMEX Mining Corp. is a junior resource company engaged in the acquisition and exploration of mineral properties in South America, particularly in the country of Chile.  The Company focuses its exploration activities on the search for deposits of precious and base metals.  SAMEX management is motivated by a strong conviction that gold and silver are precious, valuable “hard assets”.  SAMEX has persistently maintained and declared its strong belief that gold prices are significantly undervalued.  Our objective is to be well-positioned to benefit from increases in the value of gold and silver and a strong demand for copper.





In Chile, the Company holds an interest in the Los Zorros district gold-copper-silver prospects, the Chimberos gold-silver prospects, the Inca copper, gold, silver and molybdenum prospects, and the Espejismo gold prospects (see Item 4 “Description of Property” for individual property details). The Company also holds an interest in mineral exploration properties in Bolivia, however in 2009 the Company suspended exploration activities in Bolivia and put all of the Bolivian properties on “care and maintenance” status (see Item 4 “Description of Property” for individual property details).  We are an exploration stage company and have no mineral producing properties at this time.  All of our properties are exploration projects, and we receive no revenues from production.  All work presently planned by us is directed at defining mineralization and increasing our understanding of the characteristics and economics of that mineralization.  There is no assurance that a commercially viable ore deposit exists in any of our properties until further exploration work and a comprehensive evaluation based upon unit cost, grade, recoveries and other factors conclude economic feasibility.  The information contained herein respecting our mineral properties is based upon information prepared by, or the preparation of which was supervised by Robert Kell, a Director and the Vice President-Exploration of SAMEX Mining Corp., and Company geologist, Philip Southam, P.Geo., who are “qualified persons” pursuant to Canadian Securities National Instrument 43-101 concerning Standards Of  Disclosure For Mineral Projects.  Both Mr. Kell and Mr. Southam have signed forms consenting to the use of their names as “qualified persons” and the filing of this Form 20F Annual Report.





SAMEX is a reporting issuer in British Columbia and Alberta and its common shares trade in Canada on the TSX Venture Exchange under the symbol SXG.   The Company’s common shares are also quoted in the United States on the National Association of Securities Dealers’ OTC Bulletin Board under the symbol SMXMF.




3.A Selected financial data.




Conversion To International Financial Reporting Standards (“IFRS”)





As result of the Accounting Standards Board of Canada’s decision to adopt International Financial Reporting Standards ("IFRS") for publicly accountable entities for financial reporting periods beginning on or after January 1, 2011, the Company adopted IFRS in its financial statements for the year ended December 31, 2011. These are the first annual financial statements of the Company under IFRS.  The Company previously applied the available standards under previous Canadian Accepted Accounting Principles ("Canadian GAAP") that were issued by the Accounting Standards Board of Canada.  The effects of the conversion from Canadian GAAP to IFRS are identified in Note 12 "Transition To IFRS" of our consolidated financial statements for year ended December 31, 2011 included elsewhere herein.  As required by IFRS 1 “First-time Adoption of International Financial Reporting Standards”, January 1, 2010 has been considered to be the date of transition to IFRS by the Company. Therefore, the comparative figures that were previously reported under previous Canadian GAAP for the 2010 fiscal year have been restated in accordance with IFRS.  Our consolidated financial statements have been prepared in Canadian dollars and in accordance with IFRS which differs in significant respects from accounting principles generally accepted in Canadian GAAP and from accounting principles generally accepted in the United States ("U.S. GAAP").  As such, discussion of our financial condition and results of operations is based on the results prepared in accordance with IFRS.





7





The following data for the fiscal years ended December 31, 2011 and 2010 is derived from our audited consolidated financial statements, which were prepared in accordance with International Financial Reporting Standards ("IFRS"). The following selected financial data has been extracted from the more detailed consolidated financial statements included elsewhere herein (stated in Canadian Dollars, being the foreign currency our financial statements are denominated in, see “Currency and Exchange Rates”) and is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements and notes thereto included elsewhere herein.  The following information should be read in conjunction with “Item 5.  Operating and Financial Review and Prospects”.





IFRS

Fiscal Year Ended December 312011


2010Net operating revenueLoss from operations

$
(4,259,292
)

$
(1,163,026
)Net and comprehensive loss for the year


(3,845,201
)


(1,091,350
)Loss from operations per share


(0.03
)


(0.01
)Total assets


23,654,987



19,366,455Current assets


9,918,174



9,010,221Capital stock


23,565,776



19,274,565Number of shares


126,708,719



119,467,719Dividends per common share


NIL



NILBasic and diluted net loss percommon share

$
(0.03
)

$
(0.01
)





The following selected financial data has been extracted from the audited consolidated financial statements (previously filed with our Annual Reports on Form 20-F) for the 2009, 2008 and 2007 fiscal years, which were prepared in accordance with accounting principles generally accepted in Canada (“Canadian GAAP”) and reconciled to accounting principles generally accepted in the United States (“U.S. GAAP”).  There are several material differences between Canadian GAAP and U.S. GAAP that are applicable to the financial information summarized here for the 2009, 2008 and 2007 fiscal years.





US GAAP

Fiscal Year Ended December 312009


2008


2007Net operating revenueLoss from operations

$
(1,591,785
)

$
(1,154,945
)

$
(1,865,163
)Comprehensive loss for the year


(5,827,672
)


(2,731,764
)


(5,207,580
)Loss from operations per share


(0.02
)


(0.03
)


(0.07
)Total assets


1,132,085



423,117



1,585,662Current assets


1,061,603



311,614



1,429,923Capital stock


1,058,367



318,889



1,479,199Number of shares


96,856,665



81,261,165



78,696,165Dividends per common share


NIL



NIL



NILBasic and diluted net loss percommon share

$
(0.07
)

$
(0.03
)

$
(0.07
)





Canadian GAAP

Fiscal Year Ended December 312009


2008


2007Net operating revenueLoss from operations

$
(1,591,785
)

$
(1,154,945
)

$
(1,865,163
)Comprehensive loss for the year


(4,282,770
)


(2,571,737
)


(1,903,683
)Loss from operations per share


(0.02
)


(0.03
)


(0.07
)Total assets


10,154,038



11,125,120



12,083,496Current assets


1,061,603



311,614



1,429,923Capital stock


10,080,320



11,020,892



11,977,033Number of shares


96,856,665



81,261,165



78,696,165Dividends per common share


NIL



NIL



NILBasic and diluted net loss percommon share

$
(0.05
)

$
(0.03
)

$
(0.02
)








8




3.B Capitalization and indebtedness.




Not Applicable.





3.C. Reasons for the offer and use of proceeds.




Not Applicable.





3.D. Risk factors.




In addition to other information in this Report, the following risk factors should be carefully considered in evaluating our business because such factors currently may have a significant impact on our business, operating results and financial condition.  As a result of the risk factors set forth below and elsewhere in this Report, and the risks discussed in our other Securities and Exchange Commission filings, actual results could differ materially from those projected in any forward – looking statements.  See “Special Note Regarding Forward Looking Statements”.





We have a history of losses.




We have historically incurred losses and have no revenue from operations.  We incurred losses from operations of  $4,259,292 for the fiscal year ended December 31, 2011 and $1,163,026 for the fiscal year ended December 31, 2010.  As of December 31, 2011, we had a cumulative deficit of $32,996,161.  There can be no assurance that either the Company or any of our subsidiaries will achieve profitability in the future or at all.





We have not identified any commercially viable mineral deposits.  We have not commenced development or commercial production on any of our properties.  We have no history of earnings or cash flow from operations.  We do not have a line of credit and our only present source of funds available may be through the sale of our equity shares or assets.  Even if the results of exploration are encouraging, we may not have the ability to raise sufficient funds to conduct further explorations to determine whether a commercially mineable deposit exists on any of our properties.  While additional working capital may be generated through the issuance of equity or debt, the sale of our properties, the possible optioning or joint venturing of our properties, and/or the sale of royalty interests or capital assets, we cannot assure you that any such funds will be available for operations on acceptable terms, if at all.





In addition, should we be unable to continue as a going concern, realization of assets and settlement of liabilities in other than the normal course of business may be at amounts significantly different from those contained in our financial statements.





We have no production history from our mineral properties.




We have no history of producing metals from any of our properties as each of our properties are in the exploration stage.  Advancing properties from exploration into the development stage requires significant capital and time, and successful commercial production from a property, if any, will be subject to completing positive feasibility studies, permitting and construction of the mine, processing plants and roads and other related works and infrastructure.  As a result, we are subject to all the risks associated with developing and establishing new mining operations and business enterprises including:





●
Completion of feasibility studies to define reserves and commercial viability, including the ability to find sufficient mineral reserves to support a commercial mining operation;


●
The timing and cost, which can be considerable, of further exploration, preparing feasibility studies, permitting and construction of infrastructure, mining and processing facilities;


●
The availability and costs of drill equipment, qualified exploration personnel, skilled and reliable labour and mining and processing equipment, if required;


●
The availability and cost of appropriate smelting and/or refining arrangements, if required;


●
Compliance with environmental and other governmental approval and permit requirements;


●
The availability of funds to finance exploration, development and construction activities, as warranted;




9




●
Potential opposition from non-governmental organizations, environmental groups, local groups or local inhabitants which may delay or prevent development activities; and


●
Potential increases in exploration, construction and operating costs due to changes in the cost of fuel, power, materials and supplies.





The costs, timing and complexities of exploration, development and construction activities may be increased by the location of our properties and demand by other mineral exploration and mining companies.  It is common in exploration programs to experience unexpected problems and delays during drill programs and, if warranted, development, construction and mine start-up.  Accordingly, our activities may not result in profitable mining operations and we may not succeed in establishing mining operations or profitability producing metals at any of our properties.





We generally have limited financial resources and no source of cash flow.




Although we believe we have sufficient funds to meet our current obligations, we currently have no external sources of liquidity, and all additional funding required for our activities for the foreseeable future will be obtained from the sale of our securities.  Should we elect to satisfy our cash commitments through the issuance of securities, by way of either private placement or public offering, there can be no assurance that our efforts to raise such funding will be successful, or achieved on terms favourable to us or our shareholders.  Such financings, to the extent they are available, may result in substantial dilution to our existing shareholders.  Failure to obtain additional financing on a timely basis could cause us to forfeit all or a portion of our interests in the assets or rights now held by us and our ability to continue as a going concern.   As described in Note 1 to our consolidated financial statements, our consolidated financial statements have been prepared on the assumption that we will continue as a going concern, meaning that we will continue in operation for the foreseeable future, and will be able to realize assets and discharge our liabilities in the ordinary course of operations.  There can be no assurance that we will be able to continue as a going concern.





Our success depends on our ability to raise additional capital.




As of December 31, 2011, we had working capital of $9,828,963 (December 31, 2010: $8,918,331).   During fiscal 2011, we raised proceeds of $4,675,500 from the exercise of warrants and proceeds of $60,000 from the exercise of stock options as follows: during the first quarter ended March 31, 2011, the Company received proceeds of $1,784,550from the exercise of warrants for the purchase of 195,000 shares at $0.20 per share, 500,000 shares at $0.30 per share, 750,000 shares at $0.70 per share, and 1,372,500 shares at $0.78 per share.  During the second quarter ended June 30, 2011 the Company received proceeds of $2,800,950 from the exercise of warrants and $20,000 from the exercise of an option.  During the third quarter ended September 30, 2011, the Company received proceeds of $90,000 from the exercise of warrants for 200,000 shares at $0.20 per share and 50,000 shares at $1.00 per share, and proceeds of $40,000 from the exercise of a stock option to acquire 200,000 shares at $0.20 per share.





Based on the cash and gold and silver bullion on hand, we believe we have sufficient funds to conduct our ongoing general operations and our proposed exploration programs over the next year.  Beyond that time, it will be necessary to raise additional financing in order to fund our ongoing general operations and exploration programs.  We propose to raise the required funds through the issuance of securities, by way of either private placement, exercise of warrants, or by public offering.  Although we anticipate that we will be able to complete equity placements sufficient to meet our capital requirements, there can be no assurance that we will be able to do so on terms favorable to us or at all.  Failure to obtain additional financing on a timely basis could cause us to forfeit all or a portion of our interests in the assets or rights now held by us and our ability to continue our operations.





The business of mineral exploration is highly competitive and there is no assurance we can compete with other competitors for financing, qualified personnel and other resources related to the operation of our business.




Significant competition exists for the limited number of property acquisition opportunities available.  As a result of this competition, some of which is with large established mining companies with substantial capabilities and greater financial and technical resources than our Company, we may be unable to acquire attractive mining properties on terms we consider acceptable.  Competition in the precious metals mining industry is primarily for mineral rich properties which can be developed and exploited economically; the technical expertise to find, develop, and produce such properties; the labor to operate the properties; and the capital for the purpose of funding such properties.  Many competitors not only explore for and mine precious metals and minerals but conduct refining and marketing operations on a worldwide basis.  Such competition may result in our being unable to acquire desired properties, to recruit or retain qualified employees or to acquire the capital necessary to fund our operations and develop our properties.  Our inability to compete with other mining companies for these resources may have a material adverse effect on our results of operation and business.  There can be no assurance that our exploration and acquisition programs will yield any reserves or result in any commercial mining operation.





10





Our operations are subject to the inherent risk associated with mineral exploration activities.




Mineral exploration activities and, if warranted, development activities generally involve a high degree of risk, which even a combination of experience, knowledge and careful evaluation may not be able to overcome.  Environmental hazards, industrial accidents, unusual or unexpected geological formations, fires, power outages, labor disruptions, flooding, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labor are other risks involved in the operation of mines and the conduct of exploration programs.  Operations and activities in which we have a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of precious and base metals, any of which could result in work stoppages, damage to or destruction of mines, if any, and other producing facilities, damage to life and property, environmental damage and possible legal liability for any or all damage.  We plan to obtain insurance, in amounts that we consider to be adequate, to protect ourselves against certain of these mining risks once we commence mining operations.  However, we may become subject to liability for certain hazards which we cannot insure against or which we may elect not to insure against because of premium costs or other reasons.  The payment of such liabilities may have a material, adverse effect on our financial position.  At the present time, we do not conduct any mining operations and none of our properties are under development, and, therefore, we do not carry insurance to protect us against certain inherent risks associated with mining.  Reclamation requirements vary depending on the location and the managing regulatory agency, but they are similar in that they aim to minimize long-term effects of exploration and mining disturbance by requiring the operating company to control possible deleterious effluents and to re-establish to some degree pre-disturbance landforms and vegetation.





Increased costs could affect our financial condition.




We anticipate that costs at our projects that we may explore or develop, will frequently be subject to variation from one year to the next due to a number of factors, many of which are outside of our control.  A material increase in costs at any significant location could have an effect on our operations.





A shortage of equipment and supplies could adversely affect our ability to operate our business.




We are dependent on various supplies and equipment to carry out our mining exploration and, if warranted, development operations. The shortage of such supplies, equipment and parts could have a material adverse effect on our ability to carry out our operations and therefore limit or increase the cost of production.





Mineral exploration involves a high degree of risk against which we are not currently insured.




The Company’s exploration activities are subject to the hazards and risks normally incident to the exploration for and development and production of precious minerals, any of which could result in damage for which the Company may be held responsible. Hazards such as unusual or unexpected weather, rock formations, formation pressures, fires, power outages, landslides, flooding cave-ins or other adverse conditions such as the inability to obtain suitable or adequate machinery, equipment or labor may be encountered in the drilling and removal of material.  While we may obtain insurance against certain risks in such amounts as we consider adequate, the nature of these risks is such that liabilities could exceed policy limits or could be excluded from coverage.  There are also a number of risks against which we cannot insure or against which we have decided not to insure, due to high premiums or for other reasons.  Should such liabilities arise, they could reduce or eliminate any future profitability and result in increasing costs and a decline in the value of our common shares. We do not currently maintain insurance against risks relating to our mineral property interests.





All of our properties are in the exploration stage and are highly speculative in nature, which means there can be no assurance that our programs will result in the discovery of any economically feasible mineral deposit.




At present, none of our properties have a known body of ore and all our proposed exploration programs are an exploratory search for ore.  We will only develop our mineral properties if we obtain satisfactory results from our exploration programs.   The development of gold, silver, copper and other mineral properties is affected by many factors, including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of processing equipment and other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection.  We have relied and may continue to rely upon consultants and others for exploration expertise.  Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining.  We cannot assure you that any mineral deposits will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.  Depending on the price of gold, silver or other minerals produced, if any, we may determine that it is impractical to commence or, if commenced, continue commercial production.





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The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the global marketing conditions for gold and silver and other metals, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting minerals and environmental protection.  Our properties are located in Chile and Bolivia.  These jurisdictions impose certain requirements and obligations on the owners of exploratory properties and mineral exploration activities are subject to certain risks which are described elsewhere in this section.





Very few mineral properties are ultimately developed into producing mines.




The business of exploration for minerals and mining involves a high degree of risk such as unusual or unexpected geological formations and the inability to obtain suitable or adequate machinery, equipment or labour and is highly speculative in nature. Few properties that are explored are ultimately developed into commercially viable mining operations. At present, our existing properties have no known significant body of commercial ore. Most exploration projects do not result in the discovery of commercially mineable deposits of ore. The occurrence of unsuccessful exploration efforts may eventually lead to us needing to cease operations.





The success of commodity exploration is determined in part by the following factors:





●
Identification of potential mineralization based on superficial analysis;


●
Exploration permits, as granted by the various government bodies;


●
Experience and quality of management and geological consultants; and


●
Capital available for exploration activity.





Substantial expenditures are required for us to establish proven and probable ore reserves through drilling and analysis, to develop metallurgical processes, to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining.  In making the determination as to the commercial viability of a mineral deposit, a number of factors are considered, which include, without limitation, the particular attributes of the deposit, such as size, grade, and proximity to infrastructure; metal prices, which fluctuate widely; and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure and use, importing and exporting or minerals and environmental protection.





Although substantial benefits may be derived from the discovery of a major mineral deposit, no assurance can be given that we will discover minerals in sufficient quantities to justify commercial operations or that we can obtain the funds required for development on a timely basis.





We may invest significant capital and resources in exploration activities and abandon such investments if we are unable to identify commercially exploitable mineral reserves.  The decision to abandon a project may have an adverse effect on the market value of our securities and the ability to raise future financing.





We have no producing mines at this time.





Calculations of mineral reserves and of mineralized material are estimates only, subject to uncertainty due to factors including metal prices, inherent variability of the ore, and recoverability of metal in the mining process.




There is a degree of uncertainty attributable to the calculation of reserves and corresponding grades dedicated to future production. Until mineral reserves are actually mined and processed, the quantity of ore and grades must be considered as an estimate only. In addition, the quantity of mineral reserves and ore may vary depending on metal prices. Estimates of mineral resources under Canadian guidelines are subject to uncertainty as well. The estimating of mineral reserves and mineral resources under Canadian guidelines is a subjective process and the accuracy of such estimates is a function of the quantity and quality of available data and the assumptions used and judgments made in interpreting engineering and geological information. There is significant uncertainty in any reserve or estimate of mineral resources under Canadian guidelines, and the actual deposits encountered and the economic viability of mining a deposit may differ materially from our estimates. Estimated mineral reserves or mineral resources under Canadian guidelines may have to be recalculated based on changes in metal prices, further exploration or development activity or actual production experience. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence estimates of mineral reserves or mineral resources under Canadian guidelines. Any material change in the quantity of mineral reserves, mineralization, grade or stripping ratio may affect the economic viability of our properties. In addition, there can be no assurance that metal recoveries in small-scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production.





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Theprices of precious metals and base metals directly impact on our business activities.




Our business activities are significantly affected by the prices of precious metals and base metals on international markets.  The price of minerals affects our ability to raise financing, the commercial feasibility of our properties, the future profitability of our properties should they be developed and our future business prospects. The prices of precious metals and base metals fluctuate widely and are affected by numerous factors beyond our control, including expectations with respect to the rate of inflation, the strength of the U.S. dollar and of other currencies, interest rates, and global or regional political or economic crisis.  The demand for and supply of precious metals and base metals may affect precious metals and base metals prices but not necessarily in the same manner as supply and demand affect the prices of other commodities.





Our business is affected by market fluctuations in the prices of minerals sought (gold, silver, and copper), which are highly volatile.  Depending on the price of gold, silver, copper or other metals, we may determine that it is impractical to continue our exploration activities or, if warranted, to commence commercial development or production of our properties, if a mineral deposit is identified.





Gold, silver, and copper prices may fluctuate widely and are affected by numerous industry factors, such as demand for precious metals, forward selling by producers, central bank sales and purchases of gold and production and cost levels in major mineral-producing regions.  Moreover, mineral prices are also affected by macro-economic factors that are beyond our control, including international economic and political trends, expectations of inflation, currency exchange fluctuations (specifically, the Canadian dollar relative to other currencies), interest rates and global or regional consumption patterns, speculative activities and increased production due to improved mining and production methods.  We cannot assure you that the price of gold, silver, or copper will remain stable or that such prices will be at a level that will prove feasible to continue our exploration activities, or, if applicable, begin development of our properties.





The current demand for and supply of precious metals and base metals affects their prices, but not necessarily in the same manner as current demand and supply affect the prices of other commodities.  If metal prices should decline for a sustained period, we could determine that it is not economically feasible to continue our exploration activities and such decision will have a material adverse affect on our business and results of operations.





The prices of gold, silver, and copperand other metals have fluctuated in recent years.The volatility of the prices for precious metals and base metals is illustrated by the following charts from kitco.com which show the market prices (US$) of gold, silver, and copper over the last five years.




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We face certain risks associated with our gold and silver bullion holdings




We maintain a substantial portion of our current assets in the form of gold and silver bullion recorded in electronic records maintained by Net Transactions Limited, doing business as "Gold Money", of Jersey, British Channel Islands, UK, with underlying metals held on our behalf by a third party contracted by Gold Money.  At May 23, 2012 our gold holdings with Gold Money were valued at $4,461,607 and our silver holdings were valued at $1,408,870.  Although we are entitled to require physical delivery of our precious metal holdings, we have in the past and anticipate we will in the foreseeable future rely on Gold Money for physical storage and maintenance of the electronic records of our precious metal holdings and any transactions with respect thereto.  Although we believe the physical security and the integrity of the electronic record of our precious metal holdings is protected by adequate means, there may be a risk that such electronic records may be compromised by fraud, theft, or other means or the physical security of our holdings may be lost or stolen and third party insurance or indemnities provided by Gold Money may not be available to us or may be inadequate, resulting in a loss or impairment of our holdings.  The value of our precious metal holdings is subject to market fluctuation in the value of such metals, which may fluctuate due to circumstances beyond our control, resulting in further loss or impairment of our holdings.  See "The prices of precious metals and base metals directly impact on our business activities".




The loss of key management personnel may adversely affect our business and results of operations.




The success of our operations and activities is dependent to a significant extent on the efforts and abilities of our management: Jeffrey Dahl, President & Chief Executive Officer, Robert Kell, Vice President – Exploration and Larry McLean, Vice President – Operations & Chief Financial Officer.  Investors must be willing to rely to a significant extent on their discretion and judgment.  We do not maintain key employee insurance on any of our employees.





There may be defects in the title to our properties.




In accordance with mining industry practice, we attempt to acquire satisfactory title to our properties but have not obtained title insurance with the attendant risk that some titles, particularly titles to undeveloped properties, may be defective.  In accordance with mining industry practice, we have not obtained title insurance on the Chilean concessions held by us or on the concessions in Bolivia held by our partners.  The Company carries out all normal procedures to obtain title and make a conscientious search of mining records to confirm that the Company has satisfactory title to the properties it has acquired by staking, purchase or option, and/or that satisfactory title is held by the optionor/owner of properties the Company may acquire pursuant to an option agreement, and/or that satisfactory title is held by the owner of properties in which the Company has earned a percentage interest in the property pursuant to a joint venture or other type of agreement.  However, the possibility exists that title to one or more of the concessions held by the Company, or an optionor/owner, or the owner of properties in which the Company has earned a percentage interest, might be defective for various reasons.  The Company will take all reasonable steps to perfect title to any particular concession(s) found to be in question.





All of our properties are in the exploration stage and are highly speculative in nature, which means there can be no assurance that our programs will result in the discovery of any economically feasible mineral deposit.




At present, none of our properties have a known body of ore and all our proposed exploration programs are an exploratory search for ore.  We will only develop our mineral properties if we obtain satisfactory results from our exploration programs.




The development of gold, silver, copper and other mineral properties is affected by many factors, including the cost of operations, variations in the grade of ore mined, fluctuations in metal markets, costs of processing equipment and other factors such as government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals and environmental protection.  We have relied and may continue to rely upon consultants and others for exploration expertise.  Substantial expenditures are required to establish reserves through drilling, to develop metallurgical processes to extract the metal from the ore and, in the case of new properties, to develop the mining and processing facilities and infrastructure at any site chosen for mining.  We cannot assure you that any mineral deposits will be discovered in sufficient quantities to justify commercial operations or that funds required for development can be obtained on a timely basis.  Depending on the price of gold, silver, copper or other minerals produced, if any, we may determine that it is impractical to commence or, if commenced, continue commercial production.




The marketability of any minerals acquired or discovered may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the global marketing conditions for gold, silver and copper, the proximity and capacity of milling facilities, mineral markets and processing equipment, and such other factors as government regulations, including regulations relating to royalties, allowable production, importing and exporting minerals and environmental protection.  Our properties are located in Chile and Bolivia.  These countries impose certain requirements and obligations on the owners of exploratory properties which includes, among other things, certain application and permit requirements, certain limitations on mining and exploration activities, periodic reporting requirements, limited terms and certain fees and royalty payments.





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There are certain specific risks associated with mineral exploration activities and property ownership in Chile.




The process for acquiring an interest in mineral concessions in Chile is different from procedures for acquiring mining claims in Canada or the United States and involves certain risks not applicable in those jurisdictions.





The rights and obligations associated with mining concession in Chile are governed by legislation and protected by the Chilean Political Constitution enacted in 1980 (the “Constitution”). Article 19, No 24 of the Constitution, which assures the right of property, in its different forms over corporal or intangible assets, includes mining concessions within this protection.





Law No 18.097 of January 21, 1982, which has constitutional rank, regulates the granting of mining concessions and defines the mining concessions as a real and immovable right, distinctive and independent from property rights over the surface tenements, although owned by the same individual.  Such rights may be claimed against the State and any other person, may be transferred or transmitted, and may be mortgaged or subject to other real rights and, in general, to all acts and contracts.





A mining concession may be granted for exploring or exploiting mineral substances, the latter also being known as a mining claim.  All metallic and non-metallic substances and, in general, all fossil substances, regardless of their natural state, may be subject to concessions or claimed, including those in the subsoil of maritime waters under national jurisdiction, to which access may be had, through tunnels, from land.  Liquid or gaseous hydrocarbons, lithium or deposits of any kind in maritime waters under national jurisdiction or deposits of any kind entirely or partly embraced by areas which, under law have been classified as important, for mining reasons, to national security, are generally excluded from mining concessions, without prejudice to mining concessions validly granted prior to their exclusion or a resolution that classifies them as being important to national security.





Any person is entitled to dig test holes and to take samples in search for mineral substances, regardless of ownership or property rights over the tenements, except in lands included within the limits of a mining concession granted to a third party.





The object of a mining concession is all substances over which a concession may be granted lying within its limits.  The territorial area of a mining concession comprises a solid whose upper surface is, along a horizontal plane, a parallelogram with right angles and of an indefinite depth within the vertical planes that limit it.  The area of an exploitation concession may not cover more than 10 hectares and an exploration concession may not exceed 5,000 hectares.  The owner of the concession can hold any number of mining concessions that comply with the maximum surface indicated above.





Mining concessions are established by a judicial decree given following a non adversarial proceeding, without the decisory participation of any other authority or third party.





In order keep a mining concession valid and in effect, it is necessary to pay an annual license fee (patent).  The patent payments must be made in advance during the month of March of each year.  Patent fee are calculated based upon the value of the Chilean Monthly Tax Unit (“M.T.U.”) which varies from month to month.  In the case of an exploitation concession the annual patent fee is calculated as one-tenth (1/10th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/10th = 3,941.2 Chilean Pesos per hectare which, at the Observed US$/Peso exchange rate of 485.71 at March 15, 2012 equated to approximately US$8.11 per hectare for exploitation concessions).  In the case of an exploration concession the annual patent fee is calculated as one-fiftieth (1/50th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/50th = 788.24 Chilean Pesos per hectare which, at the Observed US$/Peso exchange of 485.71 rate at March 15, 2012 equated to approximately US$1.62 per hectare for exploration concessions).  Should the holder of the concession fail to pay the fee within the designated period, judicial procedures to publicly auction the concession may be instituted.





A foreign corporation may hold mining rights over mining concessions in Chile without restrictions and without any discrimination regarding Chilean nationals.





Regulatory matters could impact our ability to conduct our business in Chile




As our operations are primarily related to the exploration of our properties, many governmental regulations relating to mining activities are not yet applicable to us.





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Our potential mining processing operations and exploration activities in Chile are subject to various laws governing land use, the protection of the environment, prospecting, development, production, exports, taxes, labour standards, occupational health, mine safety and other matters.  Such operations and exploration activities are also subject to substantial regulation under these laws by governmental agencies and may require that we obtain permits from various governmental agencies.  We believe we are in substantial compliance with all material laws and regulations which currently apply to our activities.  There can be no assurance, however, that all permits which we may require for future operations will be obtainable on reasonable terms or that such laws and regulations would not have an adverse effect on any mining project which we might undertake.





Failure to comply with laws and regulations may result in orders being issued thereunder which may cause operations to cease or be curtailed or may require installation of additional equipment.  Violators may be required to compensate those suffering loss or damage by reason of their mining activities and may be subject to fines or penal sanctions if convicted of an offense under such legislation.





Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a material adverse impact on us or prevent development of our mining properties.





Chilean environmental legislation requires that the mining concessionaire obtains the prior authorization from the applicable environmental authorities to initiate any exploration or exploitation activity and for this purpose the mining concessionaire shall need to present an environmental assessments or an environmental impact study. Chilean environmental legislation defines the requisites that these studies have to fulfill, and the general mechanisms for controlling and ensuring compliance with such legislation. These reports entail a detailed technical and scientific assessment of the site and surrounding environmental as well as a prediction of the impact of proposed development on the environment.  Such authorizations and reports can add to the cost and time frame associated with any potential project development.





Environmental legislation in Chile imposes potential liability on owners and/or operators of mining facilities which release hazardous substances into the environment and are required to carry out their operations using methods and techniques not liable to cause damage to the environment or the land-owner.





Foreign investments in Chile can be repatriated under the Foreign Investment Regulations contained in Decree Law 600, the Foreign Investment Statute, which is based on the principle of non discrimination between foreign and local investors.  Foreign investors may enter into a foreign investment contract with the Republic of Chile where the terms of the investments, access to foreign currency, tax matters and other importation and exportation terms can be agreed upon for a term of 10 years or 20 years, if the investment is of an amount that exceeds US$50,000,000.  Chile and Canada entered into a Free Trade Agreement (“FTA”), which has been in effect since July 5, 1997.  This FTA enables Canadian investors to export products of Canadian origin into Chile without paying any custom duties and obtain relief under the double taxation provision, pursuant to which taxes paid in Chile on income generated by operations in Chile, including mining, will be used as a tax credit for the taxes levied in Canada on such income.





At present, the income of corporations, limited liability companies and mining companies is taxed in two stages; first, when income is accrued and or perceived, in a yearly basis, the corporate income is taxed with an income tax at a rate of 20% which was established in the year 2011 and future years; and second, when profits are distributed and remitted abroad to shareholders or partners without domicile in Chile, these profits are subject to a 35% Additional Tax rate, with a credit for the income tax paid by the corporation in Chile equivalent to 20% as stated above.  The foregoing taxes may affect the future profitability of any potential mining operations on our properties.  Operations in the mining sector may also be subject to an additional taxation, the Mining Royalty.  Pursuant to Law 20.026  (published in the Official Gazette dated June 16, 2005), amended by Law 20.469 a Royalty Payment was incorporated into the Income Tax Law which established an specific taxation to mining exploitation, known as “Mining Royalty”.  This specific tax is to be paid by any individual or legal entity who exploits concessionable mineral substances and sells any mineral products.  This specific tax applies to any mining exploitation in which annual sales exceed 50,000 metric tons of fine copper, applying in this case a tax rate which ranges from 0.5% to 34.5%, calculated over fine copper per ton and operational margins, when they exceed 80.000 metric tons.  This rate decreases if the annual production of fine copper is less than 50,000 metric tons of fine copper and more than 12,000 metric tons of fine copper, in which case the amount that exceeds the 12,000 metric tons and is less than 15,000 metric tons will be taxed at a rate of 0.5%.  There is a scale in relation to production and sales up to the amount of 50,000 metric tons of fine copper per year and exceeds this amount over 85.000 metric tons of fine copper as indicated.  In addition, to determine this Royalty, the mining concessionaire is entitled to deduct from the income generated in the sale of the mining products, all the costs necessary to produce the income, in accordance with the terms contemplated in the Income Tax Law.  If additional special taxes or royalties were to be imposed in the future upon operations in the mining sector, this may affect the future profitability of any potential mining operations on our properties.





Foreign currency exchange is regulated by the Central Bank of Chile under Chapter XIV of its Foreign Exchange Regulations.  Currently there is no restriction on bringing investments or credits into Chile, provided that such investments and credits are registered with the Central Bank of Chile in accordance with Chapter XIV of The Foreign Exchange Regulations.  Credits granted for periods of over 1 year are subject to a stamp tax of 0.6% of the amount of the loan and the Stamp Tax also will affect loans granted for less than 1 year at a reduce rate of 0.05% per month.  Interest on loans granted by banks and financial institutions are subject to a 4% tax levied upon remittance of the interest payment to the lender bank or financial institution.





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Bolivian Interests - There are certain specific risks associated with mineral exploration activities and property ownership in Bolivia.




The process for acquiring, holding and developing an interest in mineral properties in Bolivia is different from procedures for acquiring mining claims in Canada or the United States and involves a number of risks not applicable in those jurisdictions.  In addition, recent legislative, judicial and political changes have seriously added to the risk of conducting mineral operations in Bolivia.





We acquired our property interests in Bolivia under the former Law No. 1777 enacted on March 17, 1997 (the “Former Code”), which governed the rights and obligations associated with mineral concessions in Bolivia.  Under the Former Code, individuals and corporations were allowed to apply for mining concessions on and subject to certain rules respecting application and filing for such concession, which granted the lawful holder the right to explore for minerals on such concession and, subject to further requirements and qualifications, the right to own and conduct mineral operations on such concession, as well as the right to transfer such concession in compliance with certain prescribed registration and transfer requirements.  The Former Code also restricted ownership of any properties within 50 km of any international border of Bolivia or the “Frontier Zone” to a Bolivian national or a corporation owned by a Bolivian national(s), provided that such nationals were permitted to enter into a joint venture agreement with a foreign party subject to certain rules as to the form of joint venture and its operation.  Our interests within the Frontier Zone (Santa Isabel Property, Eskapa Property, El Desierto Property) are held under joint venture agreements with a Bolivian national.  In particular, the Eskapa Property and El Desierto Property mineral concessions are owned by Empresa Minera El Roble S.A. (“El Roble”), a company controlled by a Bolivian national, Patricio Kyllmann, a former director of SAMEX.  Our Bolivian subsidiary, Empresa Minera Boliviana S.A. (“Emibol S.A.”), earned a 99% interest in any mining operations which may be established on the concessions pursuant to an agreement (originally with Multimin S.A., a company also formerly controlled by Patricio Kyllmann) dated April 16, 1996 and as amended November 23, 1998 with El Roble and our Santa Isabel Property is held under a joint venture agreement with the Bolivian state mining company, Corporacion Minera de Bolivia (“COMIBOL”) (see “Item 4 – Information on the Company).





The legal effect of the Former Code has been seriously affected by subsequent legislative and judicial action, resulting in serious concern as to the status of our Bolivian concessions and our rights and obligations with respect thereto.





On May 10, 2006, the Bolivian Constitutional Tribunal determined, under Constitutional Verdict 0032/2006, that the Former Code was unconstitutional in that, under the constitution then in effect (the “Old Constitution”), all natural resources belonged to the State and therefore mining concessions could not be sold, mortgaged, transferred or inherited.  The tribunal ruled that the Bolivian Parliament would be required to make a number of specific changes to the Former Code in order to comply.  Parliament was given two years to make these changes, which did not occur.  As a result of this decision, the transfer, mortgage or testamentary disposition of mineral concessions may no longer be permitted in Bolivia. This decision has had a significant adverse effect on the ability of concession holders to dispose of their interest.  There does not yet appear to be any restriction on disposition of the shares of companies which own mineral concessions (which is the case for all of the Company’s Bolivian properties).  However, this also is not entirely clear.





On May 1, 2007, the Bolivian government issued Supreme Decree N. 29117 which declared the whole country to be a “mining fiscal reserve”.  This decree granted COMIBOL the right to administer this reserve, and further gave the right to explore the reserve to the government Geological and Technical Mining Service.  This decree effectively eliminated the entire mining concession system in Bolivia, other than filings made before May 1, 2007.





On January 25, 2009 a new constitution was approved by referendum (the “New Constitution”) which, among other things, provides that all natural resources belong to the Bolivian people and will be administered by the State for their collective interest.  This altered the Old Constitution which provided that all natural resources belong to the State, which could grant concessions according to the law, (in this case the Former Mining Code).  This new provision has given rise to numerous land title claims, particular from aboriginals living near mining concessions.  It is unclear at this time how this provision will be interpreted.





The New Constitution also provides that in relation to any mining concessions granted to national and foreign companies before the enacting of the New Constitution, the companies must sign mining contracts with the Ministry of Mining and Metallurgy (MMM), the signing of which must be within six months of the enactment of a new mining code, which has not yet been enacted.  This provision affects all of our mining concessions in Bolivia, other than possibly our Santa Isabel property, which is held under an existing joint venture agreement with COMIBOL.





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The New Constitution also provides the State must ensure reinvestment of profits from mining operations in Bolivia.  The provision does not state what portion of profits will need to be re-invested, so the effect of this provision is not clear at this time.





As a result of a referendum held on December 6, 2009, under the New Constitution, all nine departments in Bolivia are now autonomous regions that are entitled to create and administer their own taxes. Accordingly, the application and effect of this provision in relation to taxing mineral concessions is uncertain at this time.





A new mining code has been proposed to replace the Former Code, but such legislation has not yet been enacted.  While the new proposed code may resolve some of the uncertainty created by the above legislative and judicial actions, its final content and effect are uncertain.   As a result, we have concluded, the foregoing changes taken as a whole, appear to be highly prejudicial to our interests and seriously adversely affect the viability of prospective mineral projects in Bolivia.   We have also concluded that our rights and obligations with respect to our Bolivian mineral interests, are at best, uncertain.





In light of these and other factors we decided that our mineral interests in Bolivia are subject to a high degree of risk, including a risk of the loss of the entire economic benefit of our mineral interests.  Accordingly, in 2009 we decided to suspend all exploration activities in Bolivia and put all of our Bolivian projects on “care and maintenance” status.  Due to the inactivity on the Bolivian properties, the property interest for the Eskapa Property, the El Desierto Property and the Santa Isabel Property was each written down to a nominal value of $1,000 resulting in a combined valuation of only $3,000 for our Bolivian properties at December 31, 2011.   While we hope we will be able to return to exploring our Bolivian properties at some time in the future, we do not anticipate we will be able to do so as long as current political conditions persist.  There can be no assurance that these conditions will improve or, if so, when such changes might take place.





Currency exchange rate fluctuations could adversely affect our operation.




Our functional currency is the Canadian Dollar, and we have obligations and commitments in other currencies including Chilean Pesos, United States Dollars, and Bolivian Bolivianos.  Fluctuations in foreign currency exchange rates may affect our results of operations and the value of our foreign assets, which in turn may adversely affect reported financial figures and the comparability of period-to-period results of operations.  (See “Currency and Exchange Rates”)





We are a foreign corporation and most of our directors and officers are outside of the United States, which may make enforcement of civil liabilities difficult.




We are incorporated under the laws of the Province of British Columbia, Canada.  All of our directors and officers are residents of Canada, with the exception of Robert Kell (who resides in the United States), and all of our assets are located outside of the United States.  Consequently, it may be difficult for United States investors to effect service of process within the United States upon those directors or officers who are not residents of the United States, or to realize in the United States upon judgments of United States courts predicated upon civil liabilities under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”).  A judgment of a US court predicated solely upon such civil liabilities would probably be enforceable in Canada by a Canadian court if the US court in which the judgment was obtained had jurisdiction, as determined by the Canadian court, in the matter.  There is substantial doubt whether an original action could be brought successfully in Canada against any of such persons or us predicated solely upon such civil liabilities.





We do not intend to pay cash dividends.




We have never, and we do not have any intention of paying cash dividends in the foreseeable future.  In particular, there can be no assurance that our Board of Director’s will ever declare cash dividends, which action is completely within their discretion.





We have reserved 33,586,888common shares for future issuance, which if issued may cause dilution in the value of currently issued and outstanding shares.




As of May 23, 2012, we reserved 11,555,000 common shares for issuance on the exercise of incentive stock options (at a weighted average exercise price of $0.70).  In addition we reserved 22,031,888 common shares for issuance upon the exercise of outstanding warrants (at a weighted average exercise price of $0.61).  If such options and warrants are fully exercised, such common shares would constitute 26.5% of our share capital.  The exercise of such options and the subsequent resale of such common share in the public market could adversely affect the prevailing market price and our ability to raise equity capital in the future at a time and price which it deems appropriate.  We may also enter into commitments in the future which would require the issuance of additional common shares and we may grant additional share purchase warrants and stock options.  See Item 6.  “Compensation – Incentive Stock Options”





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Likely Passive Foreign Investor Company (“PFIC”) Status Has Possible Adverse Tax Consequences for U.S. Investors





Current holders of and potential investors in our common shares who are U.S. taxpayers should be aware that SAMEX believes it was a passive foreign investment company (“PFIC”) for the tax year ended December 31, 2011 and may also be a PFIC in subsequent tax years.  If SAMEX is a PFIC for any year during a U.S. taxpayer’s holding period, then such U.S. taxpayers generally will be required to treat any so-called “excess distribution” received on its common shares, or any gain realized upon a disposition of common shares, as ordinary income and to pay an interest charge on a portion of such distributions or gain, unless the taxpayer makes a qualified electing fund (“QEF”) election or a mark-to-market election with respect to the shares of SAMEX.  In certain circumstances, the sum of the tax and the interest charge may exceed the amount of the excess distribution received, or the amount of proceeds of disposition realized, by the taxpayer.  A U.S. taxpayer who makes a QEF election generally must report on a current basis its share of SAMEX’s net capital gain and ordinary earnings for any year in which SAMEX is a PFIC, whether or not SAMEX distributes any amounts to its shareholders. However, U.S. taxpayers should be aware that there can be no assurance that we will satisfy record keeping requirements that apply to a QEF, or that we will supply U.S. taxpayers with information that such U.S. taxpayers require to report under the QEF rules, in event that we are a PFIC and a U.S. taxpayers wishes to make a QEF election.  Thus, U.S. taxpayers may not be able to make a QEF election with respect to their common shares.  Each U.S. taxpayer should consult its own tax advisor regarding the availability of, and procedure for making, a QEF election.   A U.S. taxpayer who makes the mark-to-market election generally must include as ordinary income each year the excess of the fair market value of the common shares over the taxpayer’s basis therein.  U.S. taxpayers are advised to seek the counsel of their professional tax advisors.  This paragraph is qualified in its entirety by the discussion below under the heading “Taxation—Certain U.S. Federal Income Tax Considerations.”  Each U.S. taxpayer should consult his or her own tax advisor regarding the PFIC rules.  See Item 10. “Taxation – Certain U.S. Federal Income Tax Considerations”.





Economic conditions and fluctuation and volatility of stock price may negatively impact shareholder value





The market price of our common shares is highly volatile.  If investors’ interest in the sector in which we operate declines, the price for our common shares would likely also decline.  In addition, trading volumes in our common shares can be volatile and if the trading volume of our common shares experiences significant changes, the price of our common shares could be adversely affected.  The price of our common shares could also be significantly affected by other factors, many of which are beyond our control.





Fluctuations in economic conditions, such as the continuing downturn in the global economy, may also significantly affect our ability to meet our objectives which could adversely affect our share price.





Broker-dealers may be discouraged from effecting transactions in our shares because they are considered a penny stock and are subject to the penny stock rules.




Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales practice and disclosure requirements on certain brokers-dealers who engage in certain transactions involving “a penny stock.” Subject to certain exceptions, a penny stock generally includes any non-NASDAQ equity security that has a market price of less than US$5.00 per share.  The market price of our shares during the fiscal year ended December 31, 2011 and thereafter to May 23, 2012 ranged between CDN$0.20 and CDN$1.50 and our shares are deemed penny stock for the purposes of the Exchange Act.  The additional sales practice and disclosure requirements imposed upon brokers-dealers may discourage broker-dealers from effecting transactions in our shares, which could severely limit the market liquidity of the shares and impede the sale of our shares in the secondary market.





Under the penny stock regulations, a broker-dealer selling penny stock to anyone other than an established customer or “accredited investor,” generally, an individual with net worth in excess of US$1,000,000 or an annual income exceeding US$200,000, or US$300,000 together with his or her spouse, must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt.  In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the United States Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt.  A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative and current quotations for the securities.  Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer’s account and information with respect to the limited market in penny stocks.





As a foreign private issuer, our shareholders may have less complete and timely data.




The Company is a “foreign private issuer” as defined in Rule 3b-4 of the Exchange Act.  Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3 of the Exchange Act.  Therefore, the Company is not required to file a Schedule 14A proxy statement in relation to the annual meeting of shareholders.  The submission of proxy and annual meeting of shareholder information on Form 6-K may result in shareholders having less complete and timely information in connection with shareholder actions. The exemption from Section 16 rules regarding reports of beneficial ownership and purchases and sales of common shares by insiders and restrictions on insider trading in our securities may result in shareholders having less data and there being fewer restrictions on insiders’ activities in our securities.





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Recent market events and conditions




During 2011, the global economy was still experiencing the after-shocks of the 2008-2009 financial crisis, as well as the impact of measures taken to counteract its effects.  While improvements were noted, particularly in Canada and certain emerging economies, many parts of the world experienced only modest or negative growth in 2011.  The United States continued to experience sluggish growth and persistent high levels of unemployment along with large fiscal deficits and unprecedented levels of government debt, which reached a staggering $15.18 trillion by December 31, 2011.  These and other factors gave rise to mounting concerns about the ability of the US government to manage its sovereign debt and led to the historic loss of its AAA credit rating during 2011.  Conditions throughout the Euro-zone area continued to deteriorate with most member countries experiencing very low or negative growth by, and growing concern over a possible sovereign debt default in Greece and other countries, leading to widespread concern over the possible collapse of the Euro-zone as now constituted, the failure of the Euro as an international reserve currency and the possibility of contagion.  In addition, new concerns began to develop over the appearance of asset bubbles in China, leading to fears of a wider slowdown.





In light of, and likely in response to these and other factors, the price of gold rose significantly during 2011 reaching over $1,900 in August, 2011 before dropping back to a $1,600 to $1,700 range.  Silver rose to over $48 in April 2011 before dropping back to a $30-32 range by year-end.  Along with the increase in precious metal prices, the market for shares of junior precious metal explorers also improved, offering greater access to capital during the first half of 2011.  Since then, while precious metal prices have remained relatively strong with some volatility, the market for the shares junior exploration companies has declined significantly, making it much more difficult for companies like Samex to raise capital for exploration.  While this has not had a direct effect on the Company since we currently have sufficient funds on hand to cover our anticipated expenditures during the upcoming year and beyond, it may impact our future operations since we are dependent upon our ability to access capital markets in order to fund our programs.  Additional capital may not be available on terms acceptable to us or at all.





General economic conditions




The recent unprecedented events in global financial markets have had a profound impact on the global economy. Many industries, including the gold mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations and high volatility in global equity, commodity, foreign exchange and precious metal markets, and a lack of market liquidity. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates, and tax rates may adversely affect our growth and profitability.  Specifically:




●
Adverse global credit/liquidity conditions could impact the cost and availability of financing and our overall liquidity;


●
the volatility of gold, silver and copper prices may impact our revenues, profits and cash flow;


●
volatile energy prices, commodity and consumables prices and currency exchange rates impact potential production costs; and


●
the devaluation and volatility of global stock markets impacts the valuation of our equity securities





These factors could have a material adverse effect on our financial condition and results of operations.




ITEM 4.  INFORMATION ON THE COMPANY




4.A. History and Development of the Company.




Samex Mining Corp. was originally incorporated as Silver Duke Mines Ltd. (N.P.L.) on December 15, 1967 under the Company Act of British Columbia, Canada.  We changed our name and consolidated our share capital as set forth below on the following dates:




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Date
Name
Consolidation (Old:New)December 15, 1967
Silver Duke Mines Ltd. (N.P.L.)
Not applicableFebruary 3, 1976
Totem Resources Ltd. (N.P.L.)
4:1June 9, 1978
Paragon Resources Ltd. (N.P.L.)
Not applicableMay 13, 1981
Paragon Resources Ltd.
Not applicableSeptember 11, 1995
SAMEX Mining Corp.
5:1





Effective May 28, 1999, we increased our authorized capital from 100,000,000 shares divided into 50,000,000 common shares without par value and 50,000,000 preferred shares without par value, none of which preferred shares are issued, to 150,000,000 shares divided into 100,000,000 common shares without par value and 50,000,000 preferred shares without par value, none of which preferred shares are issued.





Change in Articles





On March 29, 2004, the corporate legislation under which we were incorporated, the Company Act (British Columbia), was repealed and was replaced with the new Business Corporations Act (British Columbia).   Because of this change, we were required to undertake certain transitional steps set out under the Business Corporations Act, including filing a Transition Application, which, among other things, replaced our former Memorandum of Incorporation with new Notice of Articles and which adopted certain provisions under the Business Corporations Act known as the “Pre-existing Company Provisions”.  This step was completed on February 11, 2005.  We were also required to amend our Articles to comply with the new legislation.  Coincidentally with these changes, we also altered our authorized share structure to eliminate the maximum number of common shares and preferred shares that the Company is authorized to issue, effective June 13, 2005.  See Item 10. “Additional Information – Changes to Corporate Legislation”.




Change In Year-End






During the fourth quarter of fiscal 2005,we changed the Company’s fiscal year-end to synchronize it with the year-end of our Chilean subsidiary and with the quarter ends of our Bolivian subsidiaries.  The change helps make the Company’s accounting and reporting process more streamlined and efficient.  The Company’s old financial year-end of November 30th was extended one additional month and the Company’s new financial year-end is now December 31st.




Subsidiaries





We have six subsidiaries, all of which are described below.  The present inter-corporate relationship between us and our subsidiaries is illustrated in the following chart:




SAMEX Mining Corp.

(British Columbia, Canada)

Listed on TSX Venture ExchangeSouth American Mining & Exploration Corp.

(British Columbia, Canada) 100%
Minera Samex Chile S.A.

(Chile) 99.9%Samex International Ltd.

(Bahamas) 100%

Bolivex S.A.

(Bolivia)
 98%Samex S.A.

(Bolivia) 98%

Emibol S.A.

(Bolivia) 98%






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Minera Samex Chile S.A.




Minera Samex Chile S. A. (“Samex Chile”) was incorporated in Santiago, Chile on July 5, 2002.  The directors and officers of Samex Chile are Jeffrey P. Dahl, Robert E. Kell and Allen D. Leschert and the alternate directors are Francisco Vergara, Felipe Garcia and Pedro Lyon.  Of the 1,000 issued and outstanding common shares, 999 shares are held by SAMEX Mining Corp. and 1 share is held by Francisco Vergara, our Chilean legal counsel.   Samex Chile’s principal assets are its interest in mineral concessions at the Los Zorros, Chimberos, Inca, and Espejismo properties in Chile.





South American Mining & Exploration Corp.




South American Mining & Exploration Corp. (“S.A.M.E.X. Corp.”) was incorporated in British Columbia on November 24, 1993.  S.A.M.E.X. Corp. was involved principally in the acquisition and exploration of mineral properties through its operating subsidiaries in Bolivia.  Its authorized share capital consists of 100,000,000 common shares with 7,925,001 shares outstanding, all of which are held by us.




SAMEX International Ltd.




SAMEX International Ltd. (“SAMEX International”) was incorporated as an international business company under the laws of the Commonwealth of the Bahamas on August 4, 1995.  The directors and officers of SAMEX International are Patricio Kyllmann (Director, President and Secretary) and Kenneth Taves (Director).  Its authorized share capital consists of 5,000 common shares of which 100 are issued and outstanding, all of which are held by S.A.M.E.X. Corp.  SAMEX International functions as an international holding and finance company and holds 98% of the shares of each of SAMEX S.A. and Emibol S.A.




SAMEX S.A.




SAMEX S.A. was incorporated under the laws of the Republic of Bolivia on May 10, 1994. SAMEX S.A. has authorized capital of 500,000 Bolivianos (“Bs.”) and paid up capital of 250,000 Bs. represented by 100 common shares issued with a nominal value of 2,500 Bs. each. Of the 100 issued and outstanding shares, 98 are held by SAMEX International and the remaining 2 shares are held by each of Jeffrey Dahl and Peter Dahl, directors of SAMEX.  SAMEX S.A.’s only asset is its interest in a portion of the Goya I/El Bonete concession which form the Santa Isabel property.  We have suspended exploration activities in Bolivia due to concern over the current legal and political situation.  See “Item 3. Risk Factors – Bolivian Interests”.




Bolivex S.A.




Minas Bolivex S.A. (“Bolivex S.A.”) was incorporated under the laws of the Republic of Bolivia on September 23, 1994. Bolivex S.A. has authorized capital of 500,000 Bs. and paid up capital of 250,000 Bs. represented by 100 common shares issued with a nominal value of 2,500 Bs. each.  Of the 100 issued and outstanding shares, 98 are held by S.A.M.E.X. Corp. and the remaining 2 shares are held by each of Jeffrey Dahl and Peter Dahl, directors of SAMEX.  Bolivex S.A’s. only asset, was the Walter Property that we abandoned in the first quarter of 2009.  We have suspended exploration activities in Bolivia due to concern over the current legal and political situation.  See “Item 3. Risk Factors – Bolivian Interests”.




Emibol S.A.




Empresa Minera Boliviana S. A. (“Emibol S.A.”) was incorporated under the laws of the Republic of Bolivia on August 22, 1995.  Emibol S.A. has authorized capital of 200,000 Bs. and paid up capital of 100,000 Bs. represented by 100 common shares issued with a nominal value of 1,000 Bs. each.  Of the 100 issued and outstanding shares, 98 are held by SAMEX International and the remaining 2 shares are held by each of Jeffrey Dahl and Peter Dahl, directors of SAMEX.  Emibol S.A.’s assets are its interests in the El Desierto and Eskapa properties in Bolivia. We have suspended exploration activities in Bolivia due to concern over the current legal and political situation.  See “Item 3. Risk Factors – Bolivian Interests”.





Principal Expenditures And Divestitures





Since the beginning of the last three financial years, our principal capital expenditures or divestitures include the following:





During fiscal 2011, we entered into an option contract to acquire additional concessions adjacent to the Los Zorros Property.  Under a Unilateral Option Contract dated June 28, 2011 between Cristian Marcelo Aravena Caullan and our subsidiary Minera Samex Chile S. A. ("the Aravena Option"), SAMEX can acquire 100% interest in mineral concessions covering approximately 2,900 hectare adjacent to the Los Zorros property by paying the 2011/2012 patent payments (paid) and by making option payments totaling the Chilean Peso-equivalent of US$245,345 as follows: US$60,000 upon signing the Option (paid); U.S. $95,345 due January 31, 2012 (paid); and US$90,000 by January 31, 2013.





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During fiscal 2011 we purchased 20 hectares of mineral concessions in the INCA project area held under a Unilateral Option Purchase Contract dated May 25, 2006 between Oscar David Rojas Garin and our subsidiary Minera Samex Chile S. A. (the "Rojas Option"). Under the Rojas Option, the Company had the right to acquire the concessions in consideration of the Chilean Peso-equivalent of US$300,000 (US$150,000 of which the Company had previously paid).  During 2011, the Company paid the Chilean Peso-equivalent of US$150,000 to purchase a 100% interest in these mineral concessions.





During 2009, we wrote down the value of all of our mineral properties in Bolivia to nominal consideration and placed the properties on “care and maintenance” status due to concerns over the prevailing legal and political climate in Bolivia.  See “Item 3. Risk Factors – Bolivian Interests”.





We have not made any acquisitions of other companies and our shares are not subject to any public takeover offers.  Neither we nor any of our subsidiaries have been involved in any bankruptcy, receivership or similar proceedings.





Our head office is located at #301 – 32920 Ventura Avenue, Abbotsford, British Columbia, V2S 6J3.   The address for our registered and records office is #2760 – 200 Granville Street, Vancouver, British Columbia, V6C 1S4.  The phone number of our head office is (604) 870-9920.  In South America, we have a field office in Copiapo, Chile.





4.B. Business Overview.




Fiscal Year Ending December 31, 2011 (“FYE 2011”)





During FYE 2011, we focused our activities in Chile where we continued exploration principally on our Los Zorros Property.  Our mineral interest and exploration costs for the fiscal year ended December 31, 2011 included "Exploration And Evaluation Assets" costs totaling $3,345,249 and "Mineral Interests Administration And Investigation" expenses totaling $287,369.





We continued a drilling program at the Los Zorros Property that had commenced during 2010.  In late January 2011 we started a substantial geophysical survey (at a cost of US$280,000) over portions of the Los Zorros district.  During the second quarter ended June 30, 2011, the information gained from the drilling, assaying and the geophysical survey was evaluated and complied in preparation for more drilling which commenced early in the third quarter.  During the later part of 2011 the Company engaged a consulting geophysicist to assist in the interpretation and correlation of geophysical data and we expanded the exploration program at Los Zorros by adding a second drill rig, three more geologists, and additional support staff at the camp.  Exploration at Los Zorros during 2011 included drilling 13 core drill holes for a total of 6,335 meters drilled.  We also commenced expansion of the Los Zorros camp and support facilities to accommodate the additional geologists and support workers and adding additional core logging, sampling, and core-saw equipment to facilitate increased exploration and drilling activities.





During FYE 2011, we also further expanded the Los Zorros land holdings: we entered into a Unilateral Option Contract dated June 28, 2011 with Cristian Marcelo Aravena Caullan ("the Aravena Option") to acquire a 100% interest in approximately 2,900 hectares of additional mineral concessions adjacent to the Los Zorros property by paying the 2011 patent payments (paid) and by making option payments totaling the Chilean peso equivalent of U.S. $245,345 as follows: U.S. $60,000 on signing (paid); U.S. $95,345 due January 31, 2012 (paid subsequent to the year) and U.S. $90,000 due January 31, 2013.





We also expanded our land holdings at the INCA property by staking additional concessions and by purchasing an additional 20 hectares of mineral concessions:  under a Unilateral Option Purchase Contract dated May 25, 2006 between Oscar David Rojas Garin and our subsidiary Minera Samex Chile S. A., the Company had an option to acquire concessions covering a 20-hectare portion of the Inca project for consideration of the Chilean Peso-equivalent of US$300,000 (US$150,000 of which the Company had previously paid).  During the third quarter, the Company paid the Chilean Peso-equivalent of US$150,000 to purchase a 100% interest in these mineral concessions (the "Rojas Option/Purchase").





During FYE 2011, we raised proceeds of $4,675,500 from the exercise of warrants and proceeds of $60,000 from the exercise of stock options.  During fiscal 2010 and 1011 the Company used a portion of its cash to purchase gold and silver bullion to hold in lieu of cash.  At December 31, 2011, the Company held 87,362.448 grams (2,809 ounces) of gold and 50,018.674 ounces of silver which had a fair value of $5,807,372.  The fair value of the Company's gold and silver bullion holdings is determined by the closing prices of gold and silver at the date of the period/year end and also the US dollar exchange rates on these dates. There was a gain of $433,233 on the gold and silver bullion holdings for fiscal 2011.





Fiscal Year Ending December 31, 2010 (“FYE 2010”)





During FYE 2010 we focused our exploration activities principally on our Los Zorros property in Chile.  Our exploration/mineral interests costs for FYE 2010 totaled $1,523,911.





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Our exploration work during the first, second and third quarters of 2010 was conducted at four individual projects situated within our Los Zorros gold property holdings in Chile.  The work included bulldozer trenching, sampling, assaying and construction of roads and drill pads at the Milagro, Nora, Cinchado and Milagro Pampa Projects in preparation for drilling programs to test these four projects for multiple precious metal deposits.  By the end of the third quarter we commenced exploration core drilling which continued through the fourth quarter of 2010 and into the first quarter of 2011.  During 2010 we also conducted meetings and property tours for mining companies interested in our Inca Property in Chile.





We raised a total of $10,162,060 during FYE 2010 from two private placements at a price of $0.30 per unit and at $0.50 per unit and from the exercise of warrants.





Fiscal Year Ending December 31, 2009 (“FYE 2009”)





During FYE 2009 our exploration activities were focused on our gold and silver projects in Chile.  Our exploration/mineral interests costs for FYE 2009 totaled $1,292,461.





During the first quarter of 2009, we resumed exploration work at our Los Zorros gold project in Chile including re-logging some of our previous drill core and further geologic mapping. We also conducted some preliminary sampling and assaying at our Chimberos silver/gold prospect in Chile.  We concluded the compilation and reporting of Phase I exploration results for the INCA copper-gold-molybdenum property and conducted property visits for companies who expressed interest in possible joint-ventures on this project.  During the first quarter, we made an option payment and an advance royalty payment related to our mineral properties in Chile, and completed a private placement financing raising gross proceeds of $783,050.  During the second quarter 2009, we continued our work related to gold and silver exploration at the Los Zorros project.  We also raised gross proceeds of $600,000 through the private placement of 3,000,000 units at $0.20 per unit.  During the third quarter, we continued exploration at the “Nora Project” and the “Cinchado Project” of our Los Zorros Property in Chile that we are exploring for gold deposits.  Detailed geologic mapping, re-logging of some Phase I drill core, and drafting of cross-sections and drill plans was conducted in preparation for the next phase of drilling in these two project areas.  During the third quarter, we also completed the final option payment under the “Araya Option” to acquire the Providencia Mine concessions situated within the greater INCA project area.   During the fourth quarter of 2009 we continued exploration at the “Nora Project” and the “Cinchado Project” of the Los Zorros Property.  We also conducted meetings and property tours at our Inca Property for mining companies interested in that property.  The Company received proceeds of $1,203,000 through the exercise of warrants during the fourth quarter of 2009.





Plans and Projections, 2012 - The Company's exploration activities over the next year will continue to be focused on our gold and silver projects in Chile including the Los Zorros property and the Chimberos property.  The Company will also continue to conduct meetings and property tours with parties interested in our INCA copper-gold-molybdenum property in Chile in an effort to arrange a joint venture or sale of all or a portion of the INCA property.





We raised a total of $10,162,060 during FYE 2010 from two private placements and the exercise of warrants, and during FYE 2011 we raised proceeds of $4,735,500 from the exercise of warrants and stock options.  Based on the cash and gold and silver bullion on hand, we believe we have sufficient funds to conduct our ongoing general operations and to fund our proposed exploration programs over the next year.  Beyond that time, it will be necessary to raise additional financing in order to fund our ongoing general operations and exploration programs.  We propose to raise the required funds through the issuance of securities, by way of either private placement, exercise of warrants, by public offering and/or joint venture or sale of certain mineral properties in order to fund our exploration.  Although we anticipate we will be able to complete equity placements sufficient to meet our capital requirements, there can be no assurance that we will be able to do so on terms favorable to us or at all.  See Item 4 “Information on the Company” – “Description of Property” - “Los Zorros Property”.  See “Special Note Regarding Forward Looking Statements”.





WE ARE AN EXPLORATION STAGE COMPANY AND HAVE NO MINERAL PRODUCING PROPERTIES AT THIS TIME.  ALL OF OUR PROPERTIES ARE EXPLORATION PROJECTS, AND WE RECEIVE NO REVENUES FROM PRODUCTION.  ALL WORK PRESENTLY PLANNED BY US IS DIRECTED AT DEFINING MINERALIZATION AND INCREASING UNDERSTANDING OF THE CHARACTERISTICS AND ECONOMICS OF THAT MINERALIZATION.  THERE IS NO ASSURANCE THAT A COMMERCIALLY VIABLE MINERAL DEPOSIT EXISTS IN ANY OF OUR PROPERTIES NOR DO WE ANTICIPATE SAME UNTIL AFTER COMPLETION OF FURTHER EXPLORATION WORK AND A COMPREHENSIVE EVALUATION BASED UPON UNIT COST, GRADE, RECOVERIES AND OTHER FACTORS CONCLUDE ECONOMIC FEASIBILITY.  THE INFORMATION CONTAINED HEREIN RESPECTING OUR MINERAL PROPERTIES IS BASED UPON INFORMATION PREPARED BY OR THE PREPARATION OF WHICH WAS SUPERVISED BY GEOLOGIST, ROBERT KELL, OUR VICE PRESIDENT EXPLORATION AND DIRECTOR OF THE COMPANY AND COMPANY GEOLOGIST, PHILIP SOUTHAM, P. Geo.   MR. KELL AND MR. SOUTHAM ARE “QUALIFIED PERSONS” PURSUANT TO CANADIAN SECURITIES NATIONAL INSTRUMENT 43-101 CONCERNING STANDARDS OF DISCLOSURE FOR MINERAL PROJECTS.





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Description of Property




CHILEAN PROPERTIES









LOS ZORROS PROPERTY, Chile





The Los Zorros Property in the Atacama region of northern Chile is located approximately 60 kilometers south of the city of Copiapo, Chile.  The property is accessed by vehicle by driving approximately 60 kilometers south of the city of Copiapo on the paved, four-lane Pan American Highway (Highway 5) then traveling 5.5 kilometers east on a government maintained dirt road to the western boundary of the property and a further 4 kilometers to the Company’s exploration camp.  Although gold is the primary focus of SAMEX’s exploration at Los Zorros, important values of silver and copper are also present in certain target areas.





The Los Zorros property consists of multiple project areas that have now been strategically expanded to cover more than 100 square kilometers within a district of scattered numerous small mines and prospects where there was sporadic attempts at small-scale production for gold and copper-silver in the past.   What has been revealed geologically at Los Zorros has provided SAMEX with strong impetus to explore for multiple precious metal deposits that may be clustered beneath the widespread precious metal occurrences in this district of historic small mining activity. The property is situated at the convergence of important geologic and structural features and significant gold and copper-silver mineralized areas of Cinchado, Nora, Milagro, and Milagro Pampa. There are also many other mineral occurrences at Los Zorros yet to be systematically explored by SAMEX including: La Florida and Lora (gold and copper-gold), Virgen de Carmen and Colorina (copper-silver; possible deeper-seated gold and copper-gold), and Salvadora, Cresta de Gallo, and Trueno (barite vein systems with possible deeper-seated gold and copper-gold).





26





The Company has 100% interest in approximately 7,774 hectares of mineral concessions acquired by staking, purchase at government auction, purchase/option contracts, and we further expanded the Los Zorros land holdings during 2011 by signing the Aravena Option to acquire a 100% interest in approximately 2,900 hectares of additional mineral concessions adjacent to the Los Zorros property.  The Los Zorros land holdings now cover a 15 kilometer-strike of the prospective range front/anticline along which mineralization is exposed in old-time piquenero underground workings, open cuts, trenches and pits situated in the Colorina, Nora, Virgen del Carmen, Cresta de Gallo, and Trueno project areas.  Of particular significance, at May, 2012, the only acquisition payment remaining on our extensive accumulated land holdings at Los Zorros is the final Aravena Option payment of US$90,000 due by January 31, 2013.





During 2004, we completed 8,617 meters of diamond core drilling in 26 holes, 10,800 meters of bulldozer trenching in 65 trenches and more than 3,100 trench and surface samples/assays; and an additional 1,865 meters of trenching (10 trenches/559 samples) during 2005.  Our Phase I exploration yielded significant results including: Nora - DDH-N-04-05 with 15.96 g/mt gold over 7.66 meters, Trench TN-9 with 0.757 g/mt gold over 131 meters, and Trench TN-3 with 0.558 g/mt gold over 117 meters; Milagro - DDH-ML-04-01 with 2.579 g/mt gold over 4.4 meters true width; West Florida - trench TMW-10 with .405 g/mt gold over 138 meters; Cinchado - values ranging from 0.05 to 9.5 g/mt gold in 151 rock-chip samples of breccia in the open-cut of the old San Pedro mine.  Phase I exploration work was conducted on only a portion of the target/project areas that we have identified to-date at Los Zorros.  We resumed exploration at the Los Zorros Property in 2009 and work is continuing to the present time in 2012.





During the first quarter of 2011, the Company continued a drilling program at Los Zorros that had commenced during 2010.  In late January 2011 we started a substantial geophysical survey (at a cost of US$280,000) over portions of the Los Zorros district.  During the second quarter ended June 30, 2011, the information gained from the drilling, assaying and the geophysical survey was evaluated and complied in preparation for more drilling which commenced early in the third quarter, and is still in progress at the date of this report (April 2012).  During the later part of 2011 the Company engaged a consulting geophysicist to assist in the interpretation and correlation of geophysical data and we expanded the exploration program at Los Zorros by adding a second drill rig, three more geologists, and additional support staff at the camp.  We also commenced expansion of the Los Zorros camp and support facilities to accommodate the additional geologists and support workers and adding additional core logging, sampling, and core-saw equipment to facilitate increased exploration and drilling activities.   Exploration at Los Zorros during 2011 included drilling 13 core drill holes for a total of 6,335 meters drilled.  Exploration activity and results at Loz Zorros during and subsequent to 2011 are summarized below.





Cinchado Gold Project - Exploration core drilling was designed to test both beneath and the westward down-dip projected continuation of a prospective zone of strong jasperoid-barite vein/mantos alterations features.  Such features at the south end of Cerro Cinchado can be traced down into the gold-mineralized breccia (3 grams/tonne gold average grade) at the San Pedro mine. The iron-oxide character of the matrix to the mined breccia suggests that the clasts were cemented by considerable copper- and iron-sulfide.  The three drill holes, DDH-CC-10-01, -02, & -03, did not intersect the target, but instead found that a +250-meter thick diorite sill had been emplaced, post-mineralization/alteration, cutting through the target interval.





Titan 24 DC-IP & MT Geophysical Survey – The Titan-24 survey identified 47 interpreted geophysical anomalies, of which 19 anomalies are considered first priority anomalous zones for follow up with potential for sulphide and gold mineralization from near surface to >500m depth. The remaining 28 anomalies are second priority targets that represent small area anomalies, generally with weak to moderate responses near surface.





Approximately 14 of the 47 anomalies coincide with known areas of mineralization determined by surface workings, surface sampling or drilling, including 7 first priority anomalous zones and 7 second priority targets. The known target areas which have coincident anomalies are: (Cinchado, Cinchado East, Nora North – L100N), (Nora Central, Lora Southeast - L200N), (Milagro Pampa - L300N) and (Milagro Mine - L400N).





Milagro Gold Project – Two drill holes (DDH-MM-10-01 and -02) were completed as a follow up to test the eastward, down-dip projected continuation of a highly prospective gold-mineralized mantos intercepted in the 2004 program (DDH-MM-04-01 encountered 97.3 meters averaging 0.302 g/t gold, including 2.579 g/t gold over 4.7 meters and previously reported January 21, 2005).





The first hole DDH-MM-10-01 was sited 140 meters east of DDH-ML-04-01 and aimed inclined westward with the intention of making a relatively shallow intercept of the gold-mineralized mantos layer and underlying altered volcanic debris-flow breccia which too was found to be highly anomalous in gold averaging 0.167 g/t over 71 meters (from 31.7 to 102.7 meters).  The target interval was found, in the vicinity of the new drill site, to be displaced by a steeply westward dipping normal fault intersected between depths of 37 to 53 meters.  As a result, the hole penetrated through the fault gap and beneath the target interval intended to be drill tested.  However, the footwall (54 – 60 meters) to the fault zone was a strongly pyritized/silicified volcaniclastic debris flow breccia with high anomalous gold content (averaging 0.364 g/t).  Strongly altered quartz-sericite-pyrite altered volcaniclastic sediments and interlayered debris flow breccia intervals continued to a depth of 369 meters where the hole was stopped after penetrating well into weakly altered porphyritic diorite sill (354 – 369 meters).  This entire long interval (53 to 369 meters) continuously contains elevated detectible gold values (>0.010 to <0.100 g/t) with numerous subintervals of anomalous gold (0.108 to 0.807 g/t).  One interval (268.0 to 270.0 meters) comprised of strong pyritization and silicification associated with a narrow fault zone contains 11.8 g/t gold.





27





The second drill hole (DDH-MM-10-02) was sited 900 meters east-southeast of DDH-ML-04-01.  This long step-out and location were chosen to test again the projected southeastward down-dip continuation of the gold-mineralized mantos layer and within a structural block that is largely intact without significant fault disruptions.  This hole was aimed inclined northwestward and, below an altered mafic sill, entered into a thick interval (from 228 to 517 meters) of prospective-looking, quartz-sericite-pyrite altered volcaniclastic debris-flow breccia units.  Geochemical analyses show that the interval from 261.5 to 373.0 meters continuously contains elevated detectible (<0.010 to <0.100 g/t) amounts of gold.  Within this interval, three prominent intervals of significantly anomalous gold (>0.100 to 2.14 g/t) were intersected: 261.5 to 278.0 meters, 313.0 to 332.0 meters, and 350.0 to 373.0 meters.  The hole was stopped at a depth of 517.0 meters within a silicified/pyritized carbonaceous black shale sedimentary unit where subsequent assaying shows low-level anomalous gold values (0.105 to 0.151 g/t) begin to reappear.





The results of the Milagro project reconnaissance drilling are encouraging and show widespread low-level to anomalous values of gold spread over great thicknesses of quartz-sericite-pyrite altered volcaniclastic sedimentary rock.  The extent and style of alteration, and anomalous gold are indicative of large-scale mineralizing processes, and possibly comprise a halo to areas of significant gold mineralization.  Titan-24 Line 4, which runs through the Milagro project area and in close vicinity to the drill holes, shows that DDH-MM-10-02 was drilling down into, but not through, a very strong IP chargeability anomaly; and over top of, thus missing, a strong resistivity anomaly.  The latter resistivity anomaly outlines a target highly prospective for a gold-mineralized, silicified body positioned along the range front.  This resistivity anomaly was also observed on Titan-24 Line 3, so, is known to extend for at least 700 meters from the Milagro project area northward across the east part of the Milagro Pampa project area (open-ended to the north and south).





Further west and south of the Milagro drilling, 46 samples were collected on shallow, exposed barite veins, fault zones, narrow breccias and minor jasperoid occurrences observed during prospecting traverses over a 1,300 x 800 meter area.  The 46 samples range from <0.005 to 20.2 g/t gold including 10 samples returning >1.0 g/t gold, with four of these ranging from 4.26 to 5.56 g/t gold.  Underlying this sampled area, a second sizeable IP anomaly characterized by high chargeability and high resistivity at relatively shallow depth, was identified by Titan-24 Line 4.  The character of this anomaly is that of a thick/extensive, strongly silicified/pyritiferous mantos interval and which is known to be positioned adjacent/proximal to a shallow concealed altered porphyry intrusion (gravity low).





Milagro Pampa Project – One exploration core hole (DDH-MP-10-01) was drilled westward inclined to a depth of 869.4 meters.  This hole tested down across anhydrite and quartz stock work veinlets and sheeted vein swarm within a sericite-quartz-pyrite altered porphyritic intrusion.  These bedrock features are concealed beneath 12 meters of gravel cover.  The hole proceeded downward through intense veinleting and pyritiferous sericite-altered porphyritic intrusion, which appears to comprise an extensive phyllic alteration halo.  The west margin of the intrusion was intersected at 657 meters depth where pyritized hornfelsed and calc-silicate skarnoid metasedimentary rocks were intersected.





Geochemical results on continuous sampling show, from 150 to 500 meters depth, overall increasing levels of variably anomalous copper (>100 to 905 ppm) copper and elevated detectible to anomalous gold (>0.050 to 0.332 g/t).  Below approximately 500 meters, the hole encountered a series of prominent vein and brecciated intervals from 0.3 to 1.2 meters thickness with >1% copper, and 0.475 to 6.08 g/t gold.  A 1.9-meter (true width) vein/fault interval assayed 13.0 g/t gold including 0.75 meters (true width) at 29.4 g/t gold.  The interval, 692.0 to 738.6 meters (23.3 meters true width), averaged 1.51 g/t Au, 2.15 g/t Ag and 0.27% Cu with strongly anomalous mercury and arsenic.  The dominant orientation of veins and veinlets intersected in core indicated that the drill hole was cutting down at an acute angle to the vein dip direction and that perhaps was also drilling westward and away from the “heart” of the mineralizing system.





In late 2011, we accelerated the exploration program at the Los Zorros gold property in Chile by adding a second drill rig and three more geologists.  Program highlights include:





●
Cinchado Project - Drill hole CC-11-04 encountered a near surface anomalous gold-silver-copper intercept but did not encounter a cause for the deeper seated Titan 24 anomaly.  Drill hole CC-11-05 intercepted a narrow vertical vein with coarse visible gold.  .





●
Nora Project - four holes were completed at Target Zone C  with two deep drill holes in progress at Target Zone B -.





●
Colorina Project - Drill hole MC-11-01 (first hole drilled in this project area) intersected 98 meters of a favourable sedimentary interval with highly anomalous silver along with elevated levels of pathfinder elements (46 meters averaging 10.67 g/t silver).  Anomalous pathfinder metal content and pyritized nature of the interval (carbonaceous limestone) may indicate mineralization at depth possibly related to a strong IP anomaly to the east of the area.




28




●
MD Project - three holes were drilled to test geophysical resistivity and chargeability anomalies - intercepts of low grade IOCG-type mineralization of iron, copper and gold.





●
Los Zorros camp and support facilities were expanded to accommodate additional geologists, workers and increased exploration and drilling activities.





Cinchado Project - Two holes totaling 1,500 meters were drilled at the Cinchado gold project.  Drill hole CC-11-04 was drilled in the west part of the Cinchado project to test a deep-seated IP chargeability-resistivity anomaly.  The hole was drilled to a depth of 1,000 meters, but no mineralizing source or cause for this anomaly was intercepted.  Drilling near the top of this hole did encounter anomalous gold-silver-copper mineralization and strong associated pathfinder elements (0.045 g/t gold, 2.24 g/t silver, 0.12% copper and 3.36 ppm mercury over 10.7 meters) in carbonaceous limestone with pyrite, quartz veinlets and silicification at shallow levels of less than 150 meters depth.





Drill hole CC-11-05, drilled in the southwest part of the Cinchado project, encountered a quartz-calcite veinlet with coarse visible gold along with a gold-bearing vein or localized skarn of massive hematite-magnetite with clots of chalcopyrite.  The entire interval, including the visible gold mineralization returned 11.38 g/t gold and 0.53% copper over 2.7 meters down-hole length (estimated true width of 0.92 meters). This zone lies directly below a mineralized fracture at surface with up to 4.27 g/t gold in chip samples.





Nora Project - Approximately 1,360 meters was drilled in four holes within the Nora “C” zone to follow-up on the high-grade gold interval of 15.96 g/t over 7.66 meters that was intercepted in 2004 in drill hole N-04-05.   The drilling was intended to test the target concept of a gold mineralized mantos unit beneath the Nora area.   Partial results from one of the holes indicate that a prospective stratigraphic interval that was intersected was not gold mineralized.  The Nora area hosts numerous veins with barite-gold-copper mineralization that are thought to represent leakage from mineralized sources at depth.  Additional deep drill holes have been planned to test the coincident significant IP (high) and resistivity (low) anomalies in the prospective Nora Zones “A” & “B”.





Colorina Project - The workings of the Colorina mine are an exposure of breccia hosting copper-silver mineralization that occurs on the range front in the southeastern part of the Los Zorros property.  Drill hole MC-11-01, which is the first hole we drilled in the Colorina project area, intersected carbonaceous, silicified-pyritized limestone in the upper 98 meters of the hole.  The lower portion of this intercept had anomalous levels of silver along with elevated levels of mercury, arsenic and zinc including 16.5 meters of 21.35 g/t silver within a broader 46-meter zone of 10.67 g/t silver.  The intersection coincides with a strong chargeability anomaly from the Titan-24 IP survey.  Evidence from the drill hole and the geophysics suggests the IP anomaly may be related to eastward dipping and faulted stratigraphic units that are carbonaceous and pyritized.  The Titan-24 survey also identified similar IP anomalies along the range front 700 meters to the south and 800 meters to the north of the anomaly at Colorina.





MD Project - Three drill holes were completed in the MD project area to test geophysical resistivity and chargeability anomalies.  The first two holes were drilled in a fan at -65 and -57 degrees and encountered IOCG-type mineralization of iron, copper and gold including mineralized iron-oxide zones (specular hematite-magnetite) returning 4.05 meters of 0.146 g/t gold, 0.373% copper, 33.7% iron in drill hole MD-11-01 and 17.12 meters of 0.053 g/t gold, 0.253% copper, and 22.7% iron in drill hole MD-11-02.  The third drill hole, MD-11-03, 1,200 meters to the west, was drilled to 298 meters and encountered andesite breccias and dacite lavas.  A large silica and barite vein containing chalcopyrite was encountered proximal to the contact between the andesite breccias and lavas, and returned 1.40 meters of 0.024 g/t gold and 0.50% copper.





Subsequent to mid-December, 2011 (to late March 2012) we completed over 4700 meters of drilling in 11 holes, summarized below:





●
Milagro Project - Drill hole MW-12-01, located on the western edge of the Milagro gravity anomaly, encountered 22 meters of semi-massive to massive sulphide and oxide mineralization, composed of pyrite, magnetite, hematite and chalcopyrite.  A 400 meter step out drill hole, MW-12-02 positioned more central within the Milagro gravity anomaly, was started to follow up this intersection.





●
Nora Project, Target Zones C/D - Logging, sampling and assaying have been completed on the four holes within the project area, N-11-01A, B, C and N-11-02A.  Results are discussed below.





●
Nora Project, Target Zones A/B - Three deep holes were drilled, N-11-03, -04, N-12-05 and a fourth N-12-06 was started.




29




●
Lora SE Project - Two holes, LSE-12-01, -02 were drilled in this project area to test geophysical gravity low, resistivity and chargeability anomalies - intercepts of mineralized quartz-eye diorite porphyry and altered mineralized sediments were encountered.





●
Cinchado Project - One deep drill hole SP-12-01, was completed from the east side of Cinchado towards the west and underneath the old San Pedro gold mine.





Nora Project, Target Zones C/D - The Nora Project area hosts a complex swarm of copper-gold-mineralized barite veins and a series of broad zones of anomalous gold.  Assay results have been received and compiled for four of the holes (DDH-N-11-01A, -01B, -01C and N-11-02A) drilled in Zone C and Zone D of the Nora Project area.  The holes were designed to follow-up on a significant interval of high-grade gold mineralization (15.96 g/t over 7.66 meters) in pyritized and silicified diorite-clast breccia intercepted in drill hole N-04-05 during 2004, and to test a target concept to determine if a gold-mineralized breccia mantos/stratigraphic unit was possibly wide-spread beneath the area.





A set of three drill holes (DDH-N-11-01A, N-11-01B, N-11-01C) were drilled at various angles from the same pad location (drill pad N-11-01) in order to test the concept of a mantos/stratigraphic control.  A fourth drill hole (DDH-N-11-02A) was positioned to drill steeply southeastward across the target interval in similar fashion to the nearby original 2004 “discovery” drill hole.  Three of the holes (DDH-N-11-01A, N-11-01B, and N-11-02A) holes made successful intact intersections through the targeted stratigraphic interval of “black silica” matrix diorite breccia, and hole N-11-01C intersected a similar layer much higher in the hole than anticipated - but the intersections in these mantos/stratigraphic units did not have any significant gold content.





Highly anomalous amounts of gold and silver with highly anomalous copper were intersected from the surface (or near surface) to depths of about 40.0 to 60.0 meters in all three of the holes (DDH-N-11-01A, N-11-01B, N-11-01C) drilled from drill pad N-11-01) (see Table below). These shallow intersections appear to be related to two strongly quartz-sericite-pyrite altered vein/fault zones which trend through the vicinity of the drill pad (N-11-01).  The respective true widths of these intersections can only be estimated to be between 5 to 16 meters because the orientation of the drill holes was angled at a very acute angle (<100 to 200) to the steep westward dip of the vein/faults, thus smearing out the highly fractured intersections.   Because of the highly fractured rock, core recovery in these intervals was overall poor.   Other intervals of anomalous gold and copper were also intersected at greater depths in these holes and appear to be related to quartz-sericite-pyrite altered vein/faults.





Hole Number

From

(m)

To

(m)

Interval (m)

Gold

Range

(g/t)

Gold Avg. (g/t)

Silver Range (g/t)

Silver Avg. (g/t)

Copper Range (ppm)

Copper Avg. (ppm)N-11-01A

11

18

7

0.274 - 2.69

1.34

4.3-7.2

5.47

1650-3330

2293and

24

40.7

16.7

0.077-1.74

0.4

2.6-14

7.03

1180-11100

4173N-11-01B

6

61.8

55.8

0.061-1.4

0.29

1.3-11.1

4.14

1010-51310

6090and

80.3

91.2

10.9

0.174-1.75

0.55

0.8-3.4

2.23

61-9910

2222and

221.8

224.2

2.4

0.258-1.04

0.55

3.5-6.4

4.58

3270-9980

7463N-11-01C

17

41

24

0.048-2.72

0.5

0.6-7.9

2.92

993-4100

2361and

50

58.8

8.8

0.062-1.095

0.57

1.4-3.0

2.34

215-2540

826and

155

155.85

0.85



0.218



1.1



1405and

164.6

165.5

0.9



0.161



5



12060and

218

227

9

0.253-0.694

0.44

0.1-1.6

0.6

6.0-16.0

9N-11-02A

350.4

352.2

1.8



1.575



2.6



2340All lengths are down hole distances - true widths of the mineralized structures are not known





The additional information gleaned in these recent drill holes suggests that the interval of high-grade gold mineralization intersected in 2004 may be related to one of the steep (near vertical) fault/vein structures – perhaps comprising part of the wide mineralized quartz-sericite-pyrite alteration halo - instead of being part of a mantos-style (near horizontal/stratigraphic) layer.  The intervals of highly anomalous gold and silver with highly anomalous copper in these new holes all appear to be associated with quartz-sericite-pyrite altered fault/veins (vertical/steep oriented structures).





30





The complex swarm of copper-gold-mineralized barite veins and broad zones of anomalous gold present at surface in the Nora Project area may be leakage up from deeper-seated mineralization in vertical/steep oriented structures beneath the area.  The recent drill holes (DDH-N-11-01A, -01B, -01C) were oriented as steep-angle holes in order to test through mantos-style (near horizontal/stratigraphic) layers; however, a program of low-angled holes would need to be considered in order to test the nature and true width of vertical/steep oriented structures at depth in prospective Zones C and D and in the broader and more-strongly veined prospective Zone A.





From late March to mid May, 2012, we completed over 2,500 meters of drilling in 7 holes, summarized as follows:





●
Nora Project, Target Zones A/B - Four deep holes were drilled, N-11-03, -04, N-12-05A and N-12-06A/B.  Logging, sampling and assaying was completed on three of the holes and results are discussed below.  Processing of drill hole N-12-06A/B was in progress at the time of this report.





●
Milagro Project – Three deep holes were drilled, MW-12-01, -02 and -03.  Logging, sampling and assaying of these holes was in progress at the time of this report.





●
Colorina Project – A second short drill hole was completed, MC-12-02 and a third drill hole, MC-12-01B was in progress at the time of this report.  This hole was designed to drill through a low angle thrust-fault and on to test an IP anomaly located on the eastern end of Titan 24 line 3.  Similar type IP anomalies also occur near the eastern end of Titan 24 lines 1 (Virgen de Carmen), 2 (east of Nora Zones C/D) and 4 (east Milagro).





●
Virgen de Carmen Project – At the time of this report, the second core drill rig was drilling east of the old copper/silver mine workings in the area to test for the source and or extension of the near surface mineralization.





Nora Project, Target Zones A/B - At the Nora Project area, two drill holes (DDH-N-11-03 and -04) were completed to test for possible stratigraphically-controlled gold mineralization and also investigate an IP chargeability anomaly.  Based on the mineralization features encountered, two more drill holes (DDH-N-12-05A and -06A/B) were then positioned further south as a follow-up test of a prospective package of sedimentary rocks peripheral to a prominent thick anhydrite layer encountered in both the first two drill holes.  A fourth drill hole (-06A/B) was completed and is being logged and sampled at the time of this report.





The Nora area includes four zones (A – D) of mineralized barite veins with strong gold and copper values (<0.005 to 17.8g/t Au, 14 to 25,500 ppm Cu).   Bulldozer trenching across these zones disclosed near-surface wide dispersal of anomalous gold values (<0.005 to 20.7g/t Au).  The geologic concept being drill tested was that the veins zones could have provided feeder systems to possible favorable stratigraphic intervals hosting gold and/or copper-gold sulfide mineralization over a laterally extensive area.  Hence, the IP (high) and near-coincident/slightly deeper resistivity (low) anomalies might reflect the presence of this style of mineralization.





DDH-N-11-03 was sited within Zone “B” in part to test the concept and IP anomaly in an area of veining.  DDH-N-11-04, though, was located between Zones “B” and “A” and was thus positioned within an area largely devoid of veins.  Interesting concentrations of pyrite with accessory chalcopyrite were noted with veining above and in the vicinity of a thick anhydrite layer in DDH-N-11-03.  These features were absent in DDH-N-11-04.  This led to DDH-N-12-05A being sited 800 meters to the south within Zone “A” as a stratigraphic test especially of the anhydrite interval.  The latter drill hole intersected thick intervals of strong albite-quartz, quartz-sericite and calc-silicate alteration – all strongly pyritized, and cut several well-mineralized (copper-gold sulfide) vein structures.  Importantly in DDH-N-12-05A, three prominent layers of massive pyrite + chalcopyrite comprising a five meter thickness were intersected immediately beneath the footwall of the anhydrite layer between 512 to 517 meters (drilling depths).  Significant assay results are shown in the table below.





Hole #

From (m)

To (m)

Width (m)

Approx. True Width (m)

Au (g/t)

Ag (g/t)

Cu (%)N-11-03

384.8

386.7

1.9

1.2

0.279

4.8

1.63564.1

567.9

3.8

2.5

0.38

2.97

0.165N-11-04

545.5

546.5

1

0.7

1.16

3

2.21N-12-05A

386.75

395.75

9

3.0

1.03

3.52

1.05459

462

3

1.5

0.807

3.3

1.96514.5

519

4.5

4.2

0.677

1.68

0.375incl.

516.55

517.2

0.65

0.6

1.985

6.5

2.398





31





The IP/resistivity anomalies across the central part of the Nora Project area are caused by strong concentrations of disseminated pyrite comprising the quartz-sericite pyrite halos to the sulfide veins and calc-silicate-replaced stratigraphic intervals within Zones “B”, “C” and “D”.  DDH-N-11-04 was located between Zones “B” and “A” and did not intersect strong alteration or appreciable disseminated pyrite and only a few sparse sulfide veinlets.   The furthest south drill hole, DDH-N-12-05A found, within Zone “A”, much more intense alteration and pyritization, stronger pyrite-chalcopyrite veining, and appearance of massive pyrite-chalcopyrite layers in the footwall to the anhydrite layer.





Further drilling (three holes) to test the prospective anhydrite interval was carried out in an area located west of the Milagro mine; and core processing was in progress at the time of this report.





The above results and exploration activity is part of an ongoing drill program at Los Zorros, which is continuing at the time of this report.





The Los Zorros property contains numerous large-sized gold, silver and copper targets on a single property holding.  Infrastructure for large mining activity is readily available in the area with power, transportation, water, communications and manpower all within advantageously close distances.  Because of the large size of the property, and the fact that our exploration is still in progress, the information and ideas behind the targets currently being developed must be considered as an evolving picture.  The possibility of defining further new targets and project areas on the property remains strong.





Except where otherwise noted, the analytical and test data underlying the information disclosed herein was verified by or under the supervision of Robert Kell, Vice-President Exploration for SAMEX Mining Corp. and Phil Southam, Geologist, who are “qualified persons” pursuant to Canadian Securities National Instrument 43-101 concerning Standards Of Disclosure For Mineral Projects.





Sampling, analytical procedures, controls - Geochemical analyses on samples were performed by ALS Chemex, an independent, internationally recognized and ISO certified laboratory complying with the international standards ISO 9001:2000 and ISO 17025:1999.  In preparing drill core samples for analysis, the core is cut or split in half, with one half kept for reference and re-analysis if necessary, while the other half is bagged and sealed as a sample for analysis.  To provide quality control, pre-packaged, sealed, certified standard (include low and medium grade copper-gold pulps) and blank pulps are included for analysis by inserted them as samples in random order at approximately 1 per every 30 samples. To ensure chain of custody, the bagged samples for analysis are picked up by an agent of ALS Chemex and transported directly to the ALS Chemex laboratory at Antofagasta or at La Serena, Chile.





Los Zorros Property Mineral Interests - As described below, the Company’s Chilean subsidiary, Minera Samex Chile, S.A, has a 100% interest in exploitation mining concessions covering approximately 7,774 hectares acquired by staking, purchase at government auction, purchase agreement, and by option contracts. The Company also has an option to acquire a 100% interest in additional exploitation mining concessions covering approximately 2,900 hectares adjacent to the Los Zorros Property.  The Company holds a 100% interest in the acquired concessions subject to the terms described below in the Purchase and Sale Agreement with Compania Contractual Minera Ojos del Salado, the Purchase Option Contract with Comercial Sali Hochschild S.A., the Purchase Option Contract with Compania Minera San Estaban Primera S.A., and subject to the Finder’s Fee, Bonus and Royalty described below:





Purchase and Sale Agreement dated January 29, 2003 between our subsidiary, Minera Samex Chile S.A. and Compania Contractual Minera Ojos del Salado - We entered into a purchase agreement dated January 29, 2003, with the vendor, Compania Contractual Minera Ojos del Salado, to acquire approximately 1,429 hectares of mineral concessions covering old goldmines and gold showings in the Los Zorros district for US$50,000 cash (which has been paid).  Because of the vendor’s interest in copper, under the purchase agreement, the vendor retained a back-in right to earn an interest in the property in the event that we discover a copper deposit containing not less than two million tonnes of contained equivalent copper on or within a half kilometer of the property.  The vendor can elect to exercise the back-in right to earn a 30% interest by reimbursing us three times the expenditures incurred, and up to 51% interest by expending 100% of all further costs necessary to complete a bankable feasibility study on the property.  Thereafter, the parties would negotiate a joint venture to carry out development and mining of the property.





Purchase Option Contract dated November 6, 2003, between our subsidiary, Minera Samex Chile S.A. and Compañia Minera y Comercial Sali Hochschild S.A. – In October 2006 we completed the acquisition of mineral concessions covering a 209-hectare-portion of the Los Zorros property (covers portions of the Milagro and Lora areas of the Los Zorros property).  Under the Option, SAMEX acquired the concessions by making option payments totaling US$230,000 as follows: US$30,000 upon signing of the Option Agreement (paid); US$50,000 by October 31, 2004 (paid); US$50,000 by October 31, 2005; (paid); US$100,000 by October 31, 2006 (paid).





32




Pursuant to the exercise of the option and the related Purchase Contract dated October 27, 2006, SAMEX holds 100% interest in the concessions subject to a Net Smelter Return Royalty of 2% on gold and silver, 1.5% on copper, and 1.5% on other payable minerals, if the US$ price per pound of the mineral is less than US$1 or 2% if the US$ price per pound of the mineral is US$1 or greater.  SAMEX has an option to buyout the Royalty at any time for US$1,800,000.  Pursuant to the option/purchase agreement, if the concessions were not in production by December 31, 2007, advance royalty payments of US$100,000 per year were required for five years (by February 29, 2008 (paid), by March 1, 2009 (paid), by March 1, 2010 (paid), by March 1, 2011 (paid), and by March 1, 2012 (paid subsequent to the year) to a maximum of US$500,000 (paid), or until the commencement of commercial exploitation.   The advance royalty payments are recoverable from future royalty payments.





Purchase of Mineral Concessions Completed – Re; Unilateral Purchase Option Contract dated June 29, 2005 between our subsidiary, Minera Samex Chile S.A. and Compañia Minera San Estaban Primera S.A. –  In December 2006 we completed the acquisition of mineral concessions covering a 95-hectare-portion of the Los Zorros property by making option payments totaling US$200,000 over 18 months as follows: US$75,000 upon signing the Option Agreement (paid); US$25,000 by December 20, 2005 (paid); US$50,000 by March 20, 2006 (paid); and US$50,000 by December 20, 2006 (paid).  SAMEX now holds 100% interest in the concessions subject to a Net Smelter Return Royalty of 1.5% on copper, gold, silver, and other payable minerals.  SAMEX has an option to buyout the Royalty at any time for US$1,000,000.





Finder’s Fee, Bonus and Royalty - Pursuant to a Consulting Agreement dated September 25, 2002 between SAMEX and Geosupply Servicios de Geologia & Mineria & Sondajes de Diamantina, the concessions in the Los Zorros district are subject to the following finder’s fee, bonus and royalty:





a)
A finder’s fee of US$10,000 payable within 90 days of commencement of a drilling program on the concessions (which has been paid);


b)
A bonus of US$150,000 payable within one year from the date of Commencement of Commercial Production on the concessions; and


c)
Net Smelter Return royalty equal to 0.25% of Net Smelter Returns.





The Company also has an option to acquire approximately 2,900 hectares of additional mineral concessions adjacent to the Los Zorros Property pursuant to the Aravena Option:





Aravena Option - Under a Unilateral Option Contract dated June 28, 2011 between Cristian Marcelo Aravena Caullan and our subsidiary Minera Samex Chile S. A. (the “Aravena Option”), SAMEX can acquire 100% interest in mineral concessions covering approximately 2,900 hectare adjacent to the Los Zorros property by paying the 2011/2012 patent payments (paid) and by making option payments totaling the Chilean Peso-equivalent of US$245,345 as follows: US$60,000 upon signing the Option (paid); U.S. $95,345 due January 31, 2012 (paid subsequent to the year); and US$90,000 by January 31, 2013.  No NSR is payable on these concessions.





Annual Patent Payments On the Company's Landholdings - Patents must be paid annually to the Chilean government during the month of March in order to maintain the mining concessions.  Patent fee are calculated based upon the value of the Chilean Monthly Tax Unit (“M.T.U.”) which varies from month to month.  In the case of an exploitation concession the annual patent fee is calculated as one-tenth (1/10th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/10th = 3,941.2 Chilean Pesos per hectare which, at the Observed US$/Peso exchange rate of 485.71 at March 15, 2012 equated to approximately US$8.11 per hectare for exploitation concessions).  In the case of an exploration concession the annual patent fee is calculated as one-fiftieth (1/50th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/50th = 788.24 Chilean Pesos per hectare which, at the Observed US$/Peso exchange of 485.71 rate at March 15, 2012 equated to approximately US$1.62 per hectare for exploration concessions).





Los Zorros Property Concession Names/Numbers:


FOXES 1 AL 8  #03201-8071-6; FOXES II 1 AL 2  #03201-8849-0; SELOMY 1 AL 30  #03201-9111-4; PLACER 20 1 AL 30  #03201-7005-2; PLACER 21 1 AL 30  #03201-7006-0; EL ZORRO VI 1 AL 30  #03201-7294-2; EL ZORRO VII 1 AL 30  #03201-7292-6; EL ZORRO VIII 1 AL 10  #03201-7295-0; EL ZORRO IX 1 AL 20  #03201-7293-4; EL ZORRO X 1 AL 30  #03201-7308-6; EL ZORRO XI 1 AL 30  #03201-7309-4;  EL ZORRO XII 1 AL 26  #03201-7310-8; EL ZORRO XIII 1 AL 29  #03201-7311-6; EL ZORRO XIV 1 AL 19  #03201-7312-4; EL ZORRO XV 1 AL 15  #03201-7313-2; NORITA 1-36  #03201-9564-0; LA CURIOSA 1-51  #03201-9563-2; EL ZORRO 16 B 1 AL 17  #03201-7666-2; EL ZORRO 17 1 AL 30  #03201-7667-0; EL ZORRO 18 1 AL 20  #03201-7668-9; EL ZORRO 19 1 AL 30  #03201-7669-7; EL ZORRO 20 1 AL 30  #03201-7670-0; EL ZORRO 21 1 AL 20  #03201-7671-9; EL ZORRO 1 AL 2  #03201-7664-6; THE FOXES ONE 1 AL 40  #03201-7185-7; THE FOXES TWO 1 AL 40  #03201-7186-5; THE FOXES THREE 1 AL 30  #03201-7187-3; THE FOXES FOUR 1 AL 20  #03201-7188-1; PIERNAS LARGAS 1 AL 16  #03201-7482-1; POLO 2  #03201-7485-6; POLO 3  #03201-7486-4; POLO 5  #03201-7488-0; EL ZORRO 22 1 AL 17  #03201-7606-9; EL ZORRO 23 1 AL 19  #03201-7607-7; BARBAS 1-7  #03201-3085-9; BARBAS 21-37  #03201-3086-7; BARBAS 41-68  #03201-3087-5; BARBAS 61-74  #03201-3088-3; BARBAS 81-100  #03201-3089-1; BARBAS 101-103  #03201-3090-5; CANDY 1 1-14  #03201-5547-9; COSTA PINTO(1/15) 1-4 Y 6-12  #03201-7094-K; ELISA 1 AL 4  #03201-0183-2; FLOR MARIA 1-74  #03201-2550-2; GOLD MINING I 1  #03201-6533-4; GRINGO 1-29  #03201-3941-4; GRINGO 31-60  #03201-3942-2; KARINA LXVIII 3-11  #03201-5553-3; LA COLORINA 1-15  #03201-2233-3; LA SOCIALISTA 1-20  #03201-3022-0; LA SOCIALISTA 11  #03201-1012-2; LAS VIZCACHAS 1-9  #03201-2483-2; LEONEOR 1-3  #03201-2489-1; MILAGRO 1-20  03201-2416-1; NORA I  #03201-0527-7; NORA II  #03201-2166-3; NORA TERCERA  #03201-2643-6; POLO 1  #03201-6687-K; POLO 2  #03201-6688-8; PLACER 22 1-20  #03201-6957-7; SAN PEDRO 1-5  #03201-1246-K; SANTA ROSA 1-20  #03201-2490-5; TRUENO I 1 AL 30 #03201-9332-K; TRUENO II 1 AL 30 #03201-9333-8; TRUENO III 1 AL 30 #03201-9334-6; TRUENO IV 1 AL 30 #03201-9335-4; TRUENO V 1 AL 30 #03201-9336-2; TRUENO VI 1 AL 30 #03201-9337-0; TRUENO VII 1 AL 30 #03201-9338-9; TRUENO VIII 1 AL 30 #03201-9339-7; TRUENO IX 1 AL 30 #03201-9340-0; TRUENO X 1 AL 20 #03201-9341-9. The Los Zorros Property is without a known body of commercial ore and our activities to date have been exploratory in nature.





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INCA PROPERTY, Chile


Location and means of access - The INCA property in the Atacama region of Chile is located approximately 90 kilometers north of the city of Copiapo, Chile and 6.0 kilometers east of the paved highway that connects Copiapo to Diego Del Amagro and the El Salvador Mine.  The property is accessed by vehicle by driving north from Copiapo on paved, two-lane highway (Highway C-17) to the village of Inca de Oro.  The INCA property and the Company’s exploration camp are located about 6 kilometers east of the village of Inca de Oro along a government maintained gravel road leading to the San Pedro de Cachiyuyo district.   The INCA property is favorably situated from both a geological and a logistical perspective, being close to important transportation routes, power lines and general mining infrastructure.





Historically, the INCA project area has been the center of small mining activity primarily for production of oxide-copper and some secondary enriched copper sulfide ores. This area hosts variably sized breccia pipes with outcropping, or historically mined copper, molybdenum and gold mineralization and the exploration objective has been to search beneath and around this area for substantial deposits of copper with important gold, silver and molybdenum credits.





During 2006 we completed the construction and equipping of a camp and exploration office at the INCA project and compiled extensive maps of the project area.  We also conducted more than 30 line-kilometers of IP geophysical survey over six survey lines.  In 2007 we conducted additional geophysical surveys and a program of bulldozer trenching, sampling and assaying was completed.  Blasting and bulldozer work was conducted to prepare access roads and drill pads for a Phase I core drilling program.  The core-drilling program completed 10,309 meters of drilling in 35 holes, with an average hole length of approximately 300 meters.  Generally the program was designed to test shallow targets proximal to existing historic mine workings and coincident with IP geophysical anomalies, for areas of stock-work veining, breccia bodies, and disseminated and/or porphyry style copper-gold-molybdenum mineralization.  More specifically the program was set up to test, in systematic fashion, two principal target zones including: the Delirio-Tucumana breccia complex (14 holes) and the Puntilla-San Antonio vein system with a coincident strong IP expression (8 holes).   Other target areas received more cursory drilling attention and these include: San Antonio-Providencia (7 holes), Magallanes (2 holes), Manto Cuba-San Pedro (2 holes) and Jardinera (2 holes).





From the results of the Phase I exploration, it became apparent that, although some of the results (particularly in the area around the Providencia mine) were very promising, the first phase of exploration did not discover the presence of a wide-spread, near-surface porphyry copper deposit that we had hoped for.  We concluded that, although the possibility still existed to find a large scale copper deposit at INCA, considerable more exploration work and expenditures would be required to do so, which exceeded our available resources at that time.





“Araya Option” Exercised To Acquire the Providencia Mine Concessions - Of importance, during 2009 we completed the final option payment under the “Araya Option” to acquire the Providencia Mine concessions situated within the greater INCA project area.  These concessions cover one of the stronger mineralized areas identified during phase I exploration at the INCA project including the Providencia copper breccia pipe, a swarm of sheeted veins, and other tourmalinized/silicified breccia bodies and pipes.  With this acquisition and its other land holdings, SAMEX holds what we consider to be the most prospective and strategic concessions within the INCA project area.





The size and shape of the Providencia mine breccia pipe is not fully exposed by mining and could be over 80 meters across.  The pipe is well mineralized with chalcopyrite and abundant accessory pyrite; our initial rock chip-channel samples in the mined areas were taken as a series of both vertical and several horizontal oriented lines.  The copper (total) grade of initial chip-channel sampling (25 samples) shows a range via mine level of 1.24% to 2.94% copper with an overall average of 2.16% copper.  The presence of strong sericite alteration, anomalous amounts of silver, lead, zinc, and antimony and position of the roof indicate that this level is at the top of the pipe and that very little of the pipe has actually been mined out.





34





The Providencia mine breccia pipe has a distinct IP signature and occurs within what appears to be a cluster of additional concealed, possibly well-mineralized breccia pipes with similar or stronger IP responses, which were disclosed by our regional IP survey.  The Providencia breccia cluster is a highly prospective area 1600 meters long by 500 meters across – with several separate IP targets for copper-molybdenum-gold mineralization hosted by sulfide-bearing breccia pipes/elongate tapered bodies and perhaps out into surrounding veinleted zones.  One set of our exploration core drill tests on one of the IP anomalies discovered a concealed, faulted part of a breccia pipe (Providencia West) with indications that it contains significant copper and molybdenum mineralization and anomalous silver, lead, and zinc content.  This breccia pipe is positioned 700 meters to the west of the Providencia mine where an outcropping sheeted vein swarm with oxide-copper mineralization and tourmalinized/silicified pods of breccia are present over a large area in the monzonite cap above the pipe.  Additional drilling is required in the Providencia area to test for other concealed breccia pipes with the objective of discovering multiple ore bodies and the potential deeper source from which these pipes have emanated.





Sampling, analytical procedures, controls at INCA - Geochemical analyses on samples were performed by ALS Chemex, an independent, internationally recognized and ISO certified laboratory complying with the international standards ISO 9001:2000 and ISO 17025:1999.  In preparing drill core samples for analysis, the core is cut or split in half, with one half kept for reference and re-analysis if necessary, while the other half is bagged and sealed as a sample for analysis.  To provide quality control, pre-packaged, sealed, certified standard (include low and medium grade copper-gold pulps) and blank pulps are included for analysis by inserted them as samples in random order at approximately 1 per every 30 samples. To ensure chain of custody, the bagged samples for analysis are picked up by an agent of ALS Chemex and transported directly to the ALS Chemex laboratory at Antofagasta or at La Serena, Chile.





Except where otherwise noted, the analytical and test data underlying the information disclosed herein was verified by or under the supervision of Robert Kell, Vice-President Exploration for SAMEX MINING CORP. and Phil Southam, Geologist, who are “qualified persons” pursuant to Canadian Securities National Instrument 43-101 concerning Standards Of Disclosure For Mineral Projects.





During 2011 we expanded our land holdings at the INCA property by exercising our option (the "Rojas Option") to purchase 20 hectares of mineral concessions by paying the balance of the Chilean Peso-equivalent of US$300,000 option price (US$150,000 of which the Company had previously paid) and staking addition concessions.  Our landholdings at the INCA project now consist of approximately 8,866 hectares of prospective and strategic concessions including the 45-hectare Providencia Mine concessions that we acquired in 2009 pursuant to the “Araya Option” and the 20 hectares of concessions we purchased during 2011 pursuant the Rojas Option.  We are also in discussions with Minera Porvenir concerning the acquisition of an additional 2,138 hectares of mineral interests in the INCA project area held under the disputed Minera Porvenir Option.





We are continuing our efforts to arrange a joint venture or sale of all or a portion of our INCA copper, gold, molybdenum property.





INCA Property Mineral Interests - The Company’s Chilean subsidiary, Minera Samex Chile S.A. has 100% interest in exploitation mining concessions that cover approximately 8,866 hectares acquired by staking, purchase at government auction, and by the Araya Option, the Rojas Option/Purchase, and the Viscacha I Purchase as described below:





Araya Option – Pursuant to a Unilateral Option Purchase Contract dated April 4, 2006 with Malvina del Carmen Araya Santander the Company acquired 100% interest in 45 hectares of mineral interests (the Providencia Mine concessions situated within the greater INCA project area) for consideration of option payments totaling the Chilean Peso-equivalent of US$300,000 (paid).  A 1% NSR retained by the vendor for a period of 20 years.  The Company has the option to buyout the NSR at any time for US$500,000.





Rojas Option/Purchase - The Company acquired 100% interest in 20 hectares of mineral concessions within the greater INCA project area for consideration of payments totaling U.S. $300,000 (paid).  No royalty is payable on these concessions.




Vizcacha I Purchase – The Company purchased the Vizcacha I mineral concession covering a 3-hectare-portion of the INCA project for a total consideration of US$32,938 (17,000,000 Chilean Pesos).  No royalty is payable on this concession.





Annual Patent Payments On the Company's Landholdings - Patent payments must be paid annually to the Chilean government during the month of March in order to maintain the mining concessions.  Patent fees are calculated based upon the value of the Chilean Monthly Tax Unit (“M.T.U.”) which varies from month to month.  In the case of an exploitation concession the annual patent fee is calculated as one-tenth (1/10th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/10th = 3,941.2 Chilean Pesos per hectare which, at the Observed US$/Peso exchange rate of 485.71 at March 15, 2012 equated to approximately US$8.11 per hectare for exploitation concessions).  In the case of an exploration concession the annual patent fee is calculated as one-fiftieth (1/50th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/50th = 788.24 Chilean Pesos per hectare which, at the Observed US$/Peso exchange of 485.71 rate at March 15, 2012 equated to approximately US$1.62 per hectare for exploration concessions).





35





INCA Property Concession Names/Numbers:


BLANCA O CONSUELO #03102-0525-3; CONCEPCION 1-6  #03102-0897-3; JUSTA 1  #03102-0581-8; PROVIDENCIA 1-9  #03102-1054-4; VIZCACHA 1-2  #03102-2609-2; VIZCACHA 1  #03102-2300-K; IRLANDA I 1/ 3  #03102-3047-2; IRLANDA II 1/ 2  #03102-3048-0; IRLANDA IX 1-3  #03102-3112-6; IRLANDA IV 1/4  #03102-3050-2; IRLANDA V 1  #03102-3051-0; IRLANDA VI 1   #03102-3052-9; IRLANDA VII 1  #03102-3053-7; IRLANDA VIII 1  #03102-3054-5; IRLANDA XI 1 AL 9  #03102-3056-1; IRLANDA XII 1 AL 20  #03102-3057-K;  IRLANDA X 1 AL 4  #03102-3055-3; MONTANA TRES 1 AL 30  #03102-3419-2; MONTANA CUATRO 1 AL 30  #03102-3420-6; MONTANA VII 1 AL 30  #03102-3533-4; LINDA I 1 AL 50  #03102-3044-8; LINDA II 1  # 03102-3045-6; LINDA III 1 AL 3  #03102-3046-4; MONTANA UNO 1 AL 30  #03102-3417-6; MONTANA DOS 1 AL 30  #03102-3418-4;  MONTANA CINCO 1 AL 30  #03102-3392-7; MONTANA 15 1 AL 10  #03102-3439-7;  MONTANA 16 1 AL 10  #03102-3440-0;  MONTANA 18 1 AL 10   #03102-3442-7; MONTANA 19 1 AL 30  #03102-3551-2; MONTANA 21 1 AL 30  #03102-3444-3;  MONTANA II 1 AL 30  #03102-3528-8; MONTANA VI 1 AL 30  #03102-3532-6; MONTANA VIII 1 AL 30  #03102-3534-2; MONTANA IX 1 AL 20  #03102-3535-0; MONTANA III 1 AL 20 #03102-3529-6; COLUMBIA VIII 1 AL 20 #03102-3578-4; PUNTILLA #03102-0675-K; MATILDE 3 AL 4 #03102-0674-1; AURORA #03102-0692-K; CHABELITA I #03102-D295-K;CHABELITA II #03102-D296-8; CHABELITA III #03102-D297-6; CHABELITA IV #03102-D298-4; CHABELITA V #03102-D299-2; CHABELITA VI #03102-D300-K; CHABELITA VII #03102-D301-8; CHABELITA VIII #03102-D302-6; CHABELITA IX #03102-D364-6; CHABELITA X #03102-D365-4; CHABELITA XI #03102-D303-4; CHABELITA XII #03102-D304-2; CHABELITA XIII #03102-D305-0; CHABELITA XIV #03102-D306-9; CHABELITA XV #03102-D307-7; CHABELITA XVI #03102-D308-5; CHABELITA XVII #03102-D309-3; CHABELITA XVIII #03102-D310-7; CHABELITA XIX #03102-D311-5.





The INCA property is without a known body of commercial ore and our activities to date have been exploratory in nature.





CHIMBEROS PROPERTY, Chile


The Chimberos Property is a gold-silver prospect located about 75 kilometers north of the city of Copiapo and is situated in the historic Chimberos mining district which was one of Chile’s largest silver producing areas.  The property is accessed by vehicle by driving north from Copiapo on a paved, two-lane highway (Highway C-17) to the property which is adjacent to the highway.  We recognized the potential of this old mining district a number of years ago and began quietly accumulating concessions by purchasing concessions at government auctions and by staking.  These strategic concessions cover a significant, but partial, portion of the Company's exploration objectives in this prospective, but little-explored Chimberos district.





SAMEX reconnaissance work indicates that the geologic setting of the Chimberos District includes widespread sericite-pyrite alteration of volcanic rocks cut by a principal silver-mineralized fissure vein zone, and complete garnet skarn replacement of a thick calcareous sedimentary unit, which also hosts oxide-copper mineralization.  Although SAMEX has only conducted preliminary sampling and limited detailed mapping in the area, some of the acquired concessions are clustered and cover much of the core of a complex fissure fault zone which controlled the enriched silver mineralization that was mined in the Buena Esperanza mines at Chimberos.  Historically, mining was focused along discrete narrow vein structures of this zone, but SAMEX has been studying the property with a view to defining important targets of shallow bulk-tonnage gold and/or gold-silver mineralization, and also looking for deeper, higher-grade, gold-silver/copper sulfide mineralization – perhaps as an underground, bulk-tonnage target comprised of mineralized anastomizing veins.  Potential for extensive, deeper-seated, mantos-style, more-disseminated style, copper-sulfide mineralization with important gold-silver content hosted by the skarn replacement has also been identified.   Other SAMEX concessions at Chimberos are over projected extensions of the principal fissure fault zone, parts of large areas of sericite-pyrite alteration, and outlying garnet skarn with oxide-copper showings, which are areas where additional targets might be outlined in the future.





Chimberos Property Mineral Interests - The Company’s Chilean subsidiary, Minera Samex Chile, S.A, has 100% interest in exploitation mining concessions that cover an area of approximately 1,672 hectares that comprise the Chimberos Property in Chile.  The Company acquired the concessions by a combination of staking and purchase of concessions through government auctions.





Annual Patent Payments On the Company's Landholdings - Patent payments must be paid annually to the Chilean government during the month of March in order to maintain the mining concessions.  Patent fee are calculated based upon the value of the Chilean Monthly Tax Unit (“M.T.U.”) which varies from month to month.  In the case of an exploitation concession the annual patent fee is calculated as one-tenth (1/10th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/10th = 3,941.2 Chilean Pesos per hectare which, at the Observed US$/Peso exchange rate of 485.71 at March 15, 2012 equated to approximately US$8.11 per hectare for exploitation concessions).  In the case of an exploration concession the annual patent fee is calculated as one-fiftieth (1/50th) of the Monthly Tax Unit per hectare (for example, in March 2012 the M.T.U. was 39,412 x 1/50th = 788.24 Chilean Pesos per hectare which, at the Observed US$/Peso exchange of 485.71 rate at March 15, 2012 equated to approximately US$1.62 per hectare for exploration concessions).





36





Chimberos Property Concession Names/Numbers:


TRES PUNTAS I 1 AL 38  #03201-7314-0; TRES PUNTAS II 1 AL 20  #03201-7315-9; TRES PUNTAS III 1 AL 20  #03201-7316-7; TRES PUNTAS IV 1 AL 20  #03201-7317-5; TRES PUNTAS V 1 AL 20  #03201-7318-3; TRES PUNTAS VI 1 AL 4  #03201-7319-1; TRES PUNTAS VII  #03201-7320-5; TRES PUNTAS XIII 1 AL 30  #03201-7323-K; TRES PUNTAS XIV 1 AL 53  #03201-7324-8; PUNTITA 1, 1 AL 4  #03201-8590-4; PUNTITA 2, 1  #03201-8638-2; PUNTITA 5, 1  #03201-9641-2; PUNTITA 6, 1  #03201-8642-0; PUNTITA 7, 1  #03201-8643-9; PUNTITA 8, 1  #03201-8591-2; PUNTITA 9, 1  #03201-8592-0; PUNTITA 10, 1 AL 5  #03201-8593-9; PUNTITA 11, 1  #03201-8594-7; BUENA ESPERANZA  #03201-0128-K; COLORADA 1-4  #03201-0981-7; DOS AMIGOS 1 AL 5  #03201-2242-2; GLORIA 1-2  #03201-1341-5; HILDA 2 AL 6  #03201-1765-8; INDEPENDENCIA 1-2  #03201-1157-9; PEHUENCHA  #03201-0065-8; RECOVECO 1 AL 10  #03201-1330-K; SALVADORA  #03201-1838-7; ZIG-ZAG  #03201-0195-6.





The Chimberos Property is without a known body of commercial ore and our activities to date have been exploratory in nature.





ESPEJISMO PROSPECTS, Chile - Gold Prospects, Inca de Oro region, Chile.  SAMEX has acquired rights to approximately 517 hectares of mineral concessions covering gold prospects by purchasing concessions at a government auction and by staking.  No exploration is planned for these gold prospects until additional concessions are acquired.





MISCELLANEOUS PROPERTIES, Chile - The Company holds mineral concessions (approximately 25 hectares) for possible future evaluation.  The property is inactive and no exploration is currently planned.





BOLIVIAN PROPERTIES





Cautionary Note:  Over the past several years events in Bolivia have led to a number of special risks affecting mineral exploration and the holding of mineral concessions in Bolivia, the extent and affect of which have not been fully determined, but which may have serious adverse effects on the value of our Bolivian properties and the on the viability of our Bolivian mineral projects.  See “Item 3 Key Information – Risk Factors – Bolivian Interests”.





The Eskapa, El Desierto and Santa Isabel properties in Bolivia have been on "care and maintenance" status since the Company suspended its exploration activities in Bolivia in 2009.  Due to the inactivity on the Bolivian properties, the property interest for the Eskapa Property, the El Desierto Property and the Santa Isabel Property was each written down to a nominal value of $1,000 resulting in a combined valuation of only $3,000 for our Bolivian properties at December 31, 2011.





EL DESIERTO PROPERTY, Bolivia


The El Desierto property is located in southwestern Bolivia at an elevation of about 3,800 meters, near the villages of El Desierto and Abra de Napa, processing centers for sulfur mines in the area. The property is located approximately 25 km north of the Quebrada Blanca and Collahuasi copper porphyry mines in Chile and is readily accessible by road from both Bolivia and Chile.  The property is situated along a trend of a geologic belt that is renowned for some of the world’s largest porphyry copper-gold mines.  Limited exploration on the property from 1997 to 2000 included geologic mapping, sampling and reconnaissance IP surveys.  We have not conducted any exploration on the property since that time, however we continue to maintain concessions covering approximately 319 hectares for possible future evaluation.





The El Desierto mineral concessions are owned by Empresa Minera El Roble S.A. (“El Roble”), a company controlled by a Bolivian national, Patricio Kyllmann, a former director of SAMEX Mining Corp.  Our Bolivian subsidiary, Emibol S.A. (Empresa Minera Boliviana S.A.) earned a 99% interest in any mining operations which may be established on the concessions pursuant to an agreement dated April 16, 1996 and as amended November 23, 1998 with El Roble.  Under the agreements, Emibol S.A. is required to make all expenditures on the concessions in exchange for a 99% interest in any mining operations which may be established on the concessions while El Roble is required to continue to hold the concessions and is entitled to a 1% interest in such operations. The property is also subject to a net smelter royalty of an aggregate of 0.6 % payable to Robert Kell, Front Range Exploration Corp., and El Roble S.A.





Patent fees must be paid annually to maintain the mining concessions.  In December 2011 we paid patent fees equal to approximately US $640 to cover the annual patents on the El Desierto Property until the end of February 2013.





The El Desierto Property is without a known body of commercial ore and our activities to date have been exploratory in nature.
 Our Bolivian properties are subject to a number of special risks.  See “Item 3 Key Information – Risk Factors – Bolivian Interests”.





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ESKAPA PROPERTY, Bolivia


SAMEX, through its Bolivian subsidiary, EMIBOL S.A., holds a 99% interest in any mining operations which may be established on the 3,700 hectare Eskapa property located in the Enrique Baldevieso Province, Department of Potosi, Bolivia.  The Eskapa concession (elevation between 4200 to 4400 meters) is centered over the eroded-out core zone of the extinct Cerro Eskapa stratovolcano which is situated in the southwestern part of Bolivia, approximately 48 airline kilometers east of the frontier with Chile and 55-airline kilometers southeast of Ollague, Chile.  Location and means of access - The Eskapa Property is situated in the southwest part of Bolivia approximately 3 kilometers east of the village of Copacabana.  The Eskapa property is accessible from both Bolivia and Chile by four-wheel drive vehicle.  The Chile access route is somewhat easier due to the better condition of roads in that country.  Starting from the city of Calama, Chile, where air service is available from and to Santiago, Chile, travel is by Route 21 to the border town of Ollague, Chile.  After crossing the border into Bolivia, travel is approximately 35 kilometers along dirt road following the railway tracks to the village/military outpost/train station of Chiguana and then a further 35 kilometers on dirt road to the village of Copacabana .  The property is accessed from Copacabana by a 3 kilometer dirt road constructed and maintained by the Company.   Access within Bolivia  - From the town of Uyuni, Bolivia travel is by an improved gravel road for approximately 150 kilometers and by dirt roads for approximately 35 kilometers to the Eskapa Property.





We explored the Eskapa property in sporadic fashion from 1995 to 1998 and carried out a ten-hole core drilling program in 1999. Additional exploration work was conducted during two time periods in 2001 and included drilling six core holes.   We expended more than one million dollars exploring the Eskapa property.  During fiscal 2007 we constructed a new exploration camp, and completed bulldozer work to repair and expand access roads, and build drill pads for the next phase of drill testing proposed for the Eskapa property at a later date.  Since the property is currently inactive, the property interest has been written down to a nominal carrying value of $1,000.





The region, where the Cerro Eskapa prospect is situated, is part of the Cordillera Occidental which consists of numerous extinct or dormant late-Tertiary to early quaternary, andesite-dacite stratovolcanoes positioned on a high plateau (3500 meters mean elevation) of mid- to late-Tertiary volcanic and sedimentary rocks.  The Cerro Eskapa stratovolcano is uniquely considerably eroded such that strong alteration and silver-lead-antimony sulfosalt-mineralized zones are exposed over a large 2 km. by 3 km. area of the core zone.  The strong argillic, advanced-argillic, and vuggy silica alteration are focused on porphyritic dacite and hydrothermal breccia which occupy the stratovolcano core zone.  The nature of the alteration and widespread abundant pyrite are characteristic of the high-sulfidation-type of precious-metal mineralizing system, which occur in the Cordillera Occidental of South America.





At Cerro Eskapa, silver-lead-antimony sulfosalt-mineralization occurs, at the surface of the eroded-out stratovolcano core zone, in linear/steeply dipping zones of vuggy silica-barite strongly controlled along west-northwest-trending faults.  The zones range from 1 to 3 meters in width and several can be traced for up to several thousands of meters.   The mineralized zones appear to represent the leakage up from more substantial mineralization at depth.  Ten zones can be traced confidently across the floor of the eroded stratovolcano core zone for over 11 kilometers of cumulative strike-length distance. Another +3 kilometers of cumulative strike length can be inferred in areas of cover and where zones are open ended.  The remaining potential for discovery of substantial amounts of vein, veinleted, and breccia-hosted gold-bearing, high-grade, copper-silver-antimony-bismuth mineralization is considered very good and should be pursued in the future with a rigorous drill testing involving several thousand meters of core drilling or the driving of access tunnels to test beneath the zones.  During fiscal 2007 we completed bulldozer work to repair and expand access roads, and build drill pads for the next phase of drill testing proposed for the Eskapa property at a later date.





Sampling, analytical procedures, controls - Geochemical analysis for rock-chip and drill core samples from the Eskapa property were conducted by two major laboratories, Bondar-Clegg (from 1995-1999) and ALS Chemex in 2001.  These laboratories subsequently merged as ALS Chemex which is an independent, internationally recognized and ISO certified laboratory complying with the international standards ISO 9001:2000 and ISO 17025:1999.  In preparation for analysis, drill core was cut or split in half, with one half kept for reference and re-analysis if necessary, while the other half was bagged and sealed as a sample for analysis.  No standards or blanks were submitted with any of the samples for analysis by Bondar-Clegg, whereas the samples for analysis by ALS Chemex in 2001 included blanks and standards to provide quality control and check analysis were run on approximately 10% of the samples for any one submittal.





The Eskapa property covers approximately 3,700 hectares and consists of the “Eskapa” concession (concession #4717), a principal 2885-hectare exploitation concession which covers most of the west half of the Cerro Eskapa stratovolcano.  This large concession encompasses two smaller concessions, “Estrella” / “Mi Morena” (concession #4763) which together cover 115 hectares.  On the north side of the stratovolcano, the “Eskapa II” concession covers 700 hectares.





The concessions are owned by Empresa Minera El Roble S.A. (“El Roble”), a company controlled by a Bolivian national, Patricio Kyllmann, a former director of SAMEX Mining Corp.  Our Bolivian subsidiary, Emibol S.A. (Empresa Minera Boliviana S.A.) earned a 99% interest in any mining operations which may be established on the concessions pursuant to an agreement dated April 16, 1996 and as amended November 23, 1998 with El Roble.   Under the agreement, Emibol S.A. is required to make all expenditures on the concessions in exchange for a 99% interest in any mining operations which may be established on the concessions while El Roble is required to continue to hold title to the concessions and is entitled to a 1% interest in such operations.





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The property is subject to a net smelter royalty of an aggregate of 0.6 % payable to Robert Kell, Front Range Exploration Corp., and El Roble S.A., and to a US$2,000,000 cash royalty payable to International Chalice Resources Inc., to be paid out of production on the property in eight equal quarterly payments of US $250,000 beginning after the ninth month of continuous commercial mining operations on the property.





Patent fees must be paid annually to maintain the mining concessions.  In December 2011 we paid patent fees equal to  approximately US $11,990 to cover the annual patents on the Eskapa Property until the end of February 2013.





The Eskapa Property is without a known body of commercial ore and our activities to date have been exploratory in nature. Our Bolivian properties are subject to a number of special risks.  See “Item 3 Key Information – Risk Factors – Bolivian Interests”.





SANTA ISABEL PROPERTY, Bolivia


The Santa Isabel property (1,803 hectares) is located in the Sud Lipez province in the south-central Altiplano of Bolivia.  The prospect is approximately 105 kilometers by road west from Tupiza and 150 kilometers east-southeast of the rail station of Chiguana.  Surface elevations of the prospect area range from 14,000 feet (4260 m.) to 17,000 feet (5180 m.).





The Santa Isabel property covers a well-mineralized dacitic porphyry intrusive complex with propylitic alteration and widely disseminated sulfide mineralization.  An oxide target with enriched silver values is present on a portion of the Santa Isabel property.  Here, prominent sulfide veins, intervals of vein swarms and disseminated sulfide, have been oxidized to depths of 100 meters or more.  Geologic mapping and IP geophysical surveys have outlined a sulfide-mineralized body 1,000 meters long by 900 meters wide beneath the oxide zone. Dump material and surface rock-chip samples of oxide material positioned above the sulfide target contain 119.4 to 754.8 grams/metric ton silver with 1.82% to 8.0% lead, low zinc (0.12% to 27%), 0.054 to 1.233 grams/metric ton gold (most >0.200 grams/metric ton).  Some samples contain 0.23% to 0.50% antimony.  Further geologic mapping and rock-chip sampling are needed to advance this target to a drill-ready status.  We have not conducted any exploration at Santa Isabel since 1998.





The Santa Isabel property consists of our interest in 1,803 hectares covering a portion of the Goya I and El Bonete concessions which are held under an agreement dated March 24, 1995 between the owner of the concessions, Corporation Minera de Bolivia (“Comibol”) and our subsidiary, Samex S.A.  The agreement was subsequently amended by agreement registered under Transcript Number 408/97 dated November 12, 1997 (the “Comibol Agreement”).  Under the terms of the amended Comibol Agreement, Samex S.A. is entitled to explore all or part of the property for a period of 6 years divided into three phases after which it is required to decide whether to enter into commercial production from all or a portion of the property.  If a favourable production decision is reached, Samex S.A. will have 3 years to commence production from the property after which it will be entitled to manage the joint venture project and will be required to pay a royalty to Comibol equal to 5.5% of net positive cash flow until recovery of capital investment and thereafter 16% of net positive cash flow.  The Goya I/El Bonete concessions are also subject to a 1.2% Net Profits interest in favour of Robert Kell and Front Range Exploration Corp. based on Samex S.A.’s net profits interest in the property.  Comibol is the owner of the Goya I and Bonete concessions and pays annual patent payments on theses concessions.





In order to earn its interest under the Comibol Agreement, Samex S.A. has completed:





a)
an initial payment of US$6.00 per hectare ($14,124.00), which has been paid;


b)
during the first year, a payment of US$3.00 per Hectare ($7,062.00), which has been paid;


c)
during the first year, an additional payment of US$1,000.00/ month to March 1996, which has been paid;


d)
during the second year, an additional payment of US$2,000.00/ month from April 1996 through March 1997 (which has been paid); and


e)
a payment due March 1997 of US$100.00 per hectare on property retained for further exploration (US$180,300 was paid to retain 1,803 hectares); in addition, Samex S.A. was required to fulfill work commitments totaling US$1,140,000.00 during the first two years of the agreement, which requirement was fulfilled by March, 1997.





In order to maintain its rights under the Comibol Agreement, Samex S.A. is required to make a payment by April 11, 2000 of US$500.00 per hectare on property which Samex S.A. should decide to exploit (up to US$901,500 if all 1,803 hectares are retained).  This payment, which was due April 11, 2000, has not been made.  Samex S.A. suspended any decision with respect to retention of property or delivery of the corresponding payment pending resolution of certain ongoing legal proceedings between Comibol and a third party.  Comibol confirmed to Samex S.A. that a portion of the Santa Isabel property was subject to a claim by a third party with respect to two areas covering approximately 10 hectares and 24 hectares of the 1,803 hectares covered by the Goya1/El Bonete concessions.  Comibol formally advised Samex that it was taking legal proceedings to resolve the dispute and asked Samex S.A to wait for it to do so.  Comibol advised that it was taking active steps to assert its legal rights to the disputed area and anticipated success in doing so.  Samex in turn formally advised Comibol that it considered Comibol to be in default of its obligations under the Comibol Agreement because of the dispute, but agreed to await the results of legal proceedings before taking further action.  Comibol was apparently successful in the legal proceedings against the third party’s claim to the disputed areas, but Comibol did not advised SAMEX S.A. of this outcome.   Instead, Comibol has attempted to terminate the agreement between Comibol and Samex S.A., but has not been successful in doing so.   As of the date of this report, Comibol had not yet resolved this issue with Samex S.A.  We are waiting for resolution of the issue with Comibol before making any further plans concerning the property.  Due to the inactivity on the property, and the issue with Comibol, the property interest has been written down to a nominal value of $1,000.





The Santa Isabel Property is without a known body of commercial ore and activities to date have been exploratory in nature. Our Bolivian properties are subject to a number of special risks.  See “Item 3 Key Information – Risk Factors – Bolivian Interests”.
 39





4.C. Organizational Structure.




See “History and Development of the Company” for subsidiaries and organizational chart.





4.D. Property, Plants and Equipment.




We do not own any of our offices.  Our executive office is located at suite 301, 32920 Ventura Avenue, Abbotsford, British Columbia, Canada that we rent on a month-to-month basis at a monthly cost of $2,129 including rent/taxes/operating costs.  We have a field-office/residence in Copiapo, Chile that we rent on a month to month basis at a cost of approximately US$1,570 per month which also functions as a residence for our Chilean geologic and support staff.    See “Business Overview” for a description of our mineral exploration properties.





Item 4.A. Unresolved Staff Comments.





Not Applicable.





Item 5. Operating And Financial Review And Prospects




Conversion to International Financial Reporting Standards - As result of the Accounting Standards Board of Canada’s decision to adopt International Financial Reporting Standards ("IFRS") for publicly accountable entities for financial reporting periods beginning on or after January 1, 2011, the Company adopted IFRS in its financial statements for the year ended December 31, 2011. These are the first annual financial statements of the Company under IFRS.  The Company previously applied the available standards under previous Canadian Accepted Accounting Principles ("Canadian GAAP") that were issued by the Accounting Standards Board of Canada.  The effects of the conversion from Canadian GAAP to IFRS are identified in Note 12 "Transition To IFRS" of our consolidated financial statements for year ended December 31, 2011.  As required by the accounting standard “IFRS 1 - First-time Adoption of International Financial Reporting Standards”, January 1, 2010 has been considered to be the date of transition to IFRS by the Company. Therefore, the comparative figures that were previously reported under previous Canadian GAAP have been restated in accordance with IFRS.  Our consolidated financial statements have been prepared in Canadian dollars and in accordance with IFRS which differ in significant respects from accounting principles generally accepted in Canadian GAAP and from accounting principles generally accepted in the United States ("U.S. GAAP").  As such, this discussion of our financial condition and results of operations is based on the results prepared in accordance with IFRS.





The following discussion of our operating results explains material changes in our consolidated results of operations for the fiscal year ended December 31, 2011, compared to the fiscal year ended December 31, 2010.  The discussion should be read in conjunction with the Company's consolidated financial statements to December 31, 2011 and the related notes included in Item
 18 of this report.  In order to synchronize the difference in year ends, the consolidated financial statements for the 2011 fiscal year include the accounts of the Bolivian subsidiaries for a 12 month period that includes their second, third and fourth quarters from January 1, 2011 to September 30, 2011 and the first quarter of their 2012 fiscal year from October 1, 2011 to December 31, 2011.  Management’s discussion and analysis of our operating results in this section is qualified in its entirety by, and should be read in conjunction with, the consolidated financial statements and notes thereto.  This discussion contains forward-looking statements, the accuracy of which involves risks and uncertainties and our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including, but not limited to, those risk factors described elsewhere in this report.  See “Special Note Regarding Forward Looking Statements” and Risk Factors”.





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Overview




Our business is exploration for minerals.  We do not have any properties that are in development or production. We have no earnings and, therefore, finance these exploration activities by the sale of our equity securities or through joint ventures with other mineral exploration companies.  The key determinants of our operating results include the following:




(a)
Our ability to identify and acquire quality mineral exploration properties on favorable terms;




(b)
The cost of our exploration activities;




(c)
our ability to finance our exploration activities and general operations;




(d)
our ability to identify and exploit commercial deposits of mineralization; and




(e)
the write-down and abandonment of mineral properties as exploration results provide further information relating to the underlying value of such properties.




These determinates are affected by a number of factors, most of which are largely out of our control, including the following:




(a)
The competitive demand for quality mineral exploration properties;




(b)
Political and regulatory climate in countries where properties of interest are located;




(c)
Regulatory and other costs associated with maintaining our operations as a public company;




(d)
the costs associated with exploration activities; and




(e)
the cost of acquiring and maintaining our mineral properties.




Our primary capital and liquidity requirements relate to our ability to secure funds, principally through the sale of our securities, to raise sufficient capital to maintain our operations and fund our efforts to acquire mineral properties with attractive exploration targets and conduct successful exploration programs on them.  We anticipate this requirement will continue until such time as we have either discovered sufficient mineralization on one or more properties with sufficient grade, tonnage and type of mineralization to support the commencement of sustained profitable mining operations and are thereafter able to place such property or properties into commercial production or until we have obtained sufficient positive exploration results on one or more of our properties to enable us to successfully negotiate a joint venture with a mining company with greater financial resources than us or some other suitable arrangement sufficient to fund our operations.




Our success in raising equity capital is dependent upon factors which are largely out of our control including:




a)
market prices for gold, silver, copper and other metals and minerals;




b)
the market for our securities; and




c)
the results from our exploration activities.




Significant factors affecting our operations over the past several years has been the instability in the global financial situation and the related volatility in the demand for, and in the prices of precious and base metals.  However, during 2011, lingering effects of the financial crisis and government responses to it - including high levels of government debt, adoption of expansionist monetary policies, Eurozone instability, the decline of the US dollar as a reserve currency and a growing sovereign debt crisis - contributed to a significant increase in the demand for, and in the price of, gold and silver.  We believe this trend is likely to continue through the next year and possibly beyond.  Improvement in metal prices also brought a corresponding improvement in the market for securities of precious metal exploration companies and our ability to raise capital during 2010 and 2011.  While uncertainty over global financial conditions has lead to significant increases in the price of gold and silver, it has also led to significant market instability and more recently, a decline in the market for junior resource companies.  While we anticipate that improved metal prices will in due course improve the market for the securities of junior gold and silver explorers and therefore our ability to secure additional equity financing, the timing and extent of such effects cannot be accurately predicted.  Metal prices cannot be predicted with accuracy and our plans will be largely dependent upon the timing and outcome of metal markets, particularly the price of gold, silver and copper which is entirely outside of our control.  We also anticipate that our operating results would be significantly affected by the results of our exploration activities on our existing properties.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.




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Currency Risk




Currency exchange rate fluctuations could adversely affect our operations.  Our functional currency is the Canadian dollar, and we have obligations and commitments in other currencies including United States dollars, Chilean Pesos and Bolivian Bolivianos.  Fluctuations in foreign currency exchange rates may affect our results of operations and the value of our foreign assets, which in turn may adversely affect reported financial figures and the comparability of period-to-period results of operations.




Accounting Policies





We have adopted a number of accounting policies and made a number of assumptions and estimates in preparing our financial reporting, which are described in Note 2 to the consolidated financial statements.  These policies, assumptions and estimates significantly affect how our historical financial performance is reported and also your ability to assess our future financial results.  In addition, there are a number of factors which may indicate our historical financial results, but will not be predictive of anticipated future results.  You should carefully review the following disclosure, together with the attached consolidated financial statements and the notes thereto, including, in particular, the statement of significant accounting policies set out in Note 2 to such statements.





Going Concern Assumptions





As described in Note 1 to our consolidated financial statements, our consolidated financial statements have been prepared on the assumption that we will continue as a going concern, meaning that we will continue in operation for the foreseeable future and will be able to realize assets and discharge our liabilities in the ordinary course of operations.  We do not have any mineral properties in production, and have not yet generated any revenues and have a history of losses.   Our continuation as a going concern is uncertain and dependent on our ability to discover commercial mineral deposits on our properties and place them into profitable commercial production and our ability to sustain our operations until such time.  This, in turn depends on our ability to continue to fund our operations by the sale of our securities and other factors which are largely out of our control.  Although we have been successful in the past in obtaining financing, it cannot be assured that adequate financing or financing on acceptable terms can be obtained in the future.  In the event we cannot obtain the necessary funds, it will be necessary to delay, curtail or cancel further exploration on our properties.  Our consolidated financial statements do not reflect adjustments to the carrying values and classifications of assets and liabilities that might be necessary should we not be able to continue in our operations, and the amounts recorded for such items may be at amounts significantly different from those contained in our consolidated financial statements.





Treatment of Mineral Property Costs





As we are at the exploration stage on our mineral properties, we capitalize the acquisition and exploration costs including the costs of acquiring licenses and costs associated with exploration and evaluation activity of our properties under IFRS.  Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss. Should any of these properties be placed into production, such costs would be amortized over the life of the properties on a unit-of-production basis.  Should exploration results of any of our properties prove unsatisfactory, we would then abandon such property or properties, and write off costs incurred up to that time.  The impact on our net loss for the fiscal period would be dependent upon the amount of costs deferred up to the time of the write-off. Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.  Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property and equipment.




Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.





42





Accounting Estimates and Assumptions





The preparation of consolidated financial statements in conformity with IFRS requires management to make a wide variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the consolidated financial statements, and (ii) the reported amounts of expenses during the reporting periods covered by the consolidated financial statements.  Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain.  As the number of variables and assumptions affecting the future resolution of the uncertainties increases, these judgments become even more subjective and complex.  Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  Areas requiring a significant degree of estimation and judgment relate to the determination of the useful lives of equipment, the carrying value of exploration and evaluation assets, fair value measurements for financial instruments and stock-based compensation and other equity-based payments, the recognition and valuation of provisions for restoration and environmental liabilities, and the recoverability and measurement of deferred tax assets and liabilities.  Actual results may differ from those estimates and judgments.  We have identified certain accounting policies that are most important to the portrayal of our current financial condition and results of operations.  Our significant accounting policies are disclosed in Note 2 of notes to our consolidated financial statements, which should be read in conjunction with this Report.





Among other things, we determine our stock-based compensation costs using an option pricing model which involves the selection of highly subjective assumptions, including an assumption as to price volatility.  Changes in these assumptions can materially affect the fair value estimate and therefore the current model does not provide a consistently reliable measure of the fair value cost of the Company’s outstanding stock options.





Stock-Based Compensation





We have a stock option plan whereby we grant incentive stock options as partial compensation to our directors, officers, employees and consultants.  Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods.  Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received.  The corresponding amount is recorded to the share-based payment reserve.  The fair value of options is determined using a Black–Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.  See Item 6.B “Compensation – Incentive Stock Options”.





5.A. Operating Results




Overview Of Results For The  Fiscal Year Ended December 31, 2011 (“FYE 2011”)





The following section contains a summary of our operating results for the fiscal year ended December 31, 2011, which is qualified by detailed descriptions that follow elsewhere in this document.  This section also contains a number of ‘forward looking statements’ which, although intended to be accurate, may be affected by a number of risks and uncertainties that may cause them to be materially different from actual outcomes.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





As a junior exploration company, our operations are significantly affected by a number of external factors, particularly economic trends that affect the price of the commodities we explore for or those that affect the market for our securities.  See Item 5.D “Trend Information”.





The Company raised substantial private placement funding during the later part of 2010 and received significant proceeds from the exercise of warrants during 2011, which allowed us to increase our staff and expand our exploration activities and expenditures during 2011 as compared to 2010.  Costs for categories such as exploration and evaluation assets, mineral interests administration and investigation, office and miscellaneous, salaries and benefits, and travel and promotion correspondingly increased over the expenditures during 2010.  For the year ended December 31, 2011, "Exploration And Evaluation Assets" costs totaled $3,345,249 (2010 - $1,314,972) and "Mineral Interests Administration And Investigation" expenses totaled $287,369 (2010 - $208,939).





Los Zorros Property, Chile - The Los Zorros property consists of multiple project areas that have now been strategically expanded to cover more than 100 square kilometers within a district of scattered numerous small mines and prospects where there was sporadic attempts at small-scale production for gold and copper-silver in the past.   What has been revealed geologically at Los Zorros has provided SAMEX with strong impetus to explore for multiple precious metal deposits that may be clustered beneath the widespread precious metal occurrences in this district of historic small mining activity. The property is situated at the convergence of important geologic and structural features and significant gold and copper-silver mineralized areas of Cinchado, Nora, Milagro, and Milagro Pampa. There are also many other mineral occurrences at Los Zorros yet to be systematically explored by SAMEX including: La Florida and Lora (gold and copper-gold), Virgen de Carmen and Colorina (copper-silver; possible deeper-seated gold and copper-gold), and Salvadora, Cresta de Gallo, and Trueno (barite vein systems with possible deeper-seated gold and copper-gold).





43





The Company has 100% interest in approximately 7,774 hectares of mineral concessions acquired by staking, purchase at government auction, purchase agreement, and by two purchase option contracts, and we further expanded the Los Zorros land holdings during 2011 by signing the Aravena Option to acquire a 100% interest in approximately 2,900 hectares of additional mineral concessions adjacent to the Los Zorros property.  The Los Zorros land holdings now cover a 15 kilometer-strike of the prospective range front/anticline along which mineralization is exposed in old-time piquenero underground workings, open cuts, trenches and pits situated in the Colorina, Nora, Virgen del Carmen, Cresta de Gallo, and Trueno project areas that are yet to be systematically explored.  Of particular significance, at the date of this report, the only acquisition payment remaining on our extensive accumulated land holdings at Los Zorros is the final Aravena Option payment of US$90,000 due by January 31, 2013.





During the first quarter of 2011, the Company continued a drilling program at Los Zorros that had commenced during 2010.  In late January 2011 we started a substantial geophysical survey (at a cost of US$280,000) over portions of the Los Zorros district.  During the second quarter ended June 30, 2011, the information gained from the drilling, assaying and the geophysical survey was evaluated and complied in preparation for more drilling which commenced early in the third quarter of 2011, and is still in progress at the date of this report.  During the later part of 2011 the Company engaged a consulting geophysicist to assist in the interpretation and correlation of geophysical data and we expanded the exploration program at Los Zorros by adding a second drill rig, three more geologists, and additional support staff at the camp.  We also commenced expansion of the Los Zorros camp and support facilities to accommodate the additional geologists and support workers and adding additional core logging, sampling, and core-saw equipment to facilitate increased exploration and drilling activities.





Exploration at Los Zorros during 2011 included drilling 13 core drill holes for a total of 6,335 meters drilled. See Item 4. Information On the Company - Description of Property - "Los Zorros Property" for details concerning exploration results and activities on the Los Zorros Property.  Exploration and Evaluation Assets costs related to the Los Zorros Property totaled $3,010,043 (including $774,491 of stock-based compensation capitalized to the Los Zorros Property) for the year ended December 31, 2011.  The major private placement funding we secured in the fourth quarter of 2010 along with proceeds of more than $4.6 million from exercise of warrants during 2011 has provided us with the financial resources to explore numerous project areas and prospective targets within the Los Zorros property holdings.





INCA Property, Chile - During 2011, we expanded our land holdings at the INCA property by exercising our option (the "Rojas Option") to purchase 20 hectares of mineral concessions by paying the balance of  the Chilean Peso-equivalent of US$300,000 option price (US$150,000 of which the Company had previously paid) and staking addition concessions .  Our landholdings at the INCA project now consist of approximately 8,866 hectares of prospective and strategic concessions including the 45-hectare Providencia Mine concessions that we acquired in 2009 pursuant to the “Araya Option” and the 20 hectares of concessions we purchased during 2011 pursuant the Rojas Option.  We are also in discussions with Minera Porvenir concerning the acquisition of an additional 2,138 hectares of mineral interests in the INCA project area held under the disputed Minera Porvenir Option.





We are continuing our efforts to arrange a joint venture or sale of all or a portion of our INCA copper, gold, molybdenum property.





Trends and Financing - Over the past several years, we have experienced a number of important external changes in the market place that had an affect on our overall performance.  We believe these economic trends are likely to continue through the next year and possibly beyond and may result in a significant increase in the demand for, and in the price of, gold and silver, and an improved market and price for shares of companies focused on precious metals.





The trends during 2010 and 2011 improved our ability to raise capital at higher prices, on more favourable terms, and in greater amounts.   For example, during 2009 we raised a total of $2,586,050 through two private placements at a price of $0.10 per unit and at $0.20 per unit and from the exercise of warrants.  By comparison, during fiscal 2010 we raised a total of $10,162,060 from two private placements at a price of $0.30 per unit and at $0.50 per unit and from the exercise of warrants.  As favourable trends continued, during 2011 we received proceeds of $4,675,500 from the exercise of warrants and proceeds of $60,000 from the exercise of stock options.  See Item 5.D “Trend Information”.





Gold and Silver Bullion Holdings - Management has taken advantage of our understanding of the markets in order to protect our working capital from the current environment of monetary debasement and converted a large portion of excess working capital into gold and silver physical bullion holdings which has already, and should continue to, protect our purchasing power for future operations.  Physical gold and silver bullion are highly liquid and are readily convertible to cash as required.  During the third and fourth quarters of fiscal 2010 the Company used a portion of its cash to purchase approximately $1.8 million worth of silver bullion and $2.2 million worth of gold bullion to hold in lieu of cash.  By the end of fiscal 2010, the Company’s “Gold and Silver Bullion Holdings” of 48,193.324 grams of gold and 63,498.734 ounces of silver had a fair value of $4,107,333 at December 31, 2010.  During the first quarter of fiscal 2011, the Company used a portion of its cash to purchase an additional $200,000 worth of silver bullion and $799,969 worth of gold bullion to hold in lieu of cash.  During the second quarter ended June 30, 2011, the Company used a portion of its cash to purchase approximately $999,980 worth of gold bullion to hold in lieu of cash.  During the fourth quarter ended December 31, 2011, the Company sold 35,000 ounces of silver bullion for proceeds of $1,220,291 which resulted in a gain of $229,706 and purchased $509,140 worth of silver ounces.  At December 31, 2011, the Company held 87,362.448 grams of gold and 50,018.674 ounces of silver which had a fair value of $5,807,372. The fair value of the Company's gold and silver bullion holdings is determined by the closing prices of gold and silver at the date of the period/year end and also the US dollar exchange rates on these dates.  Gold and silver bullion is measured at fair value through the statement of comprehensive loss.  There was a gain of $433,233 on the gold and silver bullion holdings for fiscal 2011.





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Bolivia:Bolivian Properties Remain In “Care And Maintenance” Status – In 2009, the Company suspended exploration activities in Bolivia and put the Bolivian properties on “care and maintenance” status.  In the several years leading up to this decision, we had been monitoring with concern a number of changes in the political climate in Bolivia.  Over that time, the political climate for resource companies continued to deteriorate with events such as the nationalization of Bolivia’s natural gas resources, a moratorium on the grant of new mineral exploration licenses, a national referendum that resulted in constitutional changes and requirements that all mining projects be conducted only in partnership with the state mining company – on economically unfavorable terms.  In light of these and other factors we decided that Bolivia carried a significant risk for development of future mineral projects.  Accordingly in 2009 we minimized our activities in Bolivia by suspending exploration activities, putting all of our Bolivian projects on “care and maintenance” status, and reducing our Bolivian office, staff, and operating expenses.  Each year, we continue to pay the annual patentes required to maintain the mineral concessions.  Due to the inactivity on the Bolivian properties, the property interest for the Eskapa Property, the El Desierto Property and the Santa Isabel Property was each written down to a nominal value of $1,000 resulting in a combined valuation of only $3,000 for our Bolivian properties at December 31, 2011.   While we hope we will be able to return to exploring our Bolivian properties at some time in the future, we do not anticipate we will be able to do so as long as current political conditions persist.





Plans and Projections – SAMEX exploration activities will continue to be focused on its high quality gold and silver projects in Chile including the Los Zorros property and the Chimberos property.  The Company will also continue to conduct meetings and property tours with parties interested in our INCA copper-gold-moly property in Chile in an effort to arrange a joint venture or sale of all or a portion of the INCA property.  See “Liquidity and Capital Resources” and “Anticipated Capital Requirements”.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





Summary for Fiscal 2011 - During the first quarter of 2011, the Company continued a drilling program at Los Zorros that had commenced during 2010.  In late January 2011 we started a substantial geophysical survey (at a cost of US$280,000) over portions of the Los Zorros district.  During the second quarter ended June 30, 2011, the information gained from the drilling, assaying and the geophysical survey was evaluated and complied in preparation for more drilling which commenced early in the third quarter.  During the later part of 2011 the Company engaged a consulting geophysicist to assist in the interpretation and correlation of geophysical data and we expanded the exploration program at Los Zorros by adding a second drill rig, three more geologists, and additional support staff at the camp.  Exploration at Los Zorros during 2011 included drilling 13 core drill holes for a total of 6,335 meters drilled.  We also commenced expansion of the Los Zorros camp and support facilities to accommodate the additional geologists and support workers and adding additional core logging, sampling, and core-saw equipment to facilitate increased exploration and drilling activities.





During 2011 we also further expanded the Los Zorros land holdings: we entered into a Unilateral Option Contract dated June 28, 2011 with Cristian Marcelo Aravena Caullan (the “Aravena Option”) to acquire a 100% interest in approximately 2,900 hectares of additional mineral concessions adjacent to the Los Zorros property by paying the 2011/2012 patent payments (paid) and by making option payments totaling the Chilean peso equivalent of U.S. $245,345 as follows: U.S. $60,000 on signing (paid); U.S. $95,345 due January 31, 2012 (paid subsequent to the year) and U.S. $90,000 due January 31, 2013.





During the first quarter, the Company made an advance royalty payment of US$100,000 (in Chilean peso equivalent) in relation to a 209-hectare-portion of the Los Zorros property which the Company purchased pursuant to the “Hochschild Option”.





During 2011 we expanded our land holdings at the INCA property by exercising the Rojas Option to purchase 20 hectares of mineral concessions and staking addition concessions.





For the year ended December 31, 2011, "Exploration And Evaluation Assets" costs totaled $3,345,249 (2010 - $1,314,972) and "Mineral Interests Administration And Investigation" expenses totaled $287,369 (2010 - $208,939).





Our assets categorized in the Consolidated Statements Of Financial Position as “Exploration And Evaluation Assets" increased to $13,625,896 at December 31, 2011 as compared to $10,299,789 at December 31, 2010.





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The amount of cash on hand at December 31, 2011 was $3,991,264 compared to $4,870,337 at December 31, 2010 and the Company's "Gold and Silver Bullion" holdings had a fair value of $5,807,372 at December 31, 2011 compared to a fair value of $4,107,333 at December 31, 2010.  The Company's total assets were $23,654,987 at December 31, 2011 compared to $19,366,455 at December 31, 2010.  At December 31, 2011, we were debt-free, apart from accounts payable and accrued liabilities of $89,211 compared to $91,890 at December 31, 2010.





The Company raised substantial private placement funding during the later part of 2010 and received significant proceeds of $4,675,500 from the exercise of warrants during 2011, which allowed us to increase our staff and expand our exploration activities and expenditures during 2011 as compared to 2010.  Expenditures for categories such as exploration and evaluation assets costs, mineral interests administration and investigation costs, office and miscellaneous, professional fees, salaries and benefits, and travel and promotion have correspondingly increased over the 2010 expenditures.





The following comments relate to certain categories in the consolidated financial statements to December 31, 2011:





Statements of Financial Position


“Gold and Silver Bullion” - During the first quarter of fiscal 2011, the Company used a portion of its cash to purchase an additional $200,000 worth of silver bullion and $799,969 worth of gold bullion to hold in lieu of cash.  During the second quarter ended June 30, 20011, the Company used a portion of its cash to purchase approximately $999,980 worth of gold bullion to hold in lieu of cash.  During the fourth quarter ended December 31, 2011, the Company sold 35,000 ounces of silver bullion for proceeds of $1,220,291 which resulted in a gain of $229,706 and purchased $509,140 of silver ounces.  At December 31, 2011, the Company held 87,362.448 grams of gold and 50,018.674 ounces of silver which had a fair value of $5,807,372.  The fair value of the Company's gold and silver bullion holdings is determined by the closing prices of gold and silver at the date of the period/year end and also the US dollar exchange rates on these dates. There was a gain of $433,233 on the gold and silver bullion holdings for fiscal 2011.  Physical gold and silver bullion are highly liquid and are readily convertible to cash.





Consolidated Statements of Comprehensive Loss


"Interest and Bank Charges" - includes vault fees for storage of the Company's gold and silver bullion holdings.





“Mineral Interests Administration and Investigation Costs” - are expensed as incurred and are not capitalized to  exploration and evaluation assets and include operating costs related to the Company’s activities in Chile and Bolivia that are not allocated to one of the Company’s specific mineral properties, and include generative exploration or investigating and evaluating mineral properties not acquired by the Company.





“Office and Miscellaneous” - includes rent and utilities for the Canadian corporate office, book-keeping/accounting, office supplies, telephone, postage, couriers, parking, mileage, and printing.  Also includes purchase of new computer software for mapping/geology and other programs.





"Salaries and Benefits" - includes bonus payments described in Note 9 to the consolidated financial statements.





“Stock-Based Compensation” – During the year ended December 31, 2011, the Company granted stock options to consultants, employees, directors and officers on a total of 2,825,000 shares at $0.70 to $1.50 per share with fair values on the grant dates of $3,400,912 of which $2,626,421 was expensed in the statement of comprehensive loss in the category “Stock-Based Compensation” and $774,491 was capitalized to the Los Zorros Property exploration and evaluation assets in relation to options granted to geologist working on the Los Zorros Property.  Stock-based compensation costs (the fair value of the options at the grant date) are determined using the Black-Scholes option pricing model which involves the selection of highly subjective assumptions.  The following assumptions were used for the Black-Scholes valuations of the stock options granted during the 2011:  Expected dividend rate – 0%; Expected stock price volatility – 114% to 135%; Risk-free interest rate – 1.43% to 3.38%; Expected life of options – 5 to 10 years.  Changes in these assumptions can materially affect the fair value estimate and therefore the current model may not provide a consistently reliable measure of the fair value cost of the stock options.





"Gain On Gold And Silver Bullion" - Gain of $433,233 - gains or losses are related to the rising or falling prices of gold or silver and the fair value of the Company's gold and silver bullion holdings determined by the closing prices of gold and silver at the date of the period ends and also the US dollar exchange rates on these dates.





Statement of Changes In Shareholders' Equity


"Warrant Extension" - the Company extended the term of 2,871,250 warrants at $1.00 per share by one additional year.  This resulted in an incremental increase in the fair value of the warrants of $455,868 that was charged to deficit.





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Overview Of Results For The 2010 Fiscal Year Ended December 31, 2010 - The following section contains a summary of our operating results for the year ended December 31, 2010, which is qualified by detailed descriptions that follow elsewhere in this document.  This section also contains a number of ‘forward looking statements’ which, although intended to be accurate, may be affected by a number of risks and uncertainties that may cause them to be materially different from actual outcomes.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





As a junior exploration company, our operations are significantly affected by a number of external factors, particularly those that affect the price of the commodities we explore for or those that affect the market for our securities.  The principal external factors in 2010 resulted from the lingering effects of the severe global financial crisis which took place in the two preceding years, and various government responses to it.  During late 2008, the world experienced a number of adverse events in the financial sector including the failure, forced takeover or government bailout of a number of major financial institutions in September-October 2008 and the start of a deep world-wide financial crisis - considered by many to be the worst since the Great Depression.  These events brought about a major decline in stock markets, which fell almost 45% from their 2007 high, and a sharp decline in the price of a number of commodities, including copper and gold, which, although usually thought to be a counter-cyclical commodity, fell at the deepest point in the crisis in October, 2008 to almost US$700 per ounce.  Prices for copper continued to remain soft during 2009, but the price of gold, likely due in large part to continuing uncertainty in the US and global economy, continued to climb throughout 2009, breaking the historical US$1,000 per ounce level in October, 2009. While 2010 saw significant economic improvement in certain parts of the world, particularly in developing countries, the effects of the financial crisis continued in many places - particularly the United States and Euro-zone countries, which have continue to suffer from slow growth and high levels of unemployment.  Further, likely due in part to high levels of government fiscal stimulus and other responses to the financial crisis, a new range of issues began to emerge in 2010, including extraordinarily high levels of government debt, major currency instability and a growing sovereign debt crisis.  These factors in turn resulted in international bailouts of Greece and Ireland, and growing concern over the fiscal stability of Spain and Portugal.  In the US, the effect of unprecedented levels of government funded stimulus, institutional bailouts, repeated "quantitative easing" and other expansionist monetary policies has led to deterioration of the US dollar and its role as a reserve currency, and serious concern over economic retrenchment.  At the same time, likely in response to global economic conditions, the price of gold soared during 2010 from a low of $1,058 in February, 2010 to over $1,400 in December 2010, climbing even further to a record price of over $1,500 in April of 2011.  Silver had an even more spectacular climb from a low of $15.14 in February 2010 to over $30 in December, reaching over $46 by April.  Further, the market for the shares of junior precious metal explorers also improved significantly, offering greater access to capital to fund exploration of our gold and silver projects in Chile.





During fiscal 2010 we focused our exploration activities principally on four individual projects situated within our Los Zorros gold property holdings in Chile.  The work included bulldozer trenching, sampling, assaying and construction of roads and drill pads at the Milagro, Nora, Cinchado and Milagro Pampa Projects in preparation for drilling programs to test these four projects for multiple precious metal deposits.  By the end of the third quarter we commenced exploration core drilling which continued through the fourth quarter of 2010 and into the first quarter of 2011.  Quarterly summaries are as follows:





During the first quarter ended March 31, 2010 we continued exploration work in the Nora, Cinchado and Milagro Project areas of our Los Zorros gold property in preparation for a drill program to test these various project areas for multiple large gold targets.   We also made an advance royalty payment (US$100,000) related to the “Hochschild Purchase” by which we acquired concessions that are part of our Los Zorros Property in Chile.  During the first quarter ended March 31, 2010, the Company received proceeds of $177,000 from the exercise of warrants for the purchase of 885,000 shares at $0.20 per share.  As a result of the Company’s activities during the three months ended March 31, 2010, exploration/mineral interests costs totaled $328,197 at March 31, 2010 as compared to $594,469 for the first quarter ended March 31, 2009.  During the second quarter ended June 30, 2010 we continued exploration work on the Nora, Cinchado, Milagro and Milagro Pampa Projects at our Los Zorros gold property in preparation for a drill program to test these various project areas for multiple large gold targets.  During the second quarter ended June 30, 2010, the Company received proceeds of $10,000 from the exercise of warrants for the purchase of 50,000 shares at $0.20 per share.  As a result of the Company’s activities during the three months ended June 30, 2010, exploration/mineral interests costs for the second quarter totaled $194,281 as compared to $243,404 for the second quarter ended June 30, 2009.





During the third quarter ended September 30, 2010 we continued exploration work at four individual projects situated within our Los Zorros gold property holdings in Chile.  Work was focused on constructing roads and drill pads at the Milagro, Nora, Cinchado and Milagro Pampa Projects in preparation for drilling programs to test these projects for multiple precious metal deposits.  By the end of the third quarter we had commenced exploration core drilling at Cinchado that is only one of the numerous project areas in the Los Zorros district.  Our exploration/mineral interests costs for the third quarter totaled $286,519for the three months ended September 30, 2010, as compared to $239,275 for the third quarter ended September 30, 2009. During the third quarter of 2010, the Company received proceeds of $20,000 from the exercise of warrants for the purchase of 100,000 shares at $0.20 per share.  Also, during the third quarter, the Company completed a private placement of 3,647,334 units at a price of $0.30 per unit for gross proceeds of $1,094,200.  During the fourth quarter ended December 31, 2010 we were core drilling at the Cinchado Project and Milagro Pampa Project situated within our Los Zorros property holdings.  Our exploration/mineral interests costs for the fourth quarter totaled $714,914for the three months ended December 31, 2010, as compared to $215,313 for the fourth quarter ended December 31, 2009.  During the fourth quarter 2010 the Company completed a private placement of 17,583,720 units at a price of $0.50 per unit for gross proceeds of $8,791,860. During the fourth third quarter, the Company also received proceeds of $69,000 from the exercise of warrants for the purchase of 345,000 shares at $0.20 per share.





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As a result of our activities throughout 2010 our exploration/mineral interests costs totaled $1,523,911 for the fiscal year ended December 31, 2010 compared to $1,292,461 for the year ended December 31, 2009.  During fiscal 2010 we raised a total of $10,162,060 from two private placements at a price of $0.30 per unit and at $0.50 per unit and from the exercise of warrants as compared to 2009 when we raised $2,586,050 through two private placements at $0.10 per unit and at $0.20 per unit and the exercise of warrants.





Los Zorros Property, Chile  – Our Los Zorros property holding consists of multiple project areas that cover approximately 80 square kilometers within a district of scattered numerous small mines and prospects where there was sporadic attempts at small-scale production for gold and copper-silver in the past.  Systematic exploration by SAMEX has revealed that the Los Zorros district is situated at the convergence of important geologic and structural features:





●
the property covers the breadth of a regional anticlinorium with bedrock of calcareous sediments and diorite sills.





●
the property is diagonally crossed by an 8-kilometer-long trend of barite veins which appears to comprise an extensive sigmoidal (S-shaped) fracture system.





●
the property is also the locus of younger porphyry intrusions.





●
clay-sericite-pyrite alteration is superposed on the porphyry intrusions in four areas that have been identified so far - much of these altered areas and parts of the barite vein swarm, are largely concealed beneath a thin veneer of gravel and wind-blown silt.  Trenching and a gravity survey have helped better outline the extent of the altered intrusions.





●
the style of mineralization at Los Zorros varies from steep crosscutting veins and breccia to bedded mantos-like occurrences – hosted within sedimentary rocks outboard to the altered porphyritic intrusions.  There is widespread occurrence of gold-bearing barite veins and altered fault zones; common, widespread occurrence of jasperoid silica; large areas/intersections of anomalous gold and the presence of important pathfinder metals (Hg, As, Sb) often found in association with gold mineralization.





Metal-laden hydrothermal fluids thought to be derived from the younger porphyritic intrusions, likely expelled out along fault structure pathways and into favorable sedimentary intervals to form the significant gold and copper-silver mineralized areas of Cinchado, Nora, Milagro, and Milagro Pampa. There are also many outlying mineral occurrences at Los Zorros yet to be systematically explored by SAMEX including: La Florida and Lora (gold and copper-gold), Virgen de Carmen and Colorina (copper-silver; possible deeper-seated gold and copper-gold), and Salvadora and Cresta de Gallo (barite vein systems with possible deeper-seated gold and copper-gold).





What has been revealed geologically at Los Zorros has provided SAMEX with strong impetus to explore for multiple precious metal deposits that may be clustered beneath the widespread precious metal occurrences in this little-explored district of historic small mining activity.  See Item 4. Information On the Company - Description of Property - "Los Zorros Property" for more details concerning the Los Zorros Property.





Subsequent to the year ended December 31, 2010 we continued drilling at projects situated within our Los Zorros property holdings and in late January 2011 commenced a substantial geophysical survey over portions of the Los Zorros district.  The survey, which included five survey lines totaling over 20 line-kilometers, was conducted by Quantec Geoscience utilizing their proprietary Titan 24 technology.  The Titan 24 Magnetotellurics and IP/Resistivity survey is a deep-earth-imaging technology system for detecting conductive mineralization, disseminated mineralization, alteration, structure and geology which can help target and direct exploration drilling to depth.  Data from the Titan 24 survey will be correlated with data from earlier exploration and current drilling to help guide ongoing exploration throughout the extensive Los Zorros gold district.





Trends and Financing - Over the past several years, we have experienced a number of important external changes including economic trends in the market place that had an affect on our overall performance.  We believe these economic trends are likely to continue through the next year and possibly beyond and may result in a significant increase in the demand for, and in the price of, gold and silver, and an improved market and price for shares of companies focused on precious metals.  These trends during 2010 improved our ability to raise capital at higher prices, on more favourable terms, and in greater amounts.   For example, during 2009 we raised a total of $2,586,050 through two private placements at a price of $0.10 per unit and at $0.20 per unit and from the exercise of warrants.  By comparison, during fiscal 2010 we raised a total of $10,162,060 from two private placements at a price of $0.30 per unit and at $0.50 per unit and from the exercise of warrants.  See Item 5.D “Trend Information”.





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In the fourth quarter of 2010, we completed a private placement of 17,583,720 units at $0.50 per unit.





Gold and Silver Holdings - During the third and fourth quarters of fiscal 2010 the Company used a portion of its cash assets to purchase approximately $1.8 million worth of silver bullion and $2.2 million worth of gold bullion to hold in lieu of cash.  By the fiscal year-end, the Company’s “Gold and Silver Holdings” of 48,193.324 grams of gold and 63,498.734 ounces of silver had a market value of $4,107,333 at December 31, 2010





INCA Property, Chile - Option Payments Not Made On Minera Porvenir Option and Rojas Option - In fiscal 2009, we concluded that, although some of the results of the Phase I exploration that we conducted at INCA from 2006 to 2008 (particularly in the area around the Providencia mine) were very promising, the first phase of exploration did not identify the presence of the wide-spread, near-surface porphyry copper deposit that we had hoped for.  We concluded that, although the possibility still existed to find a large-scale copper deposit at INCA, considerable more exploration work and expenditures would be required to do so.  Further, certain portions of the INCA property were covered by option agreements for which payments came due in March and April of 2009. Under the “Minera Porvenir Option”, which covers a 2,138-hectare portion of the INCA project, a final payment of US$1,000,000 (which would entitle us to 100% of the Property) was due March 31, 2009, less an amount required to resolve certain title issues on a 85-hectare portion of the property (which remains unresolved).  Under the “Rojas Option” which covers a 20-hectare portion of the INCA project, a final payment of US$150,000 was due April 30, 2009.  We did not make the payment under the Rojas Option at the time but subsequently made the final payment and purchased a 100% interest in the concecssions in FYE 2011.  In the case of the Porvenir Option, we considered, among other things, the fact that the optionor had not resolved title issues with respect to a portion of the property covered by the option and therefore was not able to deliver title to the entire optioned property, or for us to determine the appropriate adjustment to the final option price.  We also determined,, that, in light of economic and market conditions, exploration results to date on these particular concessions and other factors, payment of the option payments was not economically justified at the time.  These two option agreements provided that the owner may terminate the option on default by giving 30 days written notice.  At the date of this report, we have not received written notice of default under the Porvenir Option.  We are of the view that the optionor cannot at this time give valid notice of termination under the Porvenir Option, since it is unable to deliver title to the entire optioned property, however, if for any reason, notice of termination is given for these properties, which is held to be valid, we may be required to relinquish the option on this portions (2,138 hectares) of the INCA property.  Due to the possibility of relinquishing these portions of the INCA property, we wrote-off a $2,699,263 portion of the deferred expenditures on the INCA property at December 31, 2009.  We are currently in discussions with Minera Porvenier with respect to purchase of the concessions covered by the Porvenier Option on existing or amended terms.





Our landholdings at the INCA project consist of approximately 3,488 hectares of prospective and strategic concessions including the Providencia Mine concessions that we acquired in 2009 pursuant to the “Araya Option”.  In addition, the Company also has the option to acquire another 2,158 hectares of mineral interests in the INCA project area pursuant to the Minera Porvenir Option, however, as disclosed above, the Company has not made the final option payments on this option.





The Company is conducting meetings and property tours with interested parties in its continuing efforts to arrange a joint venture or sale of all or a portion of the INCA property.





Bolivia - Bolivian Properties Remain In “Care And Maintenance” Status – In 2009, the Company suspended exploration activities in Bolivia and put the Bolivian properties on “care and maintenance” status.  For several years, we had been monitoring with concern a number of changes in the political climate in Bolivia.  Over that time, the political climate for resource companies continued to deteriorate with events such as the nationalization of Bolivia’s natural gas resources, a moratorium on the grant of new mineral exploration licenses, a national referendum that resulted in constitutional changes and requirements that all mining projects be conducted only in partnership with the state mining company – on economically unfavorable terms.  In light of these and other factors we decided that Bolivia currently carried a significant risk for development of future mineral projects.  Accordingly in 2009 we minimized our activities in Bolivia by suspending exploration activities, putting all of our Bolivian projects on “care and maintenance” status, and reducing our Bolivian office, staff, and operating expenses.  While we hope we will be able to return to exploring our remaining Bolivian properties at some time in the future, we do not anticipate we will be able to do so as long as current political conditions persist.





Plans and Projections – SAMEX exploration activities will continue to be focused on its high quality gold and silver projects in Chile including the Los Zorros property and the Chimberos property.  The Company will also conduct meetings and property tours with parties interested in our INCA copper-gold-moly property in Chile in an effort to arrange a joint venture or sale of all or a portion of the INCA property.  See “Liquidity and Capital Resources” and “Anticipated Capital Requirements”.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





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5.B. Liquidity and Capital Resources





Liquidity and Capital Resources 2011 - We are an exploration company and do not have any mineral properties in production and, therefore, did not generate any revenue from operations during the year ended December 31, 2011.  We realized a net and comprehensive loss of $3,845,201 for the year ended December 31, 2011 or $0.03 per share compared to a net and comprehensive loss of $1,091,350 for the year ended December 31, 2010 or $0.01 per share.  The net and comprehensive loss for the year ended December 31, 2011 includes a stock-based compensation expense of $2,626,421 (determined by the fair values on the grant dates) for stock options granted during the year.  Losses are a reflection of our ongoing expenditures on our mineral property exploration and evaluation assets which are all currently in the exploration stage.  Since we have no source of operating revenues, no lines of credit and no current sources of external liquidity, our ability to continue as a going concern is dependent upon our ability to raise equity capital, enter into joint ventures or borrow to meet our working capital requirements.  Based on the cash and gold and silver bullion on hand at the date of this report, we believe we have sufficient funds to conduct our ongoing general operations and to fund our proposed exploration programs over the next year.  The Company plans to focus its exploration activities over the next year on its high quality gold and silver projects in Chile including project areas at Los Zorros.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





In the coming years, we will require substantial additional capital to achieve our goal of discovering significant economic mineralization on one or more of our properties.  Until such time as we are able to make such a discovery and thereafter place one or more of our properties into commercial production or negotiate one or more joint venture agreements, we will be largely dependent upon our ability to raise capital from the sale of our securities to fund our operations.  We do not anticipate being able to obtain revenue from commercial operations in the short term and anticipate we will be required to raise additional financing in the future to meet our working capital and on-going cash requirements.  We intend to raise such financing through sales of our equity securities by way of private placements, and/or the exercise of warrants.  We may also secure additional exploration funding through option or joint venture agreements on our mineral properties; or through the sale of our mineral properties, royalty interests or capital assets, or borrow to meet our working capital requirements.  While we have in the past been able to raise sufficient funds to sustain our exploration programs, there is no assurance that we will continue to be able to do so.  If, for any reason, we are not able to access the capital market, our resources during this period will be limited to cash and gold and silver bullion on hand and any revenues we are able to generate from joint venture or similar arrangements we may hereafter enter into. If we are unable to secure sufficient funds to pursue such proposed acquisitions and exploration to the level desired, we will adjust our proposed activities to reflect the amount of capital available to us after providing for sufficient working capital to maintain our existing operations.  At present, none of our properties have a known body of ore and all our proposed exploration programs are an exploratory search for ore.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





Financing 2010 to 2011 - In the past, we have relied in large part on our ability to raise capital from the sale of our securities to fund the acquisition and exploration of our mineral properties.  2010 saw a significant increase in the demand for, and in the price of, gold and silver, and an improved market and price for shares of companies focused on precious metals.  These trends during 2010 improved our ability to raise capital at higher prices, on more favourable terms, and in greater amounts than in previous years.   For example, during 2009 we raised a total of $2,586,050 through two private placements at a price of $0.10 per unit and at $0.20 per unit and from the exercise of warrants.  By comparison, during fiscal 2010 we raised a total of $10,162,060 from two private placement at a price of $0.30 per unit and at $0.50 per unit and from the exercise of warrants as follows: during the first quarter ended March 31, 2010, the Company received proceeds of $177,000 from the exercise of warrants for the purchase of 885,000 shares at $0.20 per share.  During the second quarter ended June 30, 2010 the Company received proceeds of $10,000 from the exercise of warrants for the purchase of 50,000 shares at $0.20 per share.  During the third quarter ended September 30, 2010, the Company completed a private placement of 3,647,334 units at a price of $0.30 per unit for gross proceeds of $1,094,200 and received proceeds of $20,000 from the exercise of warrants for the purchase of 100,000 shares at $0.20 per share.  During the fourth quarter ended December 31, 2010, the Company completed a private placement of 17,583,720 units at a price of $0.50 per unit for proceeds of $8,791,860 and received proceeds of $69,000 from the exercise of warrants for the purchase of 345,000 shares at $0.20 per share.





During fiscal 2011, we raised proceeds of $4,675,500 from the exercise of warrants and proceeds of $60,000 from the exercise of stock options as follows: during the first quarter ended March 31, 2011, the Company received proceeds of $1,784,550 from the exercise of warrants for the purchase of 195,000 shares at $0.20 per share, 500,000 shares at $0.30 per share, 750,000 shares at $0.70 per share, and 1,372,500 shares at $0.78 per share.  During the second quarter ended June 30, 2011 the Company received proceeds of $2,800,950 from the exercise of warrants and $20,000 from the exercise of an option.  During the third quarter ended September 30, 2011, the Company received proceeds of $90,000 from the exercise of warrants for 200,000 shares at $0.20 per share and 50,000 shares at $1.00 per share, and proceeds of $40,000 from the exercise of a stock option to acquire 200,000 shares at $0.20 per share.





50





Use Of Proceeds 2010 to 2011


In 2010 we completed a private placement in the third quarter and in regulatory filings disclosed that the intended use of the proceeds of $1,094,200 would be $800,000 for expenditures/exploration on our mineral properties and $294,200 for general working capital.   This intended use of proceeds was more than fulfilled as exploration/mineral interests costs totaled $328,197 for the first quarter ended March 31, 2010; $194,281 for the second quarter ended June 30, 2010; $286,519for the third quarter ended September 30, 2010; and $714,914 for the fourth quarter ended December 31, 2010 for a total of $1,523,911 exploration/mineral interests costs for the 2010 fiscal year.  During the fourth quarter of 2010 we completed a private placement and in regulatory filings disclosed that the intended use of the proceeds of $8,791,860 would be $5,000,000 for expenditures/exploration on our mineral properties and $3,791,860 for general working capital.





For the year ended December 31, 2011, our exploration and evaluation assets costs totaled $3,345,249 and mineral interests administration and investigation expenses totaled $287,369.





Anticipated Capital Requirements - Based on the cash and gold and silver bullion on hand at the date of this report, we believe we have sufficient funds to conduct our ongoing general operations and to fund our proposed exploration programs over the next year.





While we have in the past been able to raise sufficient funds to sustain our exploration programs, there is no assurance that we will continue to be able to do so.  If, for any reason, we are not able to secure equity financings, our resources during this period will be limited to cash and gold and silver bullion on hand and any revenues we are able to generate from joint venture or similar arrangements we may hereafter enter into.  If we are unable to secure sufficient funds to pursue exploration to the level desired, we will adjust our proposed activities to reflect the amount of capital available to us after providing for sufficient working capital to maintain our existing operations.  Since we own our interests in the majority of our mineral properties, we do not have any significant capital obligations to third parties to maintain our property interests other than the payment of periodic patent and other government fees and the payments listed under the “Table of Contractual Obligations” (see below).  Our anticipated cash requirements for the year are primarily comprised of the anticipated costs of conducting our exploration programs, our administrative overhead and the obligations listed under the “Table of Contractual Obligations” (See Item 5.F “Tabular Disclosure of Contractual Obligations”) and other operating expenses in the normal course of business.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





5.C. Research and Development, patents and licenses, etc.





We are a mineral exploration company and we do not carry on any research and development activities.





5.D. Trend Information





We anticipate that the price of gold, silver, and copper will continue to be volatile, but will generally remain strong or increase over the next year due in large part to prevailing global economic imbalances and other continuing economic conditions.  Metal prices cannot be predicted with accuracy and our plans will be largely dependent upon the timing and outcome of metal markets, particularly the price of gold, silver and copper which is entirely outside of our control.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





The prices of precious metals and base metals fluctuate widely and are affected by numerous factors beyond our control, including expectations with respect to the rate of inflation, relative strength of the U.S. dollar, Chilean Peso and of other currencies as against the Canadian Dollar, interest rates, and global or regional political or economic crisis.  The demand for and supply of precious metals and base metals may affect precious metals and base metals prices but not necessarily in the same manner as supply and demand affect the prices of other commodities.  If metal prices are weak, it is more difficult to raise financing for our exploration projects.  There is no assurance our attempts to attract capital will be successful.  Failure to attract sufficient capital may significantly affect our ability to conduct our planned exploration activities. Conversely, when metal prices are strong, competition for possible mineral properties increases as does the corresponding prices for such prospective acquisitions and the cost of drilling and other resources required to conduct exploration activities.





We have followed the policy of, at year end, writing down to nominal value any of our mineral properties on which we have not conducted any significant exploration activities during that fiscal year and do not plan to conduct exploration activities within the current year, regardless of our long term view of the prospects of the particular property.  Since our future exploration activities are dependent upon a number of uncertainties including our ability to raise the necessary capital (which is in turn affected by external factors such the prices of precious and base metals), we may be required, by application of this accounting policy, to write down other properties now shown as an asset in our consolidated financial statements to nominal value, even though we may intend to conduct future exploration activities on them after the current fiscal period.





51





As a junior exploration company, our operations are significantly affected by a number of external factors, particularly those that affect the price of the commodities we explore for or those that affect the market for our securities.  During 2011, the global economy was still experiencing the after-shocks of the 2008-2009 financial crisis, as well as the impact of measures taken to counteract its effects.  While improvements were noted, particularly in Canada and certain emerging economies, many parts of the world experienced only modest or negative growth in 2011.  The United States continued to experience sluggish growth and persistent high levels unemployment along with large fiscal deficits and unprecedented levels of government debt, which reached a staggering $15.18 trillion by December 31, 2011.  These and other factors gave rise to mounting concerns about the ability of the US government to manage its sovereign debt and led to the historic loss of its AAA credit rating during 2011.  Conditions throughout the Euro-zone area continued to deteriorate with most member countries experiencing very low or negative growth by, and growing concern over a possible sovereign debt default in Greece and other countries, leading to widespread concern over the possible collapse of the Euro-zone as now constituted, the failure of the Euro as an international reserve currency and the possibility of contagion.  In addition, new concerns began to develop over the appearance of asset bubbles in China, leading to fears of a wider slowdown.





In light of, and likely in response to these and other factors, the price of gold rose significantly during 2011 reaching over $1,900 in August, 2011 before dropping back to a $1,600 to 1,700 range.  Silver rose to over $48 in April 2011 before dropping back to a $30-32 range by year-end.  Along with the increase in precious metal prices, the market for shares of junior precious metal explorers also improved, offering greater access to capital during the first half of 2011.  Since then, while precious metal prices have remained relatively strong with some volatility, the market for the shares junior exploration companies has declined significantly, making it much more difficult for companies such as us to raise capital for exploration.  While this has not had a direct effect on the Company since we currently have sufficient funds on hand to cover our anticipated expenditures during the upcoming year and beyond, it may impact our future operations since we are dependent upon our ability to access capital markets in order to fund our programs.  See “Special Note Regarding Forward Looking Statements” and “Risk Factors”.





5.E. Off Balance Sheet Arrangements





We do not have any material off-balance sheet arrangements out of the ordinary course of business.





No Exposure to Non-Recourse Loans, Derivatives or Liquidity Problems– Our working capital, excess cash, and gold and silver bullion holdings are readily redeemable and are not exposed to the liquidity problems associated with certain short-term investments such as asset-backed securities.  The Company does not have any joint venture agreements on any of its mineral properties whereby the Company is exposed to non-recourse loans.  SAMEX Mining Corp. is not a party to, nor bound by any agreement, document or instrument whereby the Company’s interest in mineral properties may be reduced or diluted, or whereby the Company may incur any other liabilities or obligation as a direct or indirect result of any derivative embedded in any agreement, document or instrument.





5.F Tabular Disclosure of Contractual Obligations





The following table summarizes our contractual obligations at May 23, 2012 and the effect these obligations are expected to have on our liquidity and cash flows in future periods.





Contractual Obligations
Payment Due By PeriodTotal
Less than a year
1-3 Years
4-5 Years
After 5 YearsAravena Option (1)Optional Payment
US$90,000
US$90,000Capital  (Finances)Lease Obligations
NILLon-term DebtObligations
NILOperating LeaseObligations
NILPurchase ObligationsEquipment
NILOther Long-termLiabilities
NILTotal ContractualObligationsand
Commitments
Option Payment
 US$90,000
Option Payment
 US$90,000





(1) This is the final option payment pursuant to a Unilateral Option Contract dated June 28, 2011 between Cristian Marcelo Aravena Caullan and our subsidiary Minera Samex Chile S. A. whereby we have the option to purchase approximately 2,900 hectares of mineral concessions adjacent to the Los Zorros property. (see Note 7 “Mineral Exploration Assets” to the Consolidated Financial Statements) (see Item 4.B "Description of Property", "Los Zorros Property, Chile").





52





5. G. Safe Harbor





Information provided pursuant to Items 5.E and 5.F may contain forward-looking information which may vary from actual results.  See “Special Note Regarding Forward Looking Statements”.





Item 6. Directors, Senior Management And Employees




6.A. Directors and Senior Management.




The following table sets out the names of our directors, management and employees we depend on, and their positions and offices at May 23, 2012.
 All our directors are residents of Canada, with the exception of Robert Kell, a resident of the United States.
 None of our directors serve as directors for other public issuers except for independent directors Allen Leschert, who is also a director and officer of Northaven Resources Corp., and Malcolm Fraser, who is a director and officer of Northaven Resources Corp. and Tearlach Resources Limited and a director of Norzan Enterprises Ltd., all of which are TSX Venture Exchange listed companies.





Name, Age, Municipality of

Residence and Position

Present and Principal Occupation

During the Last Five Years
Date of First

Appointment as

Executive

Officer
Date of First

Appointment as

DirectorJeffrey P. Dahl, 50

Abbotsford, British Columbia

President and Director

(son of Peter Dahl)

Our President, Chief Executive

Officer, Investor Relations
November 3,

1995
November 3, 1995Peter J. Dahl, 71

Abbotsford, British Columbia

Chairman and Director

(father of Jeffrey Dahl)

Consultant;

Counselor for Garden Ministries

Society from 1997 to present
August 7, 2001
November 3, 1995Robert Kell, 61

Missoula, MT & La Paz, Bolivia

Vice President - Exploration and Director

Geologist, our Exploration Manager

from November 1995 to present;
November 3, 1995
June 11, 1996Allen D. Leschert, 55

West Vancouver, British Columbia

Director

Barrister and Solicitor with Leschert

& Company Law Corporation
N/A
November 3, 1995Larry D. McLean, 62

Abbotsford, British Columbia

Vice President - Operations and Director

(husband of Brenda McLean)

Our Operations/Administration

Manager/Chief Financial Officer

from November 1995 to present
November 3, 1995
November 3, 1995Malcolm B. Fraser, 74

Gibsons, British Columbia

Director

Management Consultant for various

public and private natural resource

companies
N/A
January 6, 2011Brenda McLean, 60

Abbotsford, British Columbia

Corporate Secretary

(wife of Larry McLean)

Our Corporate Secretary from 1995

to present
November 3, 1995
N/A





Executive officers are appointed by the Board of Directors to serve until their successors are appointed.





6.B. Compensation.




During the year ended December 31, 2011, employees who are also directors or officers of the Company were paid salaries totaling $508,431 including $177,000 to Jeffrey Dahl, our President and Chief Executive Officer, $146,631 to Robert Kell, our Vice President-Exploration, $114,000 to Larry McLean our Vice President–Operations and Chief Financial Officer, and $70,800 to our Corporate Secretary, Brenda McLean. Compensation for all of our executives is subject to review and approval by the Compensation Committee. See Item 6.C “Board Practices – Compensation Committee”.





53





Also during the year ended December 31, 2011, upon the recommendation of the Compensation Committee, the Company paid bonuses totalling $185,000 to employees who are also directors or officers of the Company as follows:  a one-time bonus of $150,000 to Jeffrey Dahl, our President and Chief Executive Officer, as recognition of exceptional performance in putting the Company on a sound financial basis during 2010; the Company paid a one-time payment of $20,000 to Robert Kell, our Vice President-Exploration, as a performance bonus for 2010 and an adjustment for United States medical cost allowance; the Company paid a one-time payment of $10,000 to Larry McLean our Vice President–Operations and Chief Financial Officer as a performance bonus for 2010; the Company paid a one-time bonus of $5,000 to Brenda McLean, the Corporate Secretary of the Company.





The Company entered into formal agreements with its senior staff (Jeff Dahl, Larry McLean, Brenda McLean, Rob Kell and Phil Southam) effective October 1, 2011 reflecting compensation and terms of employment in effect as at that date, which formalized prior verbal arrangements with such individuals as at that date and clarified certain provisions respecting employment duties, use of confidential information, and provisions applicable upon cessation of employment.  Among other things, the agreements, all of which are in similar form, provided that all confidential information held or work product developed by the employee will remain the property of the Company upon termination.   The Agreements also provided that if the employee were terminated for ‘cause’ (as interpreted by courts in Canada), the employee would be entitled only to compensation (salary, expenses, bonuses and stock options) (“Compensation”) earned up to the time of termination, but if terminated without ‘cause’, including constructive termination due to a material change in the employee's conditions of employment, remuneration, position, duties or reporting structure, within 24 months following a change of control, the Company will be required to either give prior notice of such proposed termination for terms ranging from 18 to 24 months (the “Notice Period”) or pay Compensation which would have been payable during the Notice Period in lieu.  The employee is also required to remain available on a limited consulting basis for the purpose of providing documentation and information arising from their prior employment for an additional period after termination equal to the Notice Period in consideration for retention during such period of any incentive stock options held by them at termination.





Allen D. Leschert, one of our directors, provides legal services to us through Leschert & Company Law Corporation.  Leschert & Company charged $65,982 for legal services during the year ended December 31, 2011.  During the year ended December 31, 2011, Malcolm Fraser, one of our directors, charged $2,800 for conducting research and consulting for the Company.  During 2011, the Company granted stock options to directors and officers on 1,900,000 shares at a price of $1.50 per share with a fair value on the grant date of $2,430,335.





Except as otherwise disclosed herein, we have not entered into any employment or management agreements with any of our directors or executive officers.  In addition, we do not currently have any retirement, pension, bonus, profit-sharing or similar plans and none are proposed at this time.





Incentive Stock Options




In order to attract and retain highly qualified personnel, we provide incentives in the form of stock options to certain of our qualified employees, directors, officers and consultants on terms and conditions which are in accordance the Company’s Stock Option Plan and the prevailing rules and policies of the TSX Venture Exchange, and our Board of Directors.





At our Annual General Meetings held on May 29, 2008, May 26, 2009, May 26, 2010, and June 7, 2011 the shareholders passed ordinary resolutions giving annual approval to the Company’s “rolling” stock option plan.  Under the terms of the Company’s Stock Option Plan (the “Plan”), our Board of Directors are authorized to grant options to any person who is an employee, director, officer, or consultant for us or one of our subsidiaries and who is not otherwise prevented from receiving the Option under the terms of applicable policy of the TSX-V or a company which is owned by one or more such individuals (an “Eligible Person”).  The maximum number of Common Shares which may be reserved for issuance under the Plan is 10% of the Common Shares outstanding at the time of the grant (on a non-diluted basis) less the aggregate number of Common Shares reserved for issuance under any other existing stock options or similar share compensation arrangement and the maximum number which may be reserved for issuance to any one person under the Plan is 5% (unless otherwise approved by a majority of disinterested shareholders, which approval has not been sought or granted).  Our Board of Directors is entitled, subject to the requirements of applicable TSX-V policy, to set the exercise price of each option (provided it is greater than the minimum prescribed under TSX-V Policy), the term during which it may be exercised (to a maximum of 10 years) and any vesting provisions as they may deem appropriate and as are in compliance with TSX-V policy.  Any options granted under the Plan are exercisable only while the holder remains an Eligible Person or the time period determined by the Board of Directors after ceasing to be an Eligible Person, and are not assignable or transferable other than by will or the laws of descent and distribution.





54





During the first quarter ended March 31, 2011, the Company granted a stock option to a new director for the purchase of 200,000 shares at a price of $0.70 per share with a fair value on the grant date of $132,130 that was expensed in the statements of comprehensive loss in the category “Stock-based compensation”.  During the second quarter ended June 30, 2011, the Company granted options on 525,000 shares at $1.50 per share to consultants and employees of the Company, and options to directors and officers on 1,900,000 shares at a price of $1.50 per share with a fair value on the grant date of $3,101,875, of which a $2,494,291 portion was expensed in “Stock-based compensation” and $607,584 was capitalized in exploration and evaluation assets in relation to stock options granted to geologists working on the Los Zorros Property.    During the second quarter, an option on 100,000 shares at $0.20 per share was exercised for proceeds of $20,000.  During the third quarter ended September 30, 2011, the Company granted a stock option on 100,000 shares at $1.40 per share with a fair value on the grant date of $111,894 that was capitalized in exploration and evaluation assets in relation to the option granted to a geologist working on the Los Zorros Property.  During the third quarter, one of our directors exercised a stock option to acquire 200,000 shares at $0.20 per share for proceeds of $40,000 to the Company.  During the fourth quarter ended December 31, 2011, the Company granted a stock option on 100,000 shares at $0.70 per share with a fair value on the grant date of $55,014 that was capitalized in exploration and evaluation assets in relation to the option granted to a geologist working on the Los Zorros Property.





At May 23, 2012 options were outstanding to acquire 11,555,000 shares as shown in the table below.  They consist of options to purchase an aggregate of 9,270,000 common shares granted to our directors and/or officers and options to purchase an aggregate of 2,285,000 common shares granted to our employees or consultants as follows:





Optionee
Date of Option
# of Shares
Price
Expiry DateJeffrey Dahl
April 20, 2005

May 2, 2006

Feb 23, 2007

Sep 4, 2009

May 2, 2011
350,000

300,000

270,000

625,000

375,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Peter Dahl
April 20, 2005

May 2, 2006

Feb 23, 2007

Sep 4, 2009

May 2, 2011
350,000

150,000

150,000

400,000

225,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Robert Kell
April 20, 2005

May 2, 2006

Feb 23, 2007

Sep 4, 2009

May 2, 2011
350,000

300,000

275,000

625,000

375,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Larry McLean
April 20, 2005

May 2, 2006

Feb 23, 2007

Sep 4, 2009

May 2, 2011
350,000

300,000

250,000

625,000

375,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Allen Leschert
April 20, 2005

May 2, 2006

Feb 23, 2007

Sep 4, 2009

May 2, 2011
350,000

150,000

150,000

200,000

225,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Malcolm Fraser
Jan 6, 2011

May 2, 2011
200,000

225,000
$0.70

$1.50
Jan 6, 2021

May 2, 2021Brenda McLean
April 20, 2005

May 2, 2006

Feb 23, 2007

Sep 4, 2009

May 2, 2011
175,000

150,000

75,000

250,000

100,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Philip Southam
April 20, 2005

May 2, 2006

Sep 4, 2009

Sep 16, 2010

May 2, 2011
30,000

70,000

150,000

150,000

100,000
$0.40

$0.85

$0.20

$0.35

$1.50
April 20, 2015

May 2, 2016

Sep 4, 2019

Sep 16, 2015

May 2, 2021Francisco Vergara
May 2, 2006

Sep 4, 2009

Sep 16, 2010

May 2, 2011
50,000

150,000

100,000

100,000
$0.85

$0.20

$0.35

$1.50
May 2, 2016

Sep 4, 2019

Sep 16, 2015

May 2, 2021   
  Manuel Avalos
May 2, 2006

Sep 4, 2009

Sep 16, 2010

May 2, 2011
100,000

150,000

150,000

100,000
$0.85

$0.20

$0.35

$1.50
May 2, 2016

Sep 4, 2019

Sep 16, 2015

May 2, 2021Jorge Humphreys
May 2, 2006
20,000
$0.85
May 2, 2016Jean Nicholl
May 2, 2006

Sep 4, 2009

Sep 16, 2010

May 2, 2011
20,000

50,000

30,000

25,000
$0.85

$0.20

$0.35

$1.50
May 2, 2016

Sep 4, 2019

Sep 16, 2015

May 2, 2021Jorge Espinoza
May 2, 2006
30,000
$0.85
May 2, 2016Gerald Rayner
Sep 24, 2007
50,000
$0.80
Sep 24, 2012Adrian Douglas
Dec 20, 2007

Jan 15, 2009

Sep 4, 2009

Jan 29, 2010

May 2, 2011
60,000

60,000

30,000

110,000

200,000
$0.70

$0.20

$0.20

$0.35

$1.50
Dec 20, 2012

Jan 15, 2014

Sep 4, 2019

Jan 29, 2015

May 2, 2021Justin Milliard
Sep 6, 2011
100,000
$1.40
Sep 6, 2016Lauren Foiles
Dec 7, 2011
100,000
$0.70
Dec 7, 2016





6.C. Board Practices.




Our board of directors consists of six members, the terms of which expire at the general meeting of shareholders to be held each year.  Directors are elected by a majority of the votes of our common shares present in person or represented by proxy at our annual meeting of shareholders and entitled to vote at such election.  Each director will hold office until his or her term expires and his or her successor has been elected and qualified.  Executive officers serve at the discretion of the board of directors.  Officers are elected at the annual meeting of the directors held immediately after the annual general meeting of shareholders.





We have granted and intend to continue to grant incentive stock options to employees, directors, officers and consultants on terms and conditions established by the Company’s Stock Option Plan and in accordance with prevailing policy of the TSX Venture Exchange, as summarized in Item 6. “Directors, Senior Management and Employees; Compensation – Incentive Stock Options”.





Our directors do not receive any monies for serving in their capacity as directors and there is currently no arrangement for the payment of any compensation in the future.





Except as disclosed herein, we have not entered into any service or employment agreements with any of our directors or officers.  We do not have any retirement, pension, profit-sharing or such similar plans and none are proposed at the present time.





Audit Committee





Our Audit Committee is composed of director, Larry McLean, Vice President, Operations and Chief Financial Officer of the Company who is not independent, and directors, Allen Leschert and Malcolm Fraser, who the Board of Directors have determined to be independent in accordance with the requirements of our Audit Committee Charter.  The Audit Committee functions under a Charter adopted by the Board of Directors.  The Audit Committee’s primary function is to review the annual audited financial statements with the Company’s external auditor (the “Auditor”) prior to presentation to the Board and to make recommendations thereon, together with recommendations to the Board with respect to such financial statements and compensation payable to the Auditor.  The Audit Committee also reviews the Company’s interim un-audited quarterly financial statements prior to finalization and publication.  The Audit Committee also provides review oversight with respect to pre-approval of all non-audit services to be provided by the Auditor to the Company and a number of other related matters including issues related to a change of auditors and establishing procedures for treatment of complaints regarding accounting, internal accounting controls or auditing matters.  The Audit Committee meets as a separate committee of the board as and when needed to carry out its functions and keeps formal minutes of its proceedings.





Compensation Committee





Our Compensation Committee is composed of independent directors of the Company, Allen Leschert and Malcolm Fraser, and executive director, Larry McLean.  The Compensation Committee was established during fiscal year 2003 to assist and advise the Board of Directors with respect to any and all matters relating to the compensation of the executive officers of the Company or other such persons as the Board may from time to time request.  The Compensation Committee meets as a separate committee of the board as and when needed to carry out its functions and keeps formal minutes of its proceedings.





56





6.D. Employees.




We had from 21 to 27 employees during 2011 with 27 employees at the year-end of December 31, 2011.  At May 23, 2012, we had 27 employees, four of which are also our directors or officers.  A summary of employees over the last three fiscal years is set out below.  The majority of our employees during 2011 were involved in activities related to our mineral exploration properties in Chile.  None of our employees are represented by unions or covered by collective bargaining agreements.





Year ending
Category of Activity
Location
Total Number of Employees per Category and Total at Year EndCanada
Chile
BoliviaDecember 31, 2011
Exploration
-
22
-
22Administrative/Office
4
1
-
5Total:


-
27December 31, 2010
Exploration
-
16
-
16Administrative/Office
4
1
-
5Total:
4
17
-
21December 31, 2009
Exploration
1
12
-
13Administrative/Office
4
1
-
5Total:
5
13
-
18





Share ownership.




The following table sets forth the shareholdings, to our knowledge, owned beneficially, directly or indirectly, by our directors and members of our administrative, supervisory or management bodies as of May 23, 2012.  There were 126,733,719 common shares issued and outstanding as of May 23, 2012.





Name and Position
Number of Shares of SAMEX Owned
Percentage of Shares Owned at

May 23/12
Incentive Stock Options OwnedNumber of Shares under Option
Exercise Price
Expiry DateJeffrey P. Dahl

President and Chief Executive Officer/Director
1,080,000
.85%
350,000

300,000

270,000

625,000

375,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Peter J. Dahl

Chairman/Director
826,600
.65%
350,000

150,000

150,000

400,000

225,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Robert E. Kell

Vice President Exploration /

Director
545,000
.43%
350,000

300,000

275,000

625,000

375,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Larry D. McLean

Vice President – Operations and Chief Financial Officer /

Director
511,525
.40%
350,000

300,000

250,000

625,000

375,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Allen D. Leschert

Director
229,344
0.18%
350,000

150,000

150,000

200,000

225,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021Malcolm B. Fraser

Director
-
-
200,000

225,000
$0.70

$1.50
January 6, 2021

May 2, 2021Brenda McLean

Corporate Secretary
303,975
.24%
175,000

150,000

75,000

250,000

100,000
$0.40

$0.85

$0.84

$0.20

$1.50
April 20, 2015

May 2, 2016

Feb 23, 2017

Sep 4, 2019

May 2, 2021





57





Statements as to securities beneficially owned by directors, or as to securities over which they exercise control or direction, are based upon information obtained from such directors and from records available to the Company.  For particulars on outstanding stock options, see “Item 6. Directors, Senior Management and Employees – Compensation – Incentive Stock Options”.





Item 7. Major Shareholders And Related Party Transactions




7.A. Major Shareholders.




As at April 30, 2012, 126,727,227 common shares of the Company were issued and outstanding.  At that date, we had 140 shareholders of record with addresses in the United States holding an aggregate of 41,679,444 common shares representing 32.89% of our common shares.  A further 38,627,754 shares are beneficially held by seven shareholders known by management to be U.S. residents, with shares representing an additional 30.5% of our common shares. To our knowledge, no person beneficially owns, directly or indirectly or exercises control or direction over, or has a combination of direct or indirect beneficial ownership of and control or direction over, shares carrying more than 5% of the voting rights attached to our issued and outstanding common shares at April 30, 2012 except as follows:





Name and Address
Number of Shares
Percentage of Issued SharesSASAN SADEGHPOUR, Suite 1107 – 2001 Kirby Drive, Houston, Texas 77019
29,484,368(1)
23.4%CDS & CO, NCI Account, 25 The EsplanadePO Box 1038, Station A, Toronto, ON, M5W 1G5
36,114,581(2)
29.53%CEDE & CO, PO Box 20, Bowling Green Stn, New York, NY 10274, United States
38,332,525(2)
31.35%





(1) 11,887,668 shares are held directly and 17,596,700 shares are held by Sasco Partners, LP, which is indirectly controlled by Sasan Sadeghpour.  A further 11,025,834 share purchase warrrants are held by Mr. Sadeghpour which, if exercised would increase his direct and indirect holdings to 40,510,202 shares representing 29.5% of the shares of the Company then outstanding.


(2)This holder acts as a depository for brokerage firms and other intermediaries.  Management of the Company is unaware of the beneficial owners of these shares, other than 17,596,700 of such shares beneficially held by Sasco Partners, LP.





Mr. Sadeghpour acquired his shares by way of private placements and open market purchases.  His position (which includes shares held by Sasco Partners LP) increased to in excess of 5% upon purchase of a private placement of 10,164,000 units (each of which was comprised of 1 share and 1 warrant) which, together with shares and warrants then held by him increased his security holding position to 11,887,667 shares and 11,025,834 warrants, representing approximately 9.97% of the Company’s then issued and outstanding shares (22,913,501 shares representing 17.6% upon exercise).  The warrants issued under the second placement contained certain restrictions blocking exercise where his holdings would thereby increase to 10% (the “10% Blocker Restriction”) or 20% (the 20% Blocker Restriction”) of the Company’s issued and outstanding shares, unless certain conditions were met.  Mr. Sadgedepour’s position increased to in excess of 10% by market purchase of 105,000 shares made prior to December 28, 2010 and then increased again to in excess of 25,618,468 shares representing over 20% of the Company’s then issued and outstanding shares as a result of additional market purchases made prior to April 27, 2011.  The shareholders, by way of special resolution passed at the Annual General Meeting held on June 7, 2011, agreed to remove the “20% Blocker Restriction” contained in the warrants allowing him to increase his share position beyond 20%.  His position increased to 29,484,368 shares (23.26% of the Company’s shares then issued and outstanding) as a result of further market purchases made up to December 14, 2011.





58





The above information was supplied by the Company’s transfer agent, Computershare Investor Services or was provided by the respective shareholders directly or through public filings on the SEDAR and SEDI filling systems.  All of our common shares have identical voting rights.





7.B. Related Party Transactions.




Except where described elsewhere in this Annual Report, we have not, during the last completed fiscal year ended December 31, 2011 and the subsequent period to May 23, 2012, entered into transactions or loans with any (a) enterprises that are directly or indirectly controlled by or under common control with us; (b) our associates; (c) individuals directly or indirectly owning voting right which give them significant influence over us or close members of their respective families, (d) our directors, senior management or close members of their respective families or (e) enterprises in which a significant voting is held or significantly influenced by any of the foregoing individuals (a “Related Party”), except as follows:





Stock Options Granted to Related Parties:





Related Party Name/Position
Date Option Granted
#
of Shares Granted
Exercise

Price/Share
Expiry DateJeffrey Dahl

Director, President, CEO
Sep 4, 2009

May 2, 2011
625,000

375,000
$0.20

$1.50
Sep 4, 2019

May 2, 2021Peter Dahl

Director and Chairman
Sep 4, 2009

May 2, 2011
400,000

225,000
$0.20

$1.50
Sep 4, 2019

May 2, 2021Robert Kell

Director, Vice President - Exploration
Sep 4, 2009

May 2, 2011
625,000

375,000
$0.20

$1.50
Sep 4, 2019

May 2, 2021Larry McLean

Director, Vice President – Operations, CFO
Sep 4, 2009

May 2, 2011
625,000

375,000
$0.20

$1.50
Sep 4, 2019

May 2, 2021Allen Leschert

Director
Sep 4, 2009

May 2, 2011
400,000

225,000
$0.20

$1.50
Sep 4, 2019

May 2, 2021Malcolm B. Fraser

Director
Jan 6, 2011

May 2, 2011
200,000

225,000
$0.70

$1.50
Jan 6, 2021

May 2, 2021Brenda McLean

Corporate Secretary
Sep 4, 2009

May 2, 2011
250,000

100,000
$0.20

$1.50
Sep 4, 2019

May 2, 2021Patricio Kyllmann

Former Director
Sep 4, 2009
100,000
$0.20
Sep 4, 2019





Stock Options Exercised by Related Parties:





Related Party Name/Position
Date Option Exercised
# of Shares
 Exercised
Exercise

Price/Share
Proceeds To

The CompanyPatricio KyllmannFormer Director
May 2, 2011
100,000
$0.20
$20,000Allen LeschertDirector
July 4, 2011
200,000
$0.20
$40,000





Other Related Party Transactions





Allen D. Leschert, one of our directors, provides legal services to us through Leschert & Company Law Corporation.  Leschert & Company charged $65,982 for legal services during the fiscal year ended December 31, 2011, $28,387 for legal services during the fiscal year ended December 31, 2010, and $17,650 for legal services during the 2009 fiscal year.





In the second quarter of fiscal 2011, upon the review and recommendations of the Compensation Committee, the Company paid a one time bonus of $150,000 to Jeffrey Dahl, our President and Chief Executive Officer, as recognition of exceptional performance in putting the Company on a sound financial basis during 2010; the Company paid a one time payment of $20,000 to Robert Kell, our Vice President-Exploration, as a performance bonus for 2010 and an adjustment for United States medical cost allowance; the Company paid a one time payment of $10,00 to Larry McLean our Vice President–Operations and Chief Financial Officer as a performance bonus for 2010; the Company paid a one time bonus of $5,000 to Brenda McLean, the  Corporate Secretary of the Company, for extra services provided.   These bonuses were paid in addition to regular salary and other compensation.  See Item 6.B "Compensation".





59





Except as disclosed herein, no Related Party is or has been indebted to us or our subsidiaries since December 31, 2011 and there are no management, consulting, lease or other agreements in which our management, directors or subsidiaries are parties.





7.C. Interests of Experts and Counsel.




Not Applicable.





Item 8. Financial Information




8.A. Consolidated Statements and Other Financial Information.




Attached hereto, in Item 18 “Financial Statements”, are our audited consolidated financial statements, consisting of Consolidated Statements Of Financial Position and Consolidated Statements of Changes In Shareholder's Equity at December 31, 2011, December 31, 2010 and January 1, 2010, Consolidated Statements of Comprehensive Loss and Consolidated Statements of Cash Flows for the years ended December 31, 2011 and December 31, 2010, together with related notes and schedules and the report of our Auditor.  See Item 18 "Financial Statements".





Legal Proceedings




To our knowledge, there are no currently pending or threatened legal proceedings that could have a material effect on our business, results of operations or financial condition.





Dividend Policy




We have never declared or paid any cash dividends on our common shares.  As we do not have any earnings, we do not anticipate paying cash dividends on the common shares for the foreseeable future.  Future dividends on the commons shares will be determined by the Board of Directors in light of circumstances existing at the time, including our earnings and financial condition.  There is no assurance that dividends will ever be paid.  See “Special Note Regarding Forward Looking Statements”.





8.B. Significant Changes.




No significant changes have occurred since the date of the annual financial statements.





Item 9. The Offer And Listing.




9.A. Offer and Listing Details.




The following sets forth the price history of our common shares for the period indicated, as reported by the TSX Venture Exchange.  They reflect inter-dealer prices, without retail markup, markdown or commissions, and may not represent actual transactions.





Period
High (CDN $)
Low (CDN $)Most Recent Six MonthsApril 2012
0.49
0.29March 2012
0.63
0.46February 2012
0.64
0.55January 2012
0.78
0.61December 2011
0.88
0.46November 2011
0.90
0.70Financial Year 2011
1.50
0.46Fourth Quarter
1.07
0.46Third Quarter
1.50
1.00Second Quarter
1.36
0.67First Quarter
0.95
0.61Financial Year 2010
0.82
0.225Fourth Quarter
0.82
0.35Third Quarter
0.40
0.225Second Quarter
0.34
0.24First Quarter
0.52
0.27Financial Year 2009
0.485
0.11Financial Year 2008
0.78
0.115Financial Year 2007
1.45
0.51





60





The closing price of our common shares on the TSX Venture Exchange on May 23, 2012 was $0.345.





The following sets forth the price history of our common shares quoted on the OTC Bulletin Board (SMXMF) for the period indicated, as reported by Yahoo Finance, which receives its financial information from the OTC Bulletin Board.





Period
High (US$)
Low (US$)Most Recent Six MonthsApril 2012
0.49
0.30March 2012
0.65
0.47February 2012
0.66
0.55January 2012
0.79
0.59December 2011
0.84
0.43November 2011
0.92
0.65Financial Year 2011
1.61
0.43Fourth Quarter
1.07
0.43Third Quarter
1.61
0.96Second Quarter
1.50
0.68First Quarter
1.03
0.59Financial Year 2010
0.83
0.20Fourth Quarter
0.83
0.33Third Quarter
0.39
0.20Second Quarter
0.36
0.21First Quarter
0.50
0.23Financial Year 2009
0.50
0.09Financial Year 2008
0.82
0.09Financial Year 2007
1.64
0.50





9.B Plan of distribution.




Not Applicable.





9.C. Markets.




Our Common Shares are quoted in Canada on the TSX Venture Exchange under the trading symbol “SXG” and in the United States on the OTC Bulletin Board under the trading symbol “SMXMF”.





9.D. Selling shareholders.




Not Applicable.





9.E Dilution.




Not Applicable.





9.F. Expenses of the Issue.




Not Applicable.




61







Item 10. Additional Information.




10.A. Share capital.




Not Applicable.





10.B. Memorandum and Articles of Association





Corporate Legislation.




We are organized as a corporation under, and operate subject to the Business Corporations Act (British Columbia).   See Item 4 “Information On the Company”.





Notice of Articles and Articles of association.




Our Articles and Notice of Articles (our “Constating Documents”) are attached as exhibits hereto as noted in Item 19.  Our Articles and Notice of Articles do not contain any limitations on our objects or purposes.





The following is a summary of certain provisions of our Constating Documents:





Director's Power To Vote On Matters In Which The Director Is Materially Interested




Our Articles provide that it is the duty of any of our directors who are directly or indirectly interested in an existing or proposed contract or transaction with us to declare the nature of their interest at a meeting of our Board of Directors.  In the case of a proposed contract or transaction, the declaration must be made at the meeting of our Board of Directors at which the question of entering into the contract or transaction is first taken into consideration, or if the interested directors are not present at that meeting, our directors are required to declare their interest at the next meeting.  If an interested Director votes in favour of such contract or transaction, he or she may be liable to account for any profit obtained therefrom.




Director's Power To Vote On Compensation To Themselves





Subject to the Business Corporations Act (British Columbia), our Articles provide that the directors may determine the amount to be paid out of our funds or capital as remuneration for their service.  The directors may also determine the proportions and manner that the remuneration will be divided among them.  The Directors have, by resolution, formed a Compensation Committee to assist and advise the Board of Directors with respect to any and all matters relating to the compensation of the executive officers of the Company or other such persons as the Board may from time to time request.





Director's Borrowing Powers




Our Articles provide that the directors, on our behalf, may:





(a) raise or borrow money for our purposes upon such terms and conditions as they think fit;





(b) guarantee obligations of any other person;





(c) issue debt obligations as security for loans; and





(d) mortgage or charge any part of our property and assets.








Retirement Of Directors Under An Age Limit Requirement





Our Articles do not require directors to retire prior to a specified age.





Number Of Shares Required For A Director's Qualification




Our Articles do not provide for a requirement of share ownership for a director's qualification.





Changes In Our Capital




Our Articles provide that we may, subject to the Business Corporations Act (British Columbia) and, by special resolution, increase our authorized capital by:





62




(a)
creating shares with par value or shares without par value, or both;




(b)
increasing the number of shares with par value or shares without par value, or both; or




(c)
increasing the par value of a class of shares with par value, if no shares of that class are issued.




Subject to the Business Corporations Act (British Columbia), the new shares may be issued upon such terms and conditions and with such rights, privileges, limitations, restrictions and conditions attached to them as the special resolution of our shareholders determines.





In addition, subject to the Business Corporations Act (British Columbia), we may also by special resolution subdivide or consolidate our shares;





The quorum requirement at meetings of shareholders is at least two persons holding at least five percent (5%) of the outstanding shares must be present in person or represented by proxy in accordance with our Articles.





Our Articles require similar approval of the holders of Preferred Shares in the event of changes analogous to the ones described above to the Preferred Shares.  In addition, if the deletion, variation, modification, amendment or amplification of the provisions contained especially affects the rights of the holders of our Preferred Shares of any series, in a manner different from which the rights of the holders of our Preferred Shares of any other series are affected, then amendments must, in addition to being approved by the holders of our Preferred Shares, be approved by the holders of our Preferred Shares of the series especially affected.  This approval may be given in writing by the holders of 3/4 of our Preferred Shares of the series or by resolution passed by 3/4 of the votes cast on a poll at the meeting of the holders of our Preferred Shares of the series. At a meeting of the holders of our Preferred Shares as a class or as a series, each holder of our Preferred Shares is entitled to one vote in respect of each Preferred Share held by the holder.





Furthermore, the Act provides a holder of shares of any class or series of shares, the right to vote separately as a class or series upon amendments to our Constating Documents, which amendments may affect voting rights.





General Meeting




We must hold an ordinary general meeting of our shareholders at least once every calendar year at a time and place determined by our directors and not later than 15 months after the preceding ordinary general meeting, unless extended by the Registrar of Companies upon application made under the Act.  Our Chair, President and Chief Executive Officer, Chief Financial Officer or directors may at any time convene a special general meeting, and our directors, upon the requisition of shareholders in accordance with the Act, shall proceed to convene the meeting or meetings to be held at such time and place as the directors determine. The requisition shall state the objects of the meeting requested, be signed by the requisitionists and deposited at our registered office.





At least twenty one days' notice, or any longer period of notice as may be required by the Act, of every general meeting, specifying the place, day and hour of the meeting and, when special business is to be considered, the general nature of such business, must be given to our shareholders entitled to be present at our meeting by notice given as permitted by our Articles. With the consent in writing of all our shareholders entitled to vote at the meeting, a meeting may be convened by a shorter notice and in any manner they think fit, or notice of the time, place and purpose of the meeting may be waived by all of our shareholders. The accidental omission to give notice to a shareholder, or non-receipt of notice by a shareholder, will not invalidate any resolution passed at any general meeting.





No business will be transacted at any general meeting unless the requisite quorum is present at the commencement of the business. Subject to the Act, if we have two or more shareholders, a quorum for the transaction of business at a general meeting shall be two persons present in person, or by proxy and holding or representing by proxy, not less than five percent (5%) of the shares entitled to vote at the general meeting.





Holders of our Common Shares are entitled to attend meetings. However, holders of our Preferred Shares as a class will not be entitled to attend meetings, unless the rights of a particular class provide otherwise. Any of our corporate shareholders that have an authorized agent or representative present at any of the meeting will be deemed to be personally present at the meeting.





Limitations On The Rights To Own Securities




Our Articles do not provide for any limitations on the rights to own our securities. See also “Item 10.  “Exchange Controls”.





63





Change In Control Provisions




Our Articles do not contain any change in control limitations with respect to a merger, acquisition or corporate restructuring involving us.





Shareholder Ownership Disclosure




Our Articles do not contain any provision governing the ownership threshold above which shareholder ownership must be disclosed.





Share Rights, Preferences and Restrictions




The following is a summary of the rights and restrictions pertaining to our two classes of shares:





Common Shares




All Common Shares are of the same class and have the same rights, preferences and limitations.




Holders of Common Shares are entitled to one vote per share at any meeting of our shareholders except meetings at which only shareholders of a specified class of shares (other than the Common Shares) are entitled to vote.  Subject to the preference of any outstanding Preferred Shares (described below), the holders of Common Shares are entitled to participate equally in any dividends our Board of Directors declares out of funds legally available for the payment of dividends. There are no limitations on the payment of dividends if we are liquidated, dissolved or wound up, holders of Common Shares are entitled to share ratably in all assets remaining after payment of our liabilities and any liquidation preferences of any outstanding Preferred Shares. There are no pre-emptive rights, subscription rights, conversion rights and redemption provisions relating to our Common Shares and none of our Common Shares carry any liability for further calls.





The rights of holders of Common Shares may not be modified other than in accordance with our Articles and the Business Corporations Act(British Columbia) which generally requires the favorable votes of 3⁄4 of the Common Shares voting on such modification.  Because a quorum for a general meeting of shareholders can exist with only two shareholders (proxy-holders) personally present, the rights of holders of Common Shares may be modified by less than a majority of the issued Common Shares.




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




a)
direct or prohibit any act or cancel or vary any transaction or resolution;




b)
regulate the conduct of our affairs in the future;




c)
provide for the purchase of the Common Shares of any shareholder of the Company by another shareholder of the Company, or by us;




d)
in the case of a purchase by us, reduce our capital or otherwise;




e)
appoint a receiver or receiver manager;




f)
order that we be wound up;




g)
authorize or direct that proceedings be commenced in our name against any party on the terms the Court directs;




h)
require us to produce financial statements;




i)
order us to compensate an aggrieved person; and




j)
direct rectification of any of our records.




64





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




Preferred Shares




Our Board of Directors is authorized, without further action by the shareholders, to issue Preferred Shares in one or more series and to set the number of shares constituting any such series and the designation, rights, privileges, restrictions and conditions attaching to the shares of such series including dividend rights and rates, redemption provisions (including sinking fund provisions), rights of conversion or exchange, liquidation preferences and voting rights, if any.  The Preferred Shares as a class are entitled to priority over the Common Shares if our Board of Directors decides to pay any dividends, and, if we are dissolved, liquidated or wound up, the Preferred Shares are entitled as a class to priority in respect of return of capital. Except as required by law or the provisions of any designated series of Preferred Shares, the holders of Preferred Shares as a class is not entitled to receive notice of, attend or vote at any meeting of our shareholders.





There were no Preferred Shares allotted or issued as at the date of this Annual Report.





10.C. Material contracts.




The following are the material contracts which we, or any of our subsidiaries, have entered into in the last two years immediately prior to the date of this report:





1.
Our Company Stock Option Plan which received annual approval by our shareholders at our Annual General Meetings on May 29, 2008, May 26, 2009, May 26, 2010, and June 7, 2011.




2.
Aravena Option - Under a Unilateral Option Contract dated June 28, 2011 between Cristian Marcelo Aravena Caullan and our subsidiary Minera Samex Chile S. A. ("the Aravena Option"), SAMEX can acquire 100% interest in mineral concessions covering approximately 2,900 hectare adjacent to the Los Zorros property by paying the 2011 patent payments (paid) and by making option payments totaling the Chilean Peso-equivalent of US$245,345 as follows: US$60,000 upon signing the Option (paid); U.S. $95,345 due January 31, 2012 (paid); and US$90,000 by January 31, 2013.  No NSR is payable on these concessions.




3.
Employment agreements dated effective October 1, 2011 with each of Jeffrey Dahl, Larry McLean, Brenda McLean and Phil Southam.  See Item 6.B “Compensation”;




4.
Consulting agreement dated effective October 1, 2011 with Robert Kell. See Item 6.B “Compensation”;




10.D. Exchange controls.




There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital (including, without limitation, foreign exchange controls), or that affect the remittance of dividends, interest or other payments to non-resident holders of our Common Shares. However, any such remittance to a resident of the United States may be subject to a withholding tax pursuant to the reciprocal tax treaty between Canada and the United States.  For further information concerning such withholding tax, see “Item 10.E.  Taxation.”





There are no limitations under the laws of Canada, the Province of British Columbia, or in our charter or other constituent documents with respect to the right of non-resident or foreign owners to hold and/or vote our common shares.  However, the Investment Canada Act (the “Act”), enacted on June 20, 1985, as amended, requires the prior notification and, in certain cases, advance review and approval by the Government of Canada of the acquisition by a “non-Canadian” of “control” of a “Canadian business,” all as defined in the Act.  For the purposes of the Act, “control” can be acquired through the acquisition of all or substantially all of the assets used in the Canadian business, or the direct or indirect acquisition of interests in an entity that carries on a Canadian business or which controls the entity which carries on the Canadian business.  Under the Act, control of a corporation is deemed to be acquired through the acquisition of a majority of the voting shares of a corporation, and is presumed to be acquired where more than one-third, but less than a majority, of the voting shares of a corporation are acquired, unless it can be established that the corporation is not controlled in fact through the ownership of voting shares.  Other rules apply with respect to the acquisition of non-corporate entities.




Investments requiring review and approval include direct acquisition of Canadian businesses with assets with a gross book value of $5,000,000 or more; indirect acquisitions of Canadian businesses with assets of $50,000,000 or more; and indirect acquisitions of Canadian businesses where the value of assets of the entity or entities carrying on business in Canada, control of which is indirectly being acquired, is greater than $5,000,000 and represents greater than 50% of the total value of the assets of all of the entities, control of which is being acquired.




65





Pursuant to the World Trade Organization Agreement Implementation Act, the Act was amended to provide that the value of the business acquisition threshold (the “Threshold”) above described is increased from those levels outlined where the acquisition is by a World Trade Organization Investor or by a non-Canadian other than a World Trade Organization Investor where the Canadian business that is the subject of the investment is immediately before the investment controlled by a World Trade Organization Investor.  The Threshold is to be determined yearly in accordance with a formula set forth in the Act.  For 2011, the Threshold was determined to be CDN$312,000,000.




A World Trade Organization Investor includes an individual, other than a Canadian, who is a national of a World Trade Organization Member, or who has the right of permanent residence in relation to that World Trade Organization Member.




Different provisions and considerations apply with respect to investment to acquire control of a Canadian business that, as defined in the Act or regulations:




a)
engages in production of uranium and owns an interest in a producing uranium property in Canada;




b)
provides financial services;




c)
provides transportation services;




d)
is a cultural business.




If an investment is reviewable, an application for review in the form prescribed by regulation is normally required to be filed with the Ministry of Industry, Director of Investment prior to the investment taking place and the investment may not be consummated until the review has been completed and ministerial approval obtained.  Applications for review concerning indirect acquisitions may be filed up to 30 days after the investment is consummated.  Applications concerning reviewable investments in culturally sensitive and other specified activities referred to in the preceding paragraph are required upon receipt of a notice for review.  There is, moreover, provision for the Minister (a person designated as such under the Act) to permit an investment to be consummated prior to completion of review if he is satisfied that delay would cause undue hardship to the acquirer or jeopardize the operation of the Canadian business that is being acquired.




10.E. Taxation.




Certain U.S. Federal Income Tax Considerations




The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership, and disposition of common shares.





This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of common shares.  In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty.  Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder.  Each U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local tax, and foreign tax consequences relating to the acquisition, ownership and disposition of common shares.





No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.  This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary.  In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.




Scope of this Summary




Authorities




This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, U.S. court decisions, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date of this document.  Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary.  This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.




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U.S. Holders




For purposes of this summary, the term "U.S. Holder" means a beneficial owner of common shares that is for U.S. federal income tax purposes:





●
an individual who is a citizen or resident of the U.S.;




●
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the U.S., any state thereof or the District of Columbia;




●
an estate whose income is subject to U.S. federal income taxation regardless of its source; or




●
a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.




Non-U.S. Holders




For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of common shares that is not a U.S. Holder.  This summary does not address the U.S. federal income tax consequences to non-U.S. Holders arising from and relating to the acquisition, ownership, and disposition of common shares.  Accordingly, a non-U.S. Holder should consult its own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local tax, and foreign tax consequences (including the potential application of and operation of any income tax treaties) relating to the acquisition, ownership, and disposition of common shares.




U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed




This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including the following:  (a) U.S. Holders that are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) U.S. Holders that are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) U.S. Holders that are dealers in securities or currencies or U.S. Holders that are traders in securities that elect to apply a mark-to-market accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) U.S. Holders that acquired common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) partnerships and other pass-through entities (and investors in such partnerships and entities); or (j) U.S. Holders that own or have owned  (directly, indirectly, or by attribution) 10% or more of the total combined voting power of the outstanding shares of the Company.  This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are (a) U.S. expatriates or former long-term residents of the U.S. subject to Section 877 of the Code, (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Canadian Act (as defined below); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute “taxable Canadian property” under the Canadian Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention.  U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own tax advisor regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local tax, and foreign tax consequences relating to the acquisition, ownership and disposition of common shares.





If an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such partnership and the partners of such partnership generally will depend on the activities of the partnership and the status of such partners.  This summary does not address the tax consequences to any such partner.  Partners of entities that are classified as partnerships for U.S. federal income tax purposes should consult their own tax advisor regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership, and disposition of common shares.





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Tax Consequences Not Addressed




This summary does not address the U.S. state and local, U.S. federal estate and gift, U.S. federal alternative minimum tax or foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of common shares.  Each U.S. Holder should consult its own tax advisor regarding the U.S. state and local, U.S. federal estate and gift, U.S. federal alternative minimum tax and foreign tax consequences of the acquisition, ownership, and disposition of common shares.





Passive Foreign Investment Company Rules




If the Company is considered a “passive foreign investment company” under the meaning of Section 1297 of the Code (a “PFIC”) at any time during a U.S. Holder’s holding period, the following sections will generally describe the U.S. federal income tax consequences to the U.S. Holder of the acquisition, ownership, and disposition of common shares.





PFIC Status of the Company




The Company generally will be a PFIC if, for a tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income or (b) 50% or more of the value of the Company’s assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets.  “Gross income” generally includes sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.





Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all (85% or more) of a foreign corporation’s commodities are stock in trade of such foreign corporation or other property of a kind which would properly be included in inventory of such foreign corporation, or property held by such foreign corporation primarily for sale to customers in the ordinary course of business and certain other requirements are satisfied.





For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation.  In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents, or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income.





In addition, under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate share of any subsidiary of the Company which is also a PFIC (a ‘‘Subsidiary PFIC’’), and will be subject to U.S. federal income tax on their proportionate share of (i) a distribution on the shares of a Subsidiary PFIC and (ii) a disposition or deemed disposition  of shares of a Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC.





The Company believes that it qualified as a PFIC during the tax year ended December 31, 2011 and may qualify as a PFIC for the current taxable year and subsequent taxable years.  The determination of whether a corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations.  In addition, whether a corporation will be a PFIC for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this document.  Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or a Subsidiary PFIC) concerning its PFIC status or that the Company (and each Subsidiary PFIC) was not, or will not be, a PFIC for any tax year.  Each U.S. Holder should consult its own tax advisor regarding the PFIC status of the Company and each subsidiary.




In any year in which the Company is classified as a PFIC, a U.S. Holder would be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require.  U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file a IRS Form 8621.





Default PFIC Rules Under Section 1291 of the Code




If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership, and disposition of common shares will depend on whether such U.S. Holder makes an election to treat the Company as a “qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”).  A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”





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A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized on the sale or other taxable disposition of common shares and (b) any excess distribution received on the common shares.  A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for the common shares, if shorter).





Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of common shares, and any “excess distribution” received on common shares, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective common shares.  The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income.  The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year.  A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.





If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds common shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent tax years.  A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such common shares were sold on the last day of the last tax year for which the Company was a PFIC.





QEF Election




A U.S. Holder that makes a QEF Election for the first tax year in which its holding period of its common shares begins, generally, will not be subject to the rules of Section 1291 of the Code discussed above with respect to its common shares.  However, a U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) and the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder.  Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain.  A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company.  However, for any tax year in which the Company is a PFIC and has no net income or gain, U.S. Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election.  If a U.S. Holder that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge.  If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.




A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election.  In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of common shares.




The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely.  A QEF Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding period for the common shares in which the Company was a PFIC.  A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year.




A QEF Election will apply to the tax year for which such QEF Election is made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election.  If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC.  Accordingly, if the Company becomes a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year in which the Company qualifies as a PFIC.




U.S. Holders should be aware that there can be no assurance that we will satisfy record keeping requirements that apply to a QEF, or that we will supply U.S. Holders with information that such U.S. Holders require to report under the QEF rules, in event that we are a PFIC and a U.S. Holder wishes to make a QEF Election.  Thus, U.S. Holders may not be able to make a QEF Election with respect to their common shares.  Each U.S. Holder should consult its own financial advisor, legal counsel, or accountant regarding the availability of, and procedure for making, a QEF Election.  .




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Mark-to-Market Election




A U.S. Holder may make a Mark-to-Market Election only if the common shares are marketable stock.  The common shares generally will be “marketable stock” if the common shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange ensure active trading of listed stocks.  If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter.




A U.S. Holder that makes a Mark-to-Market Election with respect to its common shares generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to such common shares.  However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for the common shares or such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the common shares.




A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the common shares, as of the close of such tax year over (b) such U.S. Holder’s tax basis in such common shares.  A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted tax basis in the common shares, over (ii) the fair market value of such common shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).




A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in the common shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election.  In addition, upon a sale or other taxable disposition of common shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years).




A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the common shares cease to be “marketable stock” or the IRS consents to revocation of such election.  Each U.S. Holder should consult its own tax advisor regarding the availability of, and procedure for making, a Mark-to-Market Election.




Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to the common shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable.  Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge described above with respect to deemed dispositions of Subsidiary PFIC stock or distributions from a Subsidiary PFIC.




Other PFIC Rules




Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of common shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations).  However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which common shares are transferred.




Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election.  For example under Section 1298(b)(6) of the Code, a U.S. Holder that uses common shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such common shares.




Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC.  Subject to such special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit.  The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with their own tax advisor regarding the availability of the foreign tax credit with respect to distributions by a PFIC.










In addition, a U.S. Holder who acquires common shares from a decedent will not receive a “step up” in tax basis of such common shares to fair market value.




The PFIC rules are complex, and each U.S. Holder should consult its own tax advisor regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of common shares.




U.S. Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition of Common Shares




The following discussion is subject to the rules described above under the heading “Passive Foreign Investment Company Rules”.




General Taxation of Distributions




Subject to the PFIC rules discussed above, a U.S. Holder that receives a distribution, including a constructive distribution, with respect to a Common Share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes.  A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates.  To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the common shares and thereafter as gain from the sale or exchange of such common shares.  (See “ Sale or Other Taxable Disposition of common shares” below).  However, the Company may not maintain the calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company with respect to the common shares will constitute ordinary dividend income.  Dividends received on common shares generally will not be eligible for the “dividends received deduction”.  In addition, the Company does not anticipate that its distributions will be eligible for the preferential tax rates applicable to long-term capital gains.  The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.




Sale or Other Taxable Disposition of Common Shares




Subject to the PFIC rules discussed above, upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount of cash plus the fair market value of any property received and such U.S. Holder's tax basis in such common shares sold or otherwise disposed of.  Subject to the PFIC rules discussed above, gain or loss recognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the common shares have been held for more than one year.





Preferential tax rates apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust.  There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation.  Deductions for capital losses are subject to significant limitations under the Code.




Receipt of Foreign Currency




The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of common shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time).  If the foreign currency received is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt.  Any U.S. Holder who receives payment in foreign currency and engages in a subsequent conversion or other disposition of the foreign currency may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes.  Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.




Foreign Tax Credit




Subject to the PFIC rules discussed above, a U.S. Holder who pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the common shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid.  Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax.  This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.





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Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income.  In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.”  In addition, this limitation is calculated separately with respect to specific categories of income.  Dividends paid by the Company generally will constitute “foreign source” income and generally will be categorized as “passive category income.”  Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of common shares generally will be treated as “U.S. source” for purposes of applying the U.S. foreign tax credit rules unless the gain is subject to tax in Canada and is resourced as “foreign source” under the Canada-U.S. Tax Convention and such U.S. Holder elects to treat such gain or loss as “foreign source.”  The foreign tax credit rules are complex, and each U.S. Holder should consult its own tax advisor regarding the foreign tax credit rules.


Additional Tax on Passive Income











For tax years beginning after December 31, 2012, certain individuals, estates and trusts whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surtax on “net investment income” including, among other things, dividends and net gain from dispositions of property (other than property held in a trade or business).  U.S. Holders should consult with their own tax advisors regarding the effect, if any, of this tax on their ownership and disposition of common shares.





Backup Withholding and Information Reporting




Under U.S. federal income tax law and Treasury Regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation.  For example, recently enacted legislation generally imposes new U.S. return disclosure obligations (and related penalties) on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of $50,000.  The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity.  U.S. Holders may be subject to these reporting requirements unless their common shares are held in an account at a domestic financial institution.  Penalties for failure to file certain of these information returns are substantial.  U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.





Payments made within the U.S. or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, common shares generally may be subject to information reporting and backup withholding tax, at the rate of 28%, (and increasing to 31% for payments made after December 31, 2012) if a U.S. Holder (a) fails to furnish such U.S.  Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax.  However, certain exempt persons, such as corporations, generally are excluded from these information reporting and backup withholding rules.  Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.  Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules.




Certain Canadian Federal Income Tax Consequences




The following discussion summarizes the principal Canadian federal income tax considerations generally applicable to a person who owns one or more common shares of the Company (the "Shareholder"), and who at all material times for the purposes of the Income Tax Act (Canada)  (the  "Canadian  Act") deals at arm's length with the Company,  holds all common shares solely as capital property, is a  non-resident  of Canada,  and does not, and is not deemed to, use or hold any Common  share in or in the course of  carrying  on  business  in  Canada.  It is assumed that the common shares will at all material times be listed on a stock exchange that is designated for the purposes of the Canadian Act.





This summary is based on the current provisions of the Canadian Act, including the regulations thereunder, and the Canada-United States Income Tax Convention (1980) (the "Treaty") as amended.  This summary takes into account all specific proposals  to amend the Canadian Act and the  regulations  thereunder  publicly announced  by the  government  of Canada to the date  hereof  and the  Company's understanding of the current published administrative and assessing practices of the Canada Revenue Agency.  It is assumed that all such amendments will be enacted substantially as currently proposed, and that there will be no other material change to any such law or practice, although no assurances can be given in these respects. Except to the extent otherwise expressly set out herein, this summary does not take into account any provincial, territorial or foreign income tax law or treaty.





72





This summary is not, and is not to be construed as, tax advice to any particular Shareholder. Each prospective and current Shareholder is urged to obtain independent advice as to the Canadian income tax consequences of an investment in common shares applicable to the Shareholder's particular circumstances.





A Shareholder generally will not be subject to tax pursuant to the Canadian Act on any capital gain realized by the Shareholder on a disposition of a Common share unless the Common share constitutes "taxable Canadian property" to the Shareholder for purposes of the Canadian Act and the Shareholder is not eligible for relief pursuant to an applicable bilateral tax treaty.  A Common share that is disposed of by a Shareholder will constitute taxable Canadian property of the Shareholder and will thus be subject to Canadian tax, if the Shareholder alone or together with one or more persons with whom the Shareholder did not deal at arm's length owned, or owned any right to acquire, 25% or more of the issued shares of any class of the capital stock of the Company in the five years immediately preceding the disposition.  However, the Treaty will generally exempt a Shareholder who would otherwise be liable to pay Canadian income tax in respect of any capital gain realized by the Shareholder on the disposition of a Common Share that is Taxable Canadian Property, who is a resident of the United States for the purposes of the Treaty and who is not excluded from the benefits of the Treaty because of the application of the Limitation of Benefits provision in the Treaty, from such liability provided that the value of the  Common  share is not  derived  principally  from real  property  (including resource property) situated in Canada or that the Shareholder does not have, and has not had within the 12-month period preceding the  disposition,  a "permanent establishment"  or "fixed  base," as those terms are defined for the purposes of the  Treaty,  available  to the Shareholder  in  Canada.




Any dividend on a Common share, including a stock dividend, paid or credited, or deemed to be paid or credited, by the Company to a Shareholder  will be subject to  Canadian  withholding  tax at the  rate of 25% on the gross  amount  of the dividend, or such lesser rate as may be available under an applicable income tax treaty.  Pursuant to the Treaty, the rate of withholding tax applicable to a dividend paid on a Common share to a Shareholder who is a resident of the United States for the purposes of the Treaty will be reduced to 5% if the beneficial owner of the dividend is a company that owns at least 10% of the voting stock of the Company, and in any other case will be reduced to 15%, of the gross amount of the dividend.  The Company will be required to withhold any such tax from the dividend, and remit the tax directly to Canada Revenue Agency on behalf of the Shareholder.




The Fifth Protocol to the Treaty signed in 2007 between Canada and the US extended, in some cases, the benefits of the Treaty to US shareholders who are otherwise resident in the United States and who are considered to derive income or gain in respect of a Common share through a fiscally transparent entity (other than a Canadian resident entity) under US tax law.  Consequently, such persons may be entitled to the benefits of the Treaty to reduce Canadian taxes in respect of dividends or gains on Common shares.




ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES.




10.F. Dividends and Paying Agents.




Not Applicable.





10.G. Statement by Experts.




Not Applicable.





10.H. Documents on Display.




We have filed with the Securities and Exchange Commission this annual report on Form 20-F, including exhibits, under the Securities and Exchange Act of 1934.





We are subject to the informational requirements of the Securities Exchange Act of 1934 and file reports and other information with the Securities and Exchange Commission.  Reports and other information which we file with the Securities and Exchange Commission, including this Annual Report on Form 20-F, may be inspected and copied at the public reference facilities of the Securities and Exchange Commission at:





100 F Street, NE


Washington D.C.  20549





73





You can also obtain copies of this material by mail from the Public Reference Section of the Securities and Exchange Commission, 100 F Street, NE, Washington, D.C. 20549, at prescribed rates.  Additionally, copies of this material may also be obtained from the Securities and Exchange Commission's internet site at http://www.sec.gov.  The Commission's telephone number is 1-800-SEC-0330.





Copies of the above material contracts may be inspected at the offices of Leschert & Company Law Corporation, #2760 – 200 Granville Street, Vancouver, British Columbia, Canada, during normal business hours.





10.I. Subsidiary Information.




As of May 23, 2012 we have the following subsidiaries:




a)
South American Mining & Exploration Corp. (British Columbia, Canada)




b)
SAMEX International Ltd. (Bahamas)




c)
Minas Bolivex S.A. (“Bolivex S.A.”) (Bolivia)




d)
SAMEX S.A. (Bolivia)




e)
Empresa Minera Boliviana S. A. (“Emibol S.A.”) (Bolivia)




f)
Minera Samex Chile S. A. (Chile)





Item 11. Quantitative And Qualitative Disclosures About Market Risk.




We were incorporated under the laws of British Columbia, Canada and our financial results are quantified in Canadian dollars.  We raise equity funding through the sale of securities denominated in Canadian dollars, whereas the majority of our obligations and expenditures with respect to our properties will be incurred in Chilean Pesos, US Dollars, and Bolivian Bolivianos.  Variations in the exchange rate may give rise to foreign exchange gains or losses that may be significant.  Market risks relating to our operations, if we begin production, are anticipated to result primarily from changes in interest rates, foreign exchange rates and commodity prices, as well as credit risk concentrations.  We do not use financial instruments for trading purposes and are not parties to any leverage derivatives.  We do not currently engage in hedging transactions.  See “Currency and Exchange Rates” and Item 4 – “Information on the Company”.





We maintain holdings of gold and silver bullion in addition to holding cash reserves which may result
 in exposure to certain market risks associated with fluctuations in the prices of those metals.    See Item 3.D "Risk Factors - "The prices of precious metals and base metals directly impact on our business activities" and "We face certain risks associated with our gold and silver bullion holdings".





Item 12. Description Of Securities Other Than Equity Securities.




Not Applicable.




PART II




Item 13. Defaults, Dividend Arrearages And Delinquencies.


Not Applicable.








Item 14. Material Modifications To The Rights Of Security Holders And Use Of Proceeds.




Not Applicable.




Item 15. Controls And Procedures




(a) Disclosure Controls and Procedures





74





The Company maintains disclosure controls and procedures that are designed to ensure that the information required to be disclosed in our Exchange Act reports 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 management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  After evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d – 14(c)) as of the end of the period covered by this report, the Chief Executive Officer and Chief Financial Officer have concluded that as of such date, the Company’s disclosure controls and procedure were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.





(b) Management’s annual report on internal control over financial reporting:





Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with international financial reporting standards. Internal control over financial reporting includes policies and procedures that:





●
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and asset dispositions;


●
provide reasonable assurance that transactions are recorded as necessary to permit the preparation of our financial statements in accordance with international financial reporting standards;


●
provide reasonable assurance that receipts and expenditures are made only in accordance with authorizations of our management and board of directors (as appropriate); and


●
provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.





Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.





Management conducted an assessment of the effectiveness of our internal control over financial reporting as of the fiscal year ended December 31, 2011 based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework.   Based on this evaluation, management concluded that, as of the fiscal year ended December 31, 2011, the Company’s internal controls over our financial reporting were adequate.   Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to implementing additional improvements as necessary.





(c) Attestation report of the registered public accounting firm





This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting as we qualify as an “emerging growth company” and are therefore exempt under the Jumpstart Our Business Startups Act.




(d) Changes in internal control over financial reporting





There were no significant changes during the period covered by this Annual Report in the Company’s internal controls or in other factors that have materially adversely affected, or are reasonably likely to materially adversely affect, the Company’s internal control over financial reporting.




Item 16. [Reserved]




Item 16A. Audit Committee Financial Expert.




Our board of directors has determined that Larry McLean, our Chief Financial Officer, satisfies the requirements of an audit committee financial expert serving on our audit committee as defined in the instructions to Item 16A of Form 20-F.  Mr. McLean is not an independent director, as defined under the audit committee independent director requirements of the NYSE - AMEX Exchange.





75





Item 16B. Code Of Ethics.




We have not adopted a formal code of ethics.  We have concluded that a written code of ethics would serve little practical purpose for us in deterring wrongdoing and promoting ethical conduct and full, fair and accurate public disclosure and compliance with applicable laws and regulatory requirements.  Since our operations are currently relatively small, most of our important activities are conducted directly by or under the direct supervision of our directors and senior officers.  All of our current directors and officers have held their positions for a number of years and are familiar with our operations and our informal requirements for conduct.  In light of the lack of perceived benefit from adopting a formal code considered against the time and cost for management to consider and implement a code, we have decided not to do so at the present time.  We will continue to monitor the possible benefits of adopting a formal code of ethics, particularly as our operations and the number of our employees expand and will consider whether we should adopt a formal code of ethics at a future date.





Item 16C. Principal Accountant Fees And Services.




(a) Audit Fees





The aggregated audit fees billed for each of the past two fiscal years by our auditor, Dale Matheson Carr-Hilton LaBonte, Chartered Accountants, for professional services rendered for the audit of our annual financial statements or services that are normally provide in connection with statutory and regulatory filings were: $36,720 during the fiscal year ended December 31, 2011; and $36,720 during the fiscal year ended December 31, 2010.





(b) Audit-Related Fees





The aggregated audit related fees billed by our auditor, Dale Matheson Carr-Hilton LaBonte, Chartered Accountants, for professional services rendered were: $3,000 during the fiscal year ended December 31, 2011; and $2,000 during the fiscal year ended December 31, 2010.





(c) Tax Fees





The aggregate of tax fees billed by our auditor, Dale Matheson Carr-Hilton LaBonte, Chartered Accountants, for the preparation of all necessary Canadian tax returns for the Company and its subsidiaries was: $4,000 during the fiscal year ended December 31, 2011; and $4,000 during the fiscal year ended December 31, 2010.





(d) All Other Fees





Our auditor, Dale Matheson Carr-Hilton LaBonte, Chartered Accountants has not billed us for any other services during the past two fiscal years, than the audit fees, audit-related fees and tax fees noted above.





Audit Committee’s Pre-approval Policies and Procedures





The Audit Committee nominates and engages the independent auditors to audit the financial statements, and approves all audits, audit-related services, tax services and other services provided by the auditor.  Any services provided by our independent auditor that are not specifically included within the scope of the audit must be pre-approved by the Audit Committee prior to any engagement.  The Audit Committee is permitted to approve certain fees for audit-related services, tax services and other services pursuant to a de minimusexception before the completion of the engagement.





Item 16D. Exemptions From The Listing Standards For Audit Committees.




Not Applicable.





Item 16E. Purchase Of Equity Securities By The Issuer And Affiliated Purchases.




There were no known purchases of the Company’s securities by or on behalf of the Company or any affiliated purchaser during the period covered by this Annual Report.





Item 16F. Change in Registrant’s Certifying Accountant





Not Applicable.





Item 16G. Corporate Governance.





76





Not Applicable.





Item 16H. Mine Safety Disclosure





Not Applicable.





Item 17. Financial Statements




Not applicable as our consolidated financial statements have been prepared in accordance with Item 18.





Item 18. Financial Statements




We are furnishing the following financial statements and reports:





●
Auditor’s Report dated April 28, 2012


●
Consolidated Statements Of Financial Position at December 31, 2011 and December 31, 2010 and January 1, 2010


●
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2011 and December 31, 2010


●
Consolidated Statements of Changes In Shareholder's Equity at December 31, 2011 and December 31, 2010 and January 1, 2010


●
Consolidated Statements of Cash Flows for the years ended December 31, 2011 and December 31, 2010


●
Notes to the Consolidated Financial Statements





All financial statements herein, unless otherwise stated, have been prepared in accordance with IFRS.




77










INDEPENDENT AUDITOR’S REPORT




To the Shareholders of SAMEX Mining Corp.




We have audited the accompanying consolidated financial statements of SAMEX Mining Corp. which comprise the consolidated statements of financial position as at December 31, 2011, and 2010 and January 1, 2010, and the consolidated statements of comprehensive loss, cash flows and changes in shareholders’ equity for the years ended December 31, 2011 and 2010, and a summary of significant accounting policies and other explanatory information.





Management's Responsibility for the Consolidated Financial Statements




Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.




Auditor’s Responsibility




Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.




An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.




We believe that the audit evidence that we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.




Opinion




In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of SAMEX Mining Corp. as at December 31, 2011 and 2010 and January 1, 2010, and its financial performance and its cash flows for the years ended December 31, 2011 and 2010, in accordance with International Financial Reporting Standards.





/s/DMCL




DALE MATHESON CARR-HILTON LABONTE LLP


CHARTERED ACCOUNTANTS


Vancouver, Canada


April 28, 2012


78
 
 SAMEX MINING CORP.


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


(EXPRESSED IN CANADIAN DOLLARS)


DECEMBER 31,


DECEMBER 31,


JANUARY 1,2011


2010


2010(NOTE 12)


(NOTE 12)ASSETSCURRENT ASSETSCASH

$
3,991,264


$
4,870,337


$
1,020,863GOLD AND SILVER BULLION (NOTE 4)


5,807,372



4,107,333



757OTHER CURRENT ASSETS


119,538



32,551



39,9839,918,174



9,010,221



1,061,603NON-CURRENT ASSETS EQUIPMENT (NOTE 5)


110,917



56,445



70,482EXPLORATION AND EVALUATION ASSETS (NOTE 6)


13,625,896



10,299,789



9,021,95313,736,813



10,356,234



9,092,435TOTAL ASSETS

$
23,654,987


$
19,366,455


$
10,154,038LIABILITIESCURRENT TRADE PAYABLES AND ACCRUED LIABILITIES

$
89,211


$
91,890


$
73,718SHAREHOLDERS' EQUITYSHARE CAPITAL (NOTE 8)


50,033,529



44,702,328



34,543,268RESERVE (NOTE 12)


6,528,408



3,267,329



3,196,539DEFICIT


(32,996,161
)


(28,695,092
)


(27,659,487
)23,565,776



19,274,565



10,080,320TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$
23,654,987


$
19,366,455


$
10,154,038





COMMITMENTS (NOTE 6)


SUBSEQUENT EVENTS (NOTE 6)





APPROVED BY THE DIRECTORS




“Jeffrey P. Dahl”





Director




“Larry D. McLean”





Director









79





SAMEX MINING CORP.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


(EXPRESSED IN CANADIAN DOLLARS)




YEARS ENDED DECEMBER 31,2011


2010(Note 12)EXPENSESAMORTIZATION

$
47,037


$
38,769CONSULTING FEES


34,875



21,375FOREIGN EXCHANGE


137,909



(10,310
)INTEREST AND BANK CHARGES


25,661



5,169MINERAL INTERESTS, ADMINISTRATION AND INVESTIGATION COSTS


287,369



208,939OFFICE AND MISCELLANEOUS


148,667



102,474PROFESSIONAL FEES


166,606



125,029REGULATORY FEES


24,882



55,150SALARIES AND BENEFITS


608,569



411,408STOCK-BASED COMPENSATION (NOTE 8)


2,626,421



126,535TRANSFER AGENT FEES


12,207



11,906TRAVEL AND PROMOTION


139,089



66,582LOSS FROM OPERATIONS


4,259,292



1,163,026GAIN ON GOLD AND SILVER BULLION


(433,233
)


(108,812
)IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS


19,142



37,136NET AND COMPREHENSIVE LOSS FOR THE YEAR

$
3,845,201


$
1,091,350WEIGHTED AVERAGE NUMBER OF SHARESOUTSTANDING


124,987,219



102,615,952LOSS PER SHARE -BASIC AND DILUTED

$
(0.03
)

$
(0.01
)












SAMEX MINING CORP.
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
 (EXPRESSED IN CANADIAN DOLLARS)


SHARE CAPITALNUMBER OF SHARES


AMOUNT


SHARE-BASED PAYMENT RESERVE


DEFICIT


TOTALRESTATED BALANCE AT JANUARY 1, 2010 (NOTE 12)


96,856,665


$
34,543,268


$
3,196,539


$
(27,659,487
)

$
10,080,320TOTAL COMPREHENSIVE (LOSS)INCOME FOR THE YEAR


—



—



—



(1,091,350
)


(1,091,350
)SHARES ISSUED FOR CASH -PRIVATE PLACEMENT


21,231,054



9,883,060



—



—



9,883,060WARRANT EXERCISE


1,380,000



276,000



—



—



276,000SHARE-BASED PAYMENTS (NOTE 8)


—



—



126,535



126,535EXPIRY OF OPTIONS










(55,745
)


55,745



—RESTATED BALANCE AT DECEMBER 31, 2010


119,467,719



44,702,328



3,267,329



(28,695,092
)


19,274,565TOTAL COMPREHENSIVE (LOSS) INCOME FOR THE YEAR


—



—



—



(3,845,201
)


(3,845,201
)SHARES ISSUED FOR CASH -WARRANT EXERCISE


6,941,000



5,227,662



(552,162
)


—



4,675,500OPTION EXERCISE


300,000



103,540



(43,540
)


—



60,000WARRANT EXTENSION


—



—



455,868



(455,868
)


—SHARE-BASED PAYMENTS (NOTE 8)


—



—



3,400,913



3,400,913BALANCE AT DECEMBER 31, 2011


126,708,719


$
50,033,530


$
6,528,408


$
(32,996,161
)

$
23,565,777








81





SAMEX MINING CORP.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(EXPRESSED IN CANADIAN DOLLARS)





YEARS ENDED DECEMBER 31,2011


2010CASH PROVIDED (USED) BY OPERATING ACTIVITIESNET AND COMPREHENSIVE LOSS FOR THE YEAR

$
(3,845,201
)

$
(1,091,350
)ADJUSTMENTS FOR NON-CASH ITEMS:AMORTIZATION


47,037



38,769GAIN ON GOLD AND SILVER BULLION


(433,233
)


(108,812
)GOLD AND SILVER BULLION VAULT FEES


21,993IMPAIRMENT OF EXPLORATION AND EVALUATION
 ASSETS


19,142



37,136STOCK-BASED COMPENSATION


2,626,421



126,535CHANGES IN NON-CASH WORKING CAPITAL ITEMSOTHER CURRENT ASSETS


(86,987
)


7,432TRADE PAYABLES AND ACCRUED LIABILITIES


(2,679
)


18,172NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES


(1,653,507
)


(972,118
)INVESTING ACTIVITIESEXPENDITURES ON EXPLORATION AND EVALUATION
 ASSETS


(2,570,758
)


(1,309,685
)EXPENDITURES ON EQUIPMENT


(101,509
)


(30,019
)PURCHASE OF GOLD AND SILVER BULLION


(2,509,090
)


(3,997,764
)PROCEEDS FROM SALE OF GOLD AND SILVER BULLION


1,220,291



—NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES


(3,961,066
)


(5,337,468
)FINANCING ACTIVITIESPROCEEDS ON ISSUANCE OF COMMON SHARES -NET OF SHARE ISSUE COSTS


4,735,500



10,159,060NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES


4,735,500



10,159,060INCREASE (DECREASE) IN CASH FOR THE YEAR


(879,073
)


3,849,474CASH, BEGINNING


4,870,337



1,020,863CASH, ENDING

$
3,991,264


$
4,870,337









82


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)




1.
NATURE AND CONTINUANCE OF OPERATIONS




SAMEX Mining Corp. (the “Company”) was incorporated on December 15, 1967 under the laws of the province of British Columbia, Canada, and its principal activity is the acquisition and exploration of exploration and evaluation assets in Chile and Bolivia.  The Company’s shares are traded on the TSX Venture Exchange (“TSX-V”) under the symbol “SXG”.





These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.  Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future.  As at December 31, 2011, the Company had not advanced its properties to commercial production and is not able to finance day to day activities through operations.  The Company’s continuation as a going concern is dependent upon the successful results from its exploration activities and its ability to attain profitable operations and generate funds there from and/or raise equity capital or borrowings sufficient to meet current and future obligations.  Management intends to finance operating costs over the next twelve months with its cash, gold and silver bullion and proceeds from the exercise of warrants.





2.
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION





The financial statements were authorized for issue on April 28, 2012 by the directors of the Company.





Statement of compliance and conversion to International Financial Reporting Standards





The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).





These are the Company’s first set of annual consolidated financial statements prepared in accordance with IFRS. The disclosures concerning the transition from Canadian Generally Accepted Accounting principles (“Canadian GAAP”) to IFRS are provided in Note 12.





83





SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010


(EXPRESSED IN CANADIAN DOLLARS)





2.
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONTINUED)





Basis of preparation




The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable.  The consolidated financial statements are presented in Canadian dollars unless otherwise noted.





Consolidation




The consolidated financial statements include the accounts of the Company and its controlled entities.  Details of controlled entities are as follows:




Percentage OwnedDecember 31,Country of
 Incorporation2011

2010South American Mining &
 Exploration Corp. ("S.A.M.E.X.")
Canada


100.0
%
100.0
%Samex International Ltd.
Bahamas


100.0
%
100.0
%Minera Samex Chile S.A.
Chile


99.9
%
99.9
%Empresa Minera Boliviana S.A. ("Emibol")
Bolivia


98.0
%
98.0
%Samex S.A.
Bolivia


98.0
%
98.0
%Minas Bolivex S.A. ("Bolivex")
Bolivia


98.0
%
98.0
%





Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated on consolidation.





Significant accounting judgments, estimates and assumptions




The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.




Areas requiring a significant degree of estimation and judgment relate to the determination of the useful lives of equipment, the carrying value of exploration and evaluation assets, fair value measurements for financial instruments and stock-based compensation and other equity-based payments, the recognition and valuation of provisions for restoration and environmental liabilities, and the recoverability and measurement of deferred tax assets and liabilities.  Actual results may differ from those estimates and judgments.




84


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


2.
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONTINUED)





Foreign currency translation




The functional currency of the Company and its subsidiaries is the Canadian dollar and the consolidated financial statements of the Company are presented in Canadian dollars. At the end of each reporting period, the results and financial position in the financial statements of each of the controlled entities are translated into the functional currency, the Canadian dollar, and presented in the consolidated financial statements of the Company in Canadian dollars.




Transactions and balances:




Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.




Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the statement of comprehensive income in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.




Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income in the statement of comprehensive income to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.




Exploration and evaluation expenditures




Mineral exploration and evaluation expenditures include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Mineral exploration and evaluation expenditures are capitalized as "Exploration and Evaluation Assets". Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss.




Government tax credits received are recorded as a reduction to the cumulative costs incurred and capitalized on the related property.




Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount.




Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property and equipment.




Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.


85
 
 SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


2.
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONTINUED)





Share-based payments




The Company operates an employee stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods.  Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received.  The corresponding amount is recorded to the share-based payment reserve.  The fair value of options is determined using a Black–Scholes pricing model which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.




Loss per share




Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the period.  For all periods presented, the loss attributable to common shareholders equals the reported loss attributable to owners of the Company.  Diluted loss per share is calculated by the treasury stock method.  Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the period.




Financial instruments




The Company classifies its financial instruments in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale and financial liabilities. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition.





Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.





Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.





Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortized cost.  Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period.




86




SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


2.
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONTINUED)





Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not suitable to be classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments and are subsequently measured at fair value.  These are included in current assets. Unrealized gains and losses are recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary financial assets.





Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortized cost.





Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the group commits to purchase the asset.





Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.





At each reporting date, the Company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant and prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen.





The Company does not have any derivative financial assets and liabilities.





Impairment of assets




The carrying amount of the Company’s assets (which include equipment and exploration and evaluation assets) is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the statement of income and comprehensive income.




The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.




An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.




Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.




87


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


2.
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONTINUED)




Income taxes




Current income tax:




Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.




Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.




Deferred income tax:




Deferred income tax is provided using the balance sheet method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.




The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.




Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.




Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.




88


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)




2.
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (CONTINUED)





Restoration and environmental obligations




The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to exploration and evaluation assets along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The restoration asset will be depreciated on the same basis as other mining assets.




The Company’s estimates of restoration costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to mining assets with a corresponding entry to the restoration provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates.




Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit and loss for the period.




The net present value of restoration costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred.




The costs of restoration projects that were included in the provision are recorded against the provision as incurred. The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for exploration and evaluation assets.




Equipment




Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.




Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of income and comprehensive income during the financial period in which they are incurred.




Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss.




Depreciation and amortization are calculated on a straight-line method to write off the cost of the assets to their residual values over their estimated useful lives. The depreciation and amortization rates applicable to each category of equipment are as follows:




Class of equipment

Depreciation rateMotor vehicles

5 yearsExploration equipment

4 to 8 yearsOffice equipment

4 to 10 years




89





SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010


(EXPRESSED IN CANADIAN DOLLARS)





3.
ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE





Certain pronouncements were issued by the IASB or the IFRS Interpretations Committee that are mandatory for accounting periods beginning after January 1, 2012 or later periods.




The following new standards, amendments and interpretations that have not been early adopted in these financial statements, are not expected to have a material effect on the Company’s future results and financial position:




IFRS 9 Financial Instruments (New; to replace IAS 39 and IFRIC 9);




IFRS 10 Consolidated Financial Statements (New; to replace consolidation requirements in IAS 27 (as amended in 2008) and SIC-12);




IFRS 11 Joint Arrangements (New; to replace IAS 31 and SIC-13);




IFRS 12 Disclosure of Interests in Other Entities (New; to replace disclosure requirements in IAS  27 (as amended in 2008), IAS 28 (as revised in 2003) and IAS 31);




IFRS 13 Fair Value Measurement (New; to replace fair value measurement guidance in other IFRSs);




IAS 1 Presentation of Financial Statements, (Amendments regarding Presentation of Items of Other Comprehensive Income);




IAS 19 Employee Benefits (Amended in 2011);




IAS 27 Separate Financial Statements (Amended in 2011);




IAS 28 Investments in Associates and Joint Ventures (Amended in 2011); and




IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (New).




4.
GOLD AND SILVER BULLION




Gold and silver bullion are measured at fair value through the statement of comprehensive loss.




During the year ended December 31, 2010, the Company purchased $2,200,000 of gold bullion and $1,799,925 of silver bullion.  The Company held 48,193 grams of gold and 63,499 ounces of silver which had a fair value of $4,107,333 at December 31, 2010.





During the year ended December 31, 2011, the Company sold 35,000 ounces of silver bullion for proceeds of $1,220,291 and purchased $1,799,949 of gold bullion and $709,140 of silver bullion. The Company held 87,362 grams of gold and 50,019 ounces of silver which had a fair value of $5,807,372 at December 31, 2011.





During the year ended December 31, 2011, the Company realized a gain of $433,233 (2010 - $108,812) on its gold and silver bullion.











SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010


(EXPRESSED IN CANADIAN DOLLARS)




5.      EQUIPMENT




Motor

Vehicles


Exploration

Equipment


Office

Equipment


TotalCostAt December 31, 2010

$
150,225


$
61,329


$
132,321


$
343,875Additions


74,626



8,004



18,879



101,509Disposals


(18,510
)


—



—



(18,510
)At December 31, 2011


206,341



69,333



151,200



426,874DepreciationAt December 31, 2010


114,833



59,544



113,053



287,430Charge


34,673



3,153



9,211



47,037Disposals


(18,510
)


—



—



(18,510
)At December 31, 2011


130,996



62,697



122,264



315,957Net book valueAt December 31, 2010


35,392



1,785



19,268



56,445At December 31, 2011

$
75,345


$
6,636


$
28,936


$
110,917




Motor

Vehicles


Exploration

Equipment


Office

Equipment


TotalCostAt January 1, 2010

$
124,308


$
61,169


$
128,379


$
313,856Additions


25,917



160



3,942



30,019At December 31, 2010


150,225



61,329



132,321



343,875DepreciationAt January 1, 2010


91,060



47,476



104,838



243,374Charge


23,773



12,068



8,215



44,056At December 31, 2010


114,833



59,544



113,053



287,430Net book valueAt January 1, 2010


33,248



13,693



23,541



70,482At December 31, 2010

$
35,392


$
1,785


$
19,268


$
56,445




91


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


6.
EXPLORATION AND EVALUATION ASSETS




Los Zorros


Chimberos


INCA


Espejismo


Miscellaneous Properties -Chile


EskapaEl Desierto
 Santa Isabel


Balance December 31,2011


2010Acquisition costsBalance beginning of year

$
1,289,919


$
14,298


$
1,768,993


$
1,000


$
1,000


$
3,000


$
3,078,210


$
3,056,457Additions


76,793



—



152,281



—



—



—



229,074



23,688Write-down due to impairment


—



—



—



—



—



—



—



(1,935
)Balance end of year

$
1,366,712


$
14,298


$
1,921,274


$
1,000


$
1,000


$
3,000


$
3,307,284


$
3,078,210Exploration and evaluation costsBalance beginning of year

$
5,179,191


$
153,887


$
1,888,501


$
—


$
—


$
—


$
7,221,579


$
5,965,496Costs incurred during yearAmortization


—



—



—



—



—



—



—



5,287Drilling and sub-contracts


1,099,604



4,395



56,344



—



—



—



1,160,343



506,491Field camp supplies


46,772



—



17,096



—



—



622



64,490



41,960Geology, mapping, surveys - cash


589,769



—



—



—



—



—



589,769



263,573Geology, mapping, surveys - stock-based compensation (Note 8)


774,491



—



—



—



—



—



774,491



—Legal


3,112



—



—



—



—



1,023



4,135



8,123Property patent payments


85,199



12,960



33,233



4,384



193



12,920



148,889



159,324Site/project administration


19,069



—



39,038



—



—



—



58,107



75,795Travel and accommodation


55,953



—



717



—



—



—



56,670



—2,673,969



17,355



146,428



4,384



193



14,565



2,856,894



1,060,553OtherAdvance royalty payments


97,740



—



—



—



—



—



97,740



106,203Value-added taxes


161,541



—



—



—



—



—



161,541



124,528Write-down due to impairment


—



—



—



(4,384
)


(193
)


(14,565
)


(19,142
)


(35,201
)259,281



—



—



(4,384
)


(193
)


(14,565
)


240,139



195,530Balance end of year

$
8,112,441


$
171,242


$
2,034,929


$
—


$
—


$
—


$
10,318,612


$
7,221,579Total

$
9,479,153


$
185,540


$
3,956,203


$
1,000


$
1,000


$
3,000


$
13,625,896


$
10,299,789
  92





SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010


(EXPRESSED IN CANADIAN DOLLARS)




6.
EXPLORATION AND EVALUATION ASSETS (CONTINUED)





The following is a description of the Company’s exploration and evaluation assets and the related spending commitments:




The Company has invested in various mineral interests located in Chile and Bolivia. The mineral interests have been acquired by purchase agreements, staking, option agreements, purchase at government auctions, or by earning a percentage interest in certain properties pursuant to a joint venture or other type of agreement.  Government patent fees must be paid each year in order to keep the mineral concessions valid and in effect.





CHILE





i.
Los Zorros Property – As described below, the Company has a 100% interest in mineral concessions acquired by staking, purchase at government auction, purchase agreement, and by option contracts. The Company also has an option to acquire a 100% interest in adjacent mineral concessions.





Minera Ojos del Salado Purchase – The Company acquired a 100% interest in mineral interests for U.S. $50,000 (paid).  The vendor retained a back-in option to earn a 30% to 51% interest in the event that the Company discovers a deposit containing not less than 2,000,000 tonnes of contained equivalent copper on the mineral interests.





Hochschild Option – The Company acquired a 100% interest in mineral interests for consideration of option payments totaling U.S. $230,000 (paid). The concessions are subject to a net smelter royalty (“NSR”) of up to 2%.  The Company has the option to buyout the NSR at any time for U.S. $1,800,000.  As the concessions were not in production as at December 31, 2007, the Company is required to pay annual advance NSR payments of U.S. $100,000 per year from February 29, 2008 to March 1, 2012 to a maximum of U.S. $500,000 (U.S. $400,000 paid and U.S. $100,000 paid subsequent to the year). The advance NSR payments are recoverable from future NSR payments.





San Estaban Option – The Company acquired a 100% interest in mineral interests for consideration of option payments totaling U.S. $200,000 (paid).  A 1.5% NSR was retained by the vendor.





Geosupply Servicios Bonus and Royalty - Pursuant to a consulting agreement dated September 25, 2002 the concessions above comprising the Los Zorros property are subject to a bonus of U.S. $150,000 payable within one year from the date of commencement of commercial production on the concessions and to a 0.25% NSR.





Aravena Option – The Company has an option to acquire a 100% interest in mineral concessions adjacent to the Los Zorros property by paying the 2011 patent payments (paid) and by making option payments totaling the Chilean peso equivalent of U.S. $245,345. The option payments are due:  U.S. $60,000 due on signing (paid); U.S. $95,345 due January 31, 2012 (paid subsequent to the year) and U.S. $90,000 due January 31, 2013. The vendor did not retain an NSR on the concessions.





ii
Chimberos Property – The Company has a 100% interest in mineral concessions acquired by staking and purchasing concessions at government auction.


93
 
 SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


6.
EXPLORATION AND EVALUATION ASSETS (CONTINUED)





CHILE (CONTINUED)





iii.
INCA Property – As described below, the Company has a 100% interest in mineral concessions acquired by staking, purchase at government auction, and purchase and option agreements:





Araya Option – The Company acquired a 100% interest in mineral interests (the Providencia Mine concessions situated within the greater INCA project area) for consideration of option payments totaling U.S. $300,000 (paid).  A 1% NSR retained by the vendor for a period of 20 years.  The Company has the option to buyout the NSR at any time for U.S. $500,000.





Rojas Option/Purchase – The Company acquired a 100% interest in mineral concessions for consideration of U.S. $ 300,000 (paid).





iv.
Espejismo Prospects– The Company has a 100% interest in mineral concessions acquired by staking and purchasing concessions at government auction.  The property is inactive and no exploration is planned until additional concessions are acquired, consequently the interest was written down at December 31, 2011 to a nominal value of $1,000.





v.
Miscellaneous Property Interests- The Company holds mineral concessions for possible future evaluation.  The mineral concessions are inactive and no exploration is currently planned, consequently the mineral concessions were written down at December 31, 2011 to a nominal value of $1,000.





BOLIVIA





The Eskapa, El Desierto and Santa Isabel properties in Bolivia have been on "care and maintenance" status since the Company suspended its exploration activities in Bolivia in 2009.




i.
Eskapa Property – The Company has a 99% interest in mineral concessions owned by Empresa Minera El Roble S.A. (“El Roble S.A.”), a company controlled by a Bolivian national, Patricio Kyllmann, a former director of the Company.  Emibol earned a 99% interest in any mining operations that may be established on the concessions pursuant to an agreement dated April 16, 1996, and as amended November 23, 1998 with El Roble S.A.   The property is subject to a 0.06% NSR and to a U.S. $2,000,000 cash royalty, to be paid out of production on the property in eight equal quarterly payments of U.S. $250,000 beginning after the ninth month of continuous commercial mining operations on the property.  The property is inactive and consequently the interest was written down at December 31, 2011 to a nominal value of $1,000.





ii.
El Desierto Property - The Company has a 99% interest in mineral concessions owned by El Roble S.A.  Emibol earned a 99% interest in any mining operations which may be established on the concessions pursuant to an agreement dated April 16, 1996 and as amended November 23, 1998 with El Roble S.A.  The property is subject to an NSR of 0.6%.  The property is inactive and consequently the interest was written down at December 31, 2011 to a nominal value of $1,000.




94





SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010


(EXPRESSED IN CANADIAN DOLLARS)





6.
EXPLORATION AND EVALUATION ASSETS (CONTINUED)





BOLIVIA (CONTINUED)




iii.
Santa Isabel Property – The Company has an interest in 1,803 hectares of mineral concessions covering a portion of the Goya I and El Bonete concessions pursuant to an agreement between Corporation Minera de Bolivia (“Comibol”) and the Company’s Bolivian subsidiary, Samex S.A.  Comibol owns the Goya I and Bonete concessions and pays the annual patents on these concessions.  The concessions are subject to a royalty payable to Comibol, equal to 5.5% of net positive cash flow until recovery of capital investment and thereafter 16% of net positive cash flow.  The concessions are also subject to a 1.2% Net Profits interest based on Samex S.A.’s net profits interest in the property.  Subsequent to 1998, the Company suspended its activities on the property due to certain legal proceedings between Comibol and a third party.  Comibol confirmed that a 10 hectare and a 24 hectare portion of the property was subject to a claim by a third party.  Samex S.A. advised Comibol that it considered Comibol to be in default of its obligations under the Comibol Agreement because of the dispute, but agreed to await the results of legal proceedings before taking further action.  Issues concerning the Agreement between Comibol and Samex S.A. have not yet been resolved.  The property is inactive and consequently the interest was written down at December 31, 2011 to a nominal value of $1,000.





7.
INCOME TAX EXPENSE AND DEFERRED TAX ASSETS AND LIABILITIES





A reconciliation of the expected income tax recovery to the actual income tax recovery is as follows:





December 31,2011


2010Net loss

$
(3,845,201
)

$
(1,091,350
)Statutory tax rate


26.5
%


28.5
%Expected income tax recovery at the statutory tax rate

$
(1,018,978
)

$
(311,035
)Non-deductible items and other


1,056,303



(76,825
)Effect of change in tax rates


(65,304
)


107,214Change in valuation allowance


27,979



280,646Income tax recovery

$
-


$
-




95


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


7.
INCOME TAX EXPENSE AND DEFERRED TAX ASSETS AND LIABILITIES (CONTINUED)





The Company has the following tax assets:





December 31,


December 31,


January 1,2011


2010


2010Non-capital loss carry-forwards

$
7,220,657


$
6,163,163


$
5,116,857Exploration and evaluation assets


7,301,242



8,454,488



8,077,033Equipment


173,304



166,419



160,291Cumulative eligible capital


2,343



2,343



2,343$
14,697,546


$
14,786,413


$
13,356,524





The tax pools relating to these deductible temporary differences expire as follows:





Canadiannon-capitallosses2014

$
560,2142015


566,5482026


719,6702027


2,0842028


877,9912029


718,7012030


787,8002031


584,858$
4,817,866





Chilean non-capital losses of $2,402,791, Canadian resource deductions of $5,597,594, Chilean resource deductions of $1,703,648 and other tax pools of $175,647 can be carried forward indefinitely.





96


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


8.
SHARE CAPITAL





Authorized share capital




Unlimited number of common shares without par value.




Unlimited number of Preferred Shares - In addition to common shares, the Company’s authorized share capital includes preferred shares without par value, none of which are issued.  The board of directors is authorized, without further action by the shareholders, to issue preferred shares in one or more series and to set the number of shares constituting any such series and the designation, rights, privileges, restrictions and conditions attaching to the shares of such series including dividend rights and rates, redemption provisions (including sinking fund provisions), rights of conversion or exchange, liquidation preferences and voting rights, if any.  The preferred shares as a class are entitled to priority over the common shares if the board of directors decides to pay any dividends, and, if the Company is dissolved, liquidated or wound up, the preferred shares are entitled as a class to priority in respect of return of capital. Except as required by law or the provisions of any designated series of preferred shares, the holders of preferred shares as a class is not entitled to receive notice of, attend or vote at any meeting of the Company’s shareholders.




Warrants


Balance

Dec. 31,

2009

Issued/

(Exercised)

Balance

Dec. 31,

2010

Issued/

(Exercised)

(Expired)

Balance

Dec. 31

2011

Exercise

Price

Expiry Date1,744,000


—


1,744,000


(1,372,500
)

(371,500
)

—

$
0.78


Feb. 13, 20111,282,500


—


1,282,500


(1,282,500
)

—


—

$
0.70


Apr. 15, 20112,871,250


—


2,871,250


(2,250,000
)

—


621,250

$
1.00


Mar. 16, 2012-


1,823,668


1,823,668


—


—


1,823,668

$
0.35


Jul. 8, 20125,565,500


(1,380,000
)

4,185,500


(1,536,000
)

—


2,649,500

$
0.20


Mar. 24, 2014500,000


—


500,000


(500,000
)

—


—

$
0.30


Jun. 29, 2014-


17,583,720


17,583,720


—


—


17,583,720

$
0.70


Nov. 1, 201211,963,250


18,027,388


29,990,638


(6,941,000
)

(371,500
)

22,678,138




As at December 31, 2011, the weighted average remaining life of the share purchase warrants is 0.95 years and the weighted average exercise price is $0.58.





During the year ended December 31, 2011, the Company extended the term of 2,871,250 warrants at $1.00 per share by one additional year from March 16, 2011 to March 16, 2012.  This resulted in an incremental increase in the fair value of the warrants of $455,868 that was charged to deficit.




97


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


8.
SHARE CAPITAL (CONTINUED)





Stock options




The Company maintains a “rolling” incentive stock option plan (the “Plan”) which authorizes the issuance of common shares to qualified option holders under the Plan.  The Plan, which was approved by shareholders at the Annual General Meeting held on June 7, 2011, authorizes the Board of Directors to grant options to purchase common shares of the Company to any person who is an employee, director, officer, or consultant for the Company or one of its subsidiaries and who is not otherwise prevented from receiving the Option under the terms of applicable policy of the TSX-V, or a company which is owned by one or more such individuals (an “Eligible Person”).  The maximum number of Common Shares which may be reserved for issuance under the Plan is 10% of the Common Shares outstanding at the time of the grant (on a non-diluted basis) less the aggregate number of Common Shares reserved for issuance under any other existing stock options or similar share compensation arrangement to persons who are eligible to receive options under the Plan.  The maximum number which may be reserved for issuance to any one person under the Plan is 5% (unless otherwise approved by a majority of disinterested shareholders, which approval has not been sought or granted).  The Board is entitled, subject to the requirements of applicable TSX-V policy, to set the exercise price of each option (provided it is greater than the minimum prescribed under TSX-V Policy), the term during which it may be exercised (to a maximum of 10 years) and any vesting provisions as they may deem appropriate and as are in compliance with TSX-V policy.  Any options granted under the Plan are exercisable only while the holder remains an Eligible Person or the time period determined by the Board after ceasing to be an Eligible Person, and are not assignable or transferable other than by will or the laws of descent and distribution.


98
 
 SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


8.
SHARE CAPITAL (CONTINUED)




Balance Dec. 31, 2009

Granted (Exercised/ (Expired or (Cancelled)

Balance Dec. 31, 2010

Granted (Exercised/ (Expired or (Cancelled)

Balance Dec. 31 2011

Exercise Price

Expiry Date50,000


—


50,000


—


50,000

$
0.80


Sep. 24, 201260,000


—


60,000


—


60,000

$
0.70


Dec. 20, 2012150,000


(150,000
)

—


—


—

$
0.65


May 1, 201360,000


—


60,000


—


60,000

$
0.20


Jan. 15, 2014-


110,000


110,000


—


110,000

$
0.35


Jan. 29, 20151,955,000


—


1,955,000


—


1,955,000

$
0.40


Apr. 20, 2015-


430,000


430,000


—


430,000

$
0.35


Sep. 16, 20151,640,000


—


1,640,000


—


1,640,000

$
0.85


May 2, 2016-


—


—


100,000


100,000

$
1.40


Sep. 6, 2016-


—


—


100,000


100,000

$
0.70


Dec. 7, 20161,170,000


—


1,170,000


—


1,170,000

$
0.84


Feb. 23, 20173,555,000


—


3,555,000


(300,000
)

3,255,000

$
0.20


Sep. 4, 2019-


—


—


200,000


200,000

$
0.70


Jan 6, 2021-


—


—


2,425,000


2,425,000

$
1.50


May 2, 20218,640,000


390,000


9,030,000


2,525,000


11,555,000


As at December 31, 2011, the weighted average remaining contractual life of the options is 6.24 years and the weighted average exercise price is $0.70.




Stock-Based Compensation – During the year ended December 31, 2011, the Company granted stock options to consultants, employees, directors and officers on a total of 2,825,000 shares at $0.70 to $1.50 per share with fair values on the grant dates of $3,400,912 of which $2,626,421 was expensed in the statement of comprehensive loss in the category “Stock-Based Compensation” and of which $774,491 was capitalized to the Los Zorros Property exploration and evaluation assets.  The following assumptions were used for the Black-Scholes valuations of the stock options granted during the 2011:  Expected dividend rate – 0%; Expected stock price volatility – 114% to 135%; Risk-free interest rate – 1.43% to 3.38%; Expected life of options – 5 to 10 years. During the year ended December 31, 2011, stock options to acquire 300,000 shares were excised for proceeds of $60,000 and stock-based compensation of $43,540 relating to the options was transferred from the stock-based payment reserve to share capital.





99





SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010


(EXPRESSED IN CANADIAN DOLLARS)





9.
RELATED PARTY TRANSACTIONS




Professional fees - Allen D. Leschert, one of our directors, provides legal services to us through Leschert & Company Law Corporation.  Leschert & Company charged $65,982 for legal services during the year ended December 31, 2011 compared to $28,387 for the year ended December 31, 2010. During the year ended December 31, 2011, Malcolm Fraser, one of our directors, charged $2,800 for conducting research and consulting for the Company.




Key management personnel compensation – During the year ended December 31, 2011, employees who are also directors or officers of the Company were paid salaries totaling $508,431 (2010 - $432,091), a $146,631 portion of which was capitalized to exploration and evaluation assets (2010 - $137,791). Also during the year ended December 31, 2011, the Company paid bonuses totalling $185,000 (2010 - $34,600) to employees who are also directors or officers of the Company as follows:  $150,000 to Jeffrey Dahl, President and Chief Executive Officer; $20,000 to Robert Kell, Vice President-Exploration; $10,000 to Larry McLean, Vice President–Operations and Chief Financial Officer; and $5,000 to Brenda McLean, the Corporate Secretary of the Company.




During the year ended December 31, 2011, the Company granted stock options to directors and officers on a total of 1,900,000 shares at $1.50 per share with a fair value on the grant date of $2,430,335 (2010 - $Nil).





10.
FINANCIAL RISK MANAGEMENT




Financial Risk Management - The Company is exposed in varying degrees to a variety of financial instrument related risks.





Credit Risk – Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its bank accounts.  The Company’s bank accounts are held with a major bank in Canada, a major bank in Chile which is a subsidiary of a major Canadian bank, and a bank in Bolivia.  The Company’s cash is held by the major bank in Canada, and specific amounts are transferred to the bank in Chile or Bolivia as required to fund the Company’s budgeted exploration activities in these countries.  As the majority of the Company’s cash is held by one bank in Canada, there is a concentration of credit risk.  This risk is managed by using a major bank that is a high credit quality financial institution as determined by rating agencies.





Currency Risk - The Company operates in Canada, Chile and Bolivia and is consequently exposed to foreign exchange risk arising from transactions denominated in foreign currency.  The Company’s functional currency is the Canadian dollar, and it has obligations and commitments in other currencies including mainly Chilean Pesos, and to a lesser degree, U.S. dollars, and Bolivian Bolivianos.  Fluctuations in foreign currency exchange rates may affect the Company’s results of operations and the value of the Company’s foreign assets.  The Company manages currency risk by closely monitoring relevant exchange rates and when possible, executes currency exchange transactions at times when exchange rates are most advantageous for the Company.  The Company does not use hedging to manage its currency risk.







SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


10.
FINANCIAL RISK MANAGEMENT (CONTINUED)




Foreign Exchange risk - The following is an analysis of Canadian dollar equivalent of financial assets and liabilities that are denominated in Chilean pesos:





December 31,2011


2011Cash

$
201,017


$
97,817Accounts receivable


4,110



3,100Accounts payable


(8,520
)


(9,760
)$
196,607


$
91,157





As at December 31, 2011, a 10% change in the Chilean peso to Canadian dollar exchange rate would impact the Company’s net loss by $19,661.





Liquidity Risk - Liquidity risk arises through the excess of financial obligations over available financial assets due at any point in time. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point in time. The Company achieves this by maintaining sufficient cash and gold and silver bullion holdings.





Historically, the Company's sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.





Price Risk – The Company is exposed to price risk with respect to commodity prices, particularly gold, silver and copper. The Company monitors commodity prices to determine the appropriate course of action to be taken by the Company.




Interest Rate Risk - Interest rate risk is the risk that future cash flows will fluctuate as a result of changes in market interest rates.  The Company is not exposed to significant interest rate risk.





Capital Management - The Company identifies capital as cash and share capital.  The Company raises capital through private placement and public share offerings.  Capital is managed in a manner consistent with the risk criteria and policies provided by the board of directors and followed by management.  All sources of financing are analyzed by management and approved by the board of directors. To maintain or adjust its capital structure, the Company may issue new shares, acquire or dispose of assets or adjust the amount of cash.





The Company’s primary objectives when managing capital is to safeguard and maintain the Company’s financial resources for continued operations and to fund expenditure programs to further advance mineral interests.  The Company is able to scale its expenditure programs and the use of capital to address market conditions by reducing expenditures and the scope of operations during periods of commodity pricing decline and economic downturn.  There are no externally imposed capital restrictions.




101


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


10.
FINANCIAL RISK MANAGEMENT (CONTINUED)




Classification of financial instruments-Financial assets included in the statements of financial position are as follows:





December 31,2011


2010Cash

$
3,991,264


$
4,870,337Loans and receivables Other receivables


119,538



32,551Financial assets classified at fair value Gold and silver bullion


5,807,372



4,107,333$
9,918,174


$
9,010,221





Financial liabilities included in the statements of financial position are as follows:





December 31,2011

2010Financial liabilitiesTrade payables and accrued liabilities

$
89,211


$
91,890





Fair value -The fair value of the Company’s financial assets and liabilities approximates the carrying amount.





Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:





●
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities (cash and gold and silver bullion are Level 1 financial instruments);


●
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and


●
Level 3 – Inputs that are not based on observable market data.




102




SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


10.
FINANCIAL RISK MANAGEMENT (CONTINUED)




The following is an analysis of the Company’s financial assets measured at fair value as at December 31, 2011 and 2010:




As at December 31, 2011Level 1


Level 2


Level 3Cash

$
3,991,264


$
—


$
—Gold and silver bullion


5,807,372



—



—$
9,798,636


$
—


$
—
  As at December 31, 2010Level 1


Level 2


Level 3Cash

$
4,870,337


$
—


$
—Gold and silver bullion


4,107,333



—



—$
8,977,670


$
—


$
—


103





SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010


(EXPRESSED IN CANADIAN DOLLARS)





11.
SEGMENTED INFORMATION




The Company determines its segments by geography. The Company has operations and incurs costs associated with assets in two different geographic locations: Canada and South America.




The Company’s assets are located in the following geographic locations:




As at December 31, 2011Canada

South America

TotalEquipment

$
20,498


$
90,419


$
110,917Exploration and evaluation assets

$
—


$
13,625,896


$
13,625,896As at December 31, 2010Canada

South America

TotalEquipment

$
14,456


$
41,989


$
56,445Exploration and evaluation assets

$
—


$
10,299,789


$
10,299,789





The additions to the Company’s equipment and exploration and evaluation assets were located in the following geographic locations:




As at December 31, 2011Canada

South America

TotalEquipment

$
12,926


$
88,583


$
101,509Exploration and evaluation assets


—



3,326,107



3,326,107$
12,926


$
3,414,690


$
3,427,616As at December 31, 2010Canada

South America

TotalEquipment

$
3,296


$
26,723


$
30,019Exploration and evaluation assets


—



1,277,836



1,277,836$
3,296


$
1,304,559


$
1,307,855
  104


SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


11.
SEGMENTED INFORMATION (CONTINUED)




The Company’s net and comprehensive losses were generated in the following geographic locations:





As at December 31, 2011Canada

South America

TotalAmortization

$
6,884


$
40,153


$
47,037Foreign exchange


-



136,618



136,618Mineral interests, administrationand investigation costs


-



287,369



287,369Salaries


608,569



-



608,569Stock-based compensation


2,626,421



-



2,626,421Impairment of exploration andevaluation assets


-



19,142



19,142General and administration


33,606



86,439



120,045$
3,275,480


$
569,721


$
3,845,201As at December 31, 2010Canada

South America

TotalAmortization

$
6,128


$
32,641


$
38,769Foreign exchange


-



(10,310
)


(10,310
)Mineral interests, administrationand investigation costs


-



208,939



208,939Salaries


411,408



-



411,408Stock-based compensation


126,535



-



126,535Impairment of exploration andevaluation assets


-



37,136



37,136General and administration


195,418



83,455



278,873$
739,489


$
351,861


$
1,091,350




105


SAMEX MINING CORP.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


12.
TRANSITION TO IFRS




As result of the Accounting Standards Board of Canada’s decision to adopt IFRS for publicly accountable entities for financial reporting periods beginning on or after January 1, 2011, the Company has adopted IFRS in these financial statements making them the first annual financial statements prepared using IFRS. The Company previously applied the available standards under previous Canadian GAAP that were issued by the Accounting Standards Board of Canada.




As required by IFRS 1 “First-time Adoption of International Financial Reporting Standards”, January 1, 2010 has been considered to be the date of transition to IFRS by the Company. Therefore, the comparative figures that were previously  reported under previous Canadian GAAP have been restated in accordance with IFRS.




Exemptions applied




The Company has applied the following optional transition exemptions to full retrospective application of IFRS:




●
IFRS 3 “Business Combinations” has not been applied to acquisitions of subsidiaries or of interests in associates and joint ventures that occurred before January 1, 2010.





●
IFRS 2 “Share-based Payment” has not been applied to equity instruments that were granted on or before November 7, 2002, or equity instruments that were granted subsequent to November 7, 2002 and vested before the later of the date of transition to IFRS and January 1, 2005.  The Company has elected not to apply IFRS 2 to awards that vested prior to January 1, 2010, which have been accounted for in accordance with Canadian GAAP.




●
IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” has been applied prospectively to all provisions for restoration and environmental obligations that are within the scope of International Financial Reporting Interpretations Committee (“IFRIC”) “Changes in Existing Decommissioning, Restoration and Similar Liabilities”.  The Company has:




o
re-measured the liabilities as at January 1, 2010 in accordance with IAS 37;




o
estimated the amount that would have been included in the cost of the related asset when the liability first arose, by discounting the liability to that date using its best estimate of the historical risk-adjusted discount rates that would have applied for that liability over the intervening period; and




o
calculated the accumulated depreciation on that amount, as at January 1, 2010, on the basis of the current estimate of the useful life of the asset, using the depreciation policy adopted by the entity.




●
The Company has applied the transitional provision in IFRIC 4 “Determining whether an Arrangement contains a Lease” and has assessed all arrangements as at January 1, 2010.




106




SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)


12.
TRANSITION TO IFRS (CONTINUED)




Reconciliation of assets




As at December 31, 2010


As at January 1, 2010Canadian


Effect of





Canadian


Effect ofGAAP


Transition


IFRS


GAAP


Transition


IFRSASSETSCURRENT ASSETSCash

$
4,870,337


$
-


$
4,870,337


$
1,020,863


$
-


$
1,020,863Gold and silver bullion


4,107,333



-



4,107,333



757



-



757Accounts receivable


32,551



-



32,551



39,983



-



39,9839,010,221



-



9,010,221



1,061,603



-



1,061,603NON-CURRENT ASSETSEquipment


56,445



-



56,445



70,482



-



70,482Exploration and evaluation assets


10,299,789



-



10,299,789



9,021,953



-



9,021,95310,356,234



-



10,356,234



9,092,435



-



9,092,435$
19,366,455


$
-


$
19,366,455


$
10,154,038


$
-


$
10,154,038





107




SAMEX MINING CORP.
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010
 (EXPRESSED IN CANADIAN DOLLARS)




12.
TRANSITION TO IFRS (CONTINUED)




Reconciliation of liabilities





As at December 31, 2010


As at January 1, 2010Canadian GAAP


Effect of Transition


IFRS


Canadian GAAP


Effect of Transition


IFRSLIABILITIESCURRENT LIABILITIESTrade payables and accrued liabilities

$
91,890


$
—


$
91,890


$
73,718


$
—


$
73,718NON-CURRENT LIABILITIESFinance lease obligations


—



—



—



—



—



—Deferred tax liabilities


—



—



—



—



—



—Provision for restoration and environmental obligations


—



—



—



—



—



——



—



—



—



—



—91,890



—



91,890



73,718



—



73,718SHAREHOLDERS' EQUITYShare capital


44,702,328



—



44,702,328



34,543,268



—



34,543,268Contributed
 surplus (Notes 12(b), (c))


5,094,793



(5,094,793
)


—



4,968,258



4,968,258
)


—Reserve (Notes 12(b), (c))


109,275



3,158,054



3,267,329



463



3,196,076



3,196,539Deficit (Note 12(b))


(30,631,831
)


1,936,739



(28,695,092
)


(29,431,669
)


1,772,182



(27,659,487
)19,274,565



—



19,274,565



10,080,320



—



10,080,320$
19,366,455


$
—


$
19,366,455


$
10,154,038


$
—


$
10,154,038


108


12.
TRANSITION TO IFRS (CONTINUED)





Reconciliation of loss and comprehensive loss for the year ended December 31, 2010





Canadian


Effect ofGAAP


Transition


IFRSExpensesAmortization

$
38,769


$
-


$
38,769Consulting fees  (Note 12(b))


71,380



-



71,380Foreign exchange (gain)


(10,310
)


-



(10,310
)Interest and bank charges


5,169



-



5,169Mineral interests administrationand investigation costs


208,939



-



208,939Office and miscellaneous


102,474



-



102,474Professional fees


125,029



-



125,029Regulatory fees


55,150



-



55,150Salaries and benefits  (Note 12(b))


487,938



-



487,938Stock-based compensation (Note 12(b))


-



-



-Transfer agent fees


11,906



-



11,906Travel and promotion


66,582



-



66,5821,163,026



-



1,163,026Other itemsImpairment of exploration and evaluation asset


37,136



-



37,136Gain on gold and silver bullion


-



(108,812
)


(108,812
)37,136



(108,812
)


(71,676
)Net loss for the year

$
1,200,162


$
(108,812
)

$
1,091,350Other comprehensive loss (income)Unrealized gain on short-term investments


(108,812
)


108,812



-Total comprehensive lossfor the year

$
1,091,350


$
-


$
1,091,350Loss per shareBasic and diluted

$
(0.01
)

$
-


$
(0.01
)


109





12.
TRANSITION TO IFRS (CONTINUED)





Notes to reconciliations





a.
Functional and presentation currency





The Company has determined that the functional currency of the entities is the Canadian dollar and the presentation currency of the parent Company (the reporting entity) is the Canadian dollar.  IFRS requires that functional currency be determined in accordance with primary and secondary indicators in International Accounting Standards 21 “The Effects of Changes in Foreign Exchange Rates”.  In determining the functional currency, various factors were considered including the following: the functional currency of the parent company, SAMEX Mining Corp. in Canada is the Canadian dollar; the parent Company operates in Canada and the Canadian dollar is the currency in which funds from financing activities are generated by the parent Company which raises funding for the activities of the Company and its foreign subsidiaries; all activities of the foreign subsidiaries are carried out as an extension of the reporting entity (the parent Company) under the exclusive direction and control of the parent Company; the parent Company provides all the funding for the activities of its foreign subsidiaries which are in the  exploration stage and do not have any properties in production and therefore do not generate any revenue from operations to fund their own activities.  Based on these factors, we determined that the functional currency of the Company’s entities is the Canadian dollar.





Each of the Company’s entities use the currency of the primary economic environment in which that entity operates.  The Chilean subsidiary, Minera Samex Chile S.A., uses the Chilean peso for its day to day operations and its financial statements are expressed in Chilean pesos.  The subsidiaries in Bolivia use the Bolivian boliviano and the United States dollar and their financial statements are expressed in both bolivianos and United States dollars.  At the end of each reporting period, the results and financial position in the financial statements of each of the foreign subsidiaries are translated into the functional currency, the Canadian dollar, and presented in the consolidated financial statements of the parent Company in Canadian dollars.




Under IFRS, the results different from the presentation currency are translated into the functional currency as follows:




-
assets and liabilities are translated at the closing exchange rates at the date of the financial period end;




-
income and expenses are translated at average exchange rates for the period; and




-
Exchange differences arising on translation of foreign operations are transferred directly to the Company’s foreign currency translation reserve in the statement of comprehensive income and are recognized in the profit or loss in the period in which the operation is disposed.




The Company has determined that no adjustment was required to the balances reported in its Canadian GAAP financial statements upon the transition to IFRS on account of the functional and presentation currencies.




110





12.
TRANSITION TO IFRS (CONTINUED)





Notes to reconciliations (Continued)





b.
Share-based payments




The Company grants stock options that have a graded vesting schedule.  Under Canadian GAAP, the Company accounted for grants of options with graded vesting as a single award and determined the fair value using the average life of the options granted.  Stock-based compensation was recognized on a straight-line basis over the total vesting period.  Under IFRS, the Company treats each installment as its own award.  Therefore, each installment is measured and recognized separately.




On transition to IFRS the Company elected to change its accounting policy for the treatment of share-based payments whereby amounts recorded for expired unexercised stock options are transferred to deficit. Previously, the Company’s Canadian GAAP policy was to leave such amounts in contributed surplus. As a result of this application, the deficit balance as at January 1, 2010 decreased by $1,772,182 and as at December 31, 2010 decreased by $1,936,739.




c.
Reserves




Under Canadian GAAP, amounts recorded in relation to the fair value of stock options granted and warrants issued were recorded to contributed surplus.  Under IFRS, these amounts have been reclassified as reserves. The share-based payment reserve records the fair value of options and warrants recorded in accordance with IFRS 2 “Share-Based Payments” until such time that the stock options or warrants are exercised at which time the corresponding amount will be transferred to share capital, or the time that the stock options or warrants expire or are cancelled at which time the corresponding amount will be transferred to deficit.




d.
Interest income




Under Canadian GAAP, the Company classified interest income as operating activities.  Under IFRS, interest income has been reclassified as an investing activity.




111


ITEM 19. EXHIBITS.




The following exhibits are filed as part of this Annual Report:




1.1.

   

   *Altered Memorandum of SAMEX (*previously filed as exhibit to Form 20F Annual
    Report for the period ended November 30, 1995 (our “1995 Annual Report” on Form 20F filed with the SEC);1.2.

   

   *Change of Name Certificate for SAMEX (*previously filed with our 1995 Annual Report on Form 20F filed with the SEC);1.3.

   

   *Altered Articles of SAMEX (*previously filed as exhibit to Form 20F Annual Report for the period ended November 30, 1998 (our “1998 Annual Report” on Form 20F filed with the SEC);1.4.

   

   *Altered Memorandum of SAMEX respecting the increase of authorized share capital (*previously filed with our 1998 Annual Report on Form 20F filed with the SEC);1.5.

   

   *Form of Notice of Articles of SAMEX issued by the Registrar of Companies for British Columbia on February 11, 2005 (*previously filed with our 2004 Annual Report on Form 20F filed with the SEC);1.6.

   

   *New Articles of SAMEX effective June 13, 2005 (*previously filed with our 2005 Annual Report on Form 20F filed with the SEC);1.7.

   

   *Form of Notice of Articles of SAMEX issued by the Registrar of Companies for British Columbia on June 13, 2005 (*previously filed with our 2005 Annual Report on Form 20F filed with the SEC);4.1.

   

   Unilateral Option Contract dated June 28, 2011 between Cristian Marcelo Aravena Caullan and our subsidiary Minera Samex Chile S. A. ("the Aravena Option").4.2.

   

   Form of employment agreements dated effective October 1, 2011 entered into between the Company and each of Jeffrey Dahl, Larry McLean, Brenda McLean and Phil
    Southam;4.3.

   

   Consulting agreement dated effective October 1, 2011 entered into between the Company and Robert
    Kell;8.1.

   

   Our subsidiaries. See also Item 4. A. History and Development Of The Company;12.1.

   

   Certification of Chief Executive Officer under Rule 13a-4(a);12.2.

   

   Certification of Chief Financial Officer under Rule 13a-4(a);13.1.

   

   Sarbanes Oxley 906 Certification of Chief Executive Officer;13.2.

   

   Sarbanes Oxley 906 Certification of Chief Financial Officer









The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.




Date: May
 30, 2012





SAMEX Mining Corp.




“Jeffrey P. Dahl”

“Larry D. McLean”Jeffrey P. Dahl, Chief Executive Officer

Larry D. McLean, Chief Financial Officer




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