---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F /AAmendment No. 1

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

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

For the fiscal year ended January 31, 2007

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

For the transition period from ___________________ to
___________________

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

Date of event requiring this shell company
report______________

Commission File Number 000-09266

AVINO SILVER & GOLD MINES LTD.(Exact name of Company as specified in its charter)

A CORPORATION FORMED UNDER THE LAWS OF BRITISH COLUMBIA,
CANADA(Jurisdiction of Incorporation or Organization)

455 Granville Street, Suite 400Vancouver,
British Columbia V6C 1T1, Canada(Address of principal
executive offices)

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: None

The number of outstanding Common Shares as of January 31,
2007 was 20,584,727.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.[ 
 ] Yes   [X] No

If this report is an annual 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. [   ]
Yes   [X] No

Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes   [  
] 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. (Check on): Large Accelerated File [  
]        Accelerated Filer [ 
 ]        Non-Accelerated Filer [X]

Indicate by check mark which financial statement item the
registrant has elected to follow. Item 17 [X]    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).
Yes [   ]   No [X]

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the Company has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the

  Securities Exchange Act of 1934 subsequent to the distribution of securities
  under a plan confirmed by a court. NOT APPLICABLE

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TABLE OF CONTENTS

|Introduction                                                                                                     | 3        
|---------------------------------------------------------------------------------------------------------------- | ---------
|Currency                                                                                                         | 3        
|Forward-looking Statements                                                                                       | 3        
|Cautionary Note to United States
      Investors Concerning Estimate of Measured and Indicated Mineral Resources | 3        
|Glossary of Mining Terms                                                                                         | 4        
|Part I                                                                                                           |          
|                                                                                                                 | Item 1.  
|                                                                                                                 | Item 2.  
|                                                                                                                 | Item 3.  
|                                                                                                                 | Item 4.  
|                                                                                                                 | Item 5.  
|                                                                                                                 | Item 6.  
|                                                                                                                 | Item 7.  
|                                                                                                                 | Item 8.  
|                                                                                                                 | Item 9.  
|                                                                                                                 | Item 10. 
|                                                                                                                 | Item 11. 
|                                                                                                                 | Item 12. 
|Part II                                                                                                          |          
|                                                                                                                 | Item 13. 
|                                                                                                                 | Item 14. 
|                                                                                                                 | Item 15. 
|                                                                                                                 | Item 16A.
|                                                                                                                 | Item 16B.
|                                                                                                                 | Item 16C.
|                                                                                                                 | Item 16D.
|                                                                                                                 | Item 16E.
|Part III                                                                                                         |          
|                                                                                                                 | Item 17. 
|                                                                                                                 | Item 18. 
|                                                                                                                 | Item 19. 

2

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Introduction

Avino
Silver & Gold Mines Ltd., which we refer to as the "Company", was
incorporated by Memorandum of Association under the laws of the Province of
British Columbia on May 15, 1969, and on August 22, 1969, by virtue of an
amalgamation with Ace Mining Company Ltd., became a public company whose common
shares are registered under the United States Securities Exchange Act of
1934, as amended, and changed its name to Avino Mines & Resources
Limited. On April 12, 1995, the Company changed its corporate name to
International Avino Mines Ltd. and affected a reverse stock split of one common
share for every five common shares outstanding. On August 29, 1997, the Company
changed its corporate name to Avino Silver & Gold Mines Ltd. to better
reflect the business of the Company of exploring for and mining silver and gold.
Our principal executive office is located at Suite 400, 455 Granville Street,
Vancouver, British Columbia V6C 1T1, Canada.

In
this annual report on Form 20-F, which we refer to as the "Annual Report",
except as otherwise indicated or as the context otherwise requires, the
"Company", "we" or "us" refers to Avino Silver & Gold Mines Ltd.

This
  Form 20-F/A is being filed by Avino Silver & Gold Mines Ltd., as Amendment
  No. 1 to its annual report on Form 20-F filed on July 30, 2007. The purpose
  of this Amendment No. 1 is to include the report of the Companys prior
  auditor. Except to reflect the changes described above, this Amendment No. 1
  does not, and does not purport to, modify or update the disclosure contained
  in the annual report on Form 20-F.

You
should rely only on the information contained in this Annual Report. We have not
authorized anyone to provide you with information that is different. The
information in this Annual Report may only be accurate on the date of this
Annual Report or on or as at any other date provided with respect to specific
information.

Currency

Unless
we otherwise indicate in this Annual Report, all references to "Canadian
Dollars", "CDN$" or "$" are to the lawful currency of Canada and all references
to "U.S. Dollars" or "US$" are to the lawful currency of the United States

Forward-looking Statements

The
following discussion contains forward-looking statements within the meaning of
the United States Private Securities Legislation Reform Act of 1995concerning the Company's plans for its mineral properties which may affect
the future operating results and financial position. Such statements are subject
to risks and uncertainties that could cause our actual results and financial
position to differ materially from those anticipated in the forward-looking
statements. These factors include, but are not limited to, the factors set forth
in the sections entitled "Risk Factors" in Item 3.D., and "Operating and
Financial Review and Prospects" in Item 5. Statements concerning reserves and
resources may also be deemed to constitute forward-looking statements to the
extent that such statements reflect the conclusion that deposits may be
economically exploitable. Any statements that express or involve discussions
with respect to predictions, expectations, plans, projections, objectives,
assumptions or future events or performance (often, but not always, using words
or phrases such as "expects", "does not expect", "is expected", "anticipates",
"does not anticipate", "plans", "estimates", or "intends", or stating that
certain actions, events or results "may", "could", "would", or "will" be taken,
occur or be achieved) are not statements of historical fact and may be
"forward-looking statements".

Cautionary Note to United States Investors Concerning
Estimate of Measured and Indicated Mineral Resources

We
advise United States investors that although the terms "measured resources" and
"indicated resources" are recognized and required by Canadian regulations, the
United States Securities and Exchange Commission, referred to as the "SEC", does
not recognize them. United States investors are cautioned not to assume that all or any part of our mineral resources in these
categories will ever be converted into mineral reserves.

3

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GLOSSARY OF MINING TERMS

|agglomeration           | Cementing crushed or ground rock particles together into
      larger pieces, usually to make them easier to handle; used frequently in
      heap-leaching operations.                                                                                                                                                                                                                                                                                       
|----------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|anomalous               | A value, or values, in which the amplitude is
      statistically between that of a low contrast anomaly and a high contrast
      anomaly in a given data set.                                                                                                                                                                                                                                                                                               
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|anomaly                 | Any concentration of metal noticeably above or below the
      average background concentration.                                                                                                                                                                                                                                                                                                                                                              
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|assay                   | An analysis to determine the presence, absence or
      quantity of one or more components.                                                                                                                                                                                                                                                                                                                                                                   
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|breccia                 | A rock in which angular fragments are surrounded by a
      mass of finer-grained material.                                                                                                                                                                                                                                                                                                                                                                   
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Cretaceous              | The geologic period extending from 135 million to 65
      million years ago.                                                                                                                                                                                                                                                                                                                                                                                 
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|cubic meters or m3      | A metric measurement of volume, being a cube one meter in
      length on each side.                                                                                                                                                                                                                                                                                                                                                                          
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|cyanidation             | A method of extracting exposed gold or silver grains from
  crushed or ground ore by dissolving it in a weak cyanide solution.                                                                                                                                                                                                                                                                                                                                
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Diamond drill           | A rotary type of rock drill that cuts a core of rock that
      is recovered in long cylindrical sections, two centimeters or more in
      diameter.                                                                                                                                                                                                                                                                                                         
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|fault                   | A fracture in a rock where there has been displacement of
      the two sides.                                                                                                                                                                                                                                                                                                                                                                                
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|grade                   | The concentration of each ore metal in a rock sample,
      usually given as weight percent. Where extremely low concentrations are
      involved, the concentration may be given in grams per tonne (g/t or gpt)
      or ounces per ton (oz/t). The grade of an ore deposit is calculated, often
      using sophisticated statistical procedures, as an average of the grades of
    a very large number of samples collected from throughout the deposit.
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|heap leaching           | A process whereby valuable metals, usually gold and
      silver, are leached from a heap, or pad, of crushed ore by leaching
      solutions percolating down through the heap and collected from a sloping,
      impermeable liner below the pad.                                                                                                                                                                                                          
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|hectare or ha           | An area totaling 10,000 square meters.                                                                                                                                                                                                                                                                                                                                                                                                                        
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|highly anomalous        | An anomaly which is 50 to 100 times average background,
      i.e. it is statistically much greater in amplitude.                                                                                                                                                                                                                                                                                                                                             
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|lp induced polarization | A method of ground geophysics surveying employing an
      electrical current to determine indications of mineralization, also
      referred to as "IP".                                                                                                                                                                                                                                                                                                     
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|laterite                | A residual product of rock decay that is red in color and
  has a high content in the oxides of iron and hydroxide of aluminum.                                                                                                                                                                                                                                                                                                                               
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                               

4

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|mineral reserve                                              | The economically mineable part of a measured or indicated
      mineral resource demonstrated by at least a preliminary feasibility study.
      This study must include adequate information on mining, processing,
      metallurgical, economic and other relevant factors that demonstrate, at
      the time of the reporting, that economic extraction can be justified. A
      mineral reserve includes diluting materials and allowances for losses that
      may occur when the material is mined. Mineral resources are sub-divided in
      order of increasing confidence into "probable" and "proven" mineral
      reserves. A probable mineral reserve has a lower level of confidence than
      a proven mineral reserve. The term "mineral reserve" does not necessarily
      signify that extraction facilities are in place or operative or that all
      governmental approvals have been received. It does signify that there are
  reasonable expectations of such approvals.                                       
|------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineral resource                                             | The estimated quantity and grade of mineralization that
      is of potential economic merit. A resource estimate does not require
      specific mining, metallurgical, environmental, price and cost data, but
      the nature and continuity or mineralization must be understood. Mineral
      resources are sub-divided in order of increasing geological confidence
      into "inferred", "indicated", and "measured" categories. An inferred
      mineral resource has a lower level of confidence than that applied to an
      indicated mineral resource. An indicated mineral resource has a higher
      level of confidence than an inferred mineral resource, but has a lower
      level of confidence than a measured mineral resource. A mineral resource
      is a concentration or occurrence of natural, solid, inorganic or
      fossilized organic material in or on the earth's crust in such form and
      quantity and of such grade or quality that it has reasonable prospects for
      economic extraction.
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineralization                                               | Usually implies minerals of value occurring in rocks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|net smelter or NSR Royalty                                   | Payment of a percentage of net mining profits after
      deducting applicable smelter charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|oxide                                                        | A compound of oxygen and some other element.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|ore                                                          | A natural aggregate of one or more minerals which may be
      mined and sold at a profit, or from which some part may be profitably
      separated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|outcrop                                                      | An exposure of rock at the earth's surface.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|possible or inferred ore                                     | Term used to describe ore where the mineralization is
      believed to exist on the basis of some geological information, but the
      size, shape, grade, and tonnage are a matter of speculation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|prefeasibility study and
      preliminary feasibility study | Each means a comprehensive study of the viability of a
      mineral project that has advanced to a stage where mining method, in the
      case of underground mining, or the pit configuration, in the case of open
      pit mining, has been established, and which, if an effective method of
      mineral processing has been determined, includes a financial analysis
      based on reasonable assumptions of technical, engineering, operating and
      economic factors, and the evaluation of other relevant factors which are
      sufficient for a qualified person, acting reasonably, to determine if all
      or part of the mineral resource may be classified as a mineral reserve.                                                                                                                                                                                                                                                                                                                                     
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|probable mineral reserve                                     | The economically mineable part of an indicated, and in
      some circumstances, a measured mineral resource demonstrated by at least a
      prefeasibility study. This study must include adequate information on
      mining, processing, metallurgical, economic, and other relevant factors
      that demonstrate, at the time of reporting, that economic extraction can
      be justified.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

5

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|proven mineral reserve | The economically mineable part of a measured mineral
      resource demonstrated by at least a prefeasibility study. This study must
      include adequate information on mining, processing, metallurgical,
      economic, and other relevant factors that demonstrate, at the time of
      reporting, that economic extraction is justified. The term should be
      restricted to that part of the deposit where production planning is taking
      place and for which any variation in the estimate would not significantly
      affect potential economic viability.
|---------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|quartz                 | Silica or SiO2, a common constituent of veins,
      especially those containing gold and silver mineralization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|tailings               | Material rejected from a mill after most of the
      recoverable valuable minerals have been extracted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|ton                    | Imperial measurement of weight equivalent to 2,000
      pounds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|trench                 | A long, narrow excavation dug through overburden, or
      blasted out of rock, to expose a vein or ore structure.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|tonne                  | Metric measurement of weight equivalent to 1,000
      kilograms (or 2,204.6 pounds).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|veins                  | The mineral deposits that are found filling openings in
      rocks created by faults or replacing rocks on either side of faults.                                                                                                                                                                                                                                                                                                                                                                                                                                              

6

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Part I

Item 1. Identity of Directors, Senior Management and
Advisors

Not
applicable.

Item 2. Offer Statistics and Expected Timetable

Not
applicable.

Item 3. Key Information

**A.**     **Selected Financial Data**

The
selected historical financial information presented in the table below for each
of the years ended January 31, 2007, 2006, 2005, 2004 and 2003, is derived from
the audited financial statements of the Company. The audited financial
statements and notes for each year in the threeyears ended January 31,
2007, 2006 and 2005 are included in this Annual Report. The selected historical
financial information for each year ended January 31, 2004 and 2003, presented
in the table below are derived from financial statements of the Company that are
not included in this Annual Report. The selected financial information presented
below should be read in conjunction with the Company's financial statements and
the notes thereto (Item 17) and the Operating and Financial Review and Prospects
(Item 5) included elsewhere in this Annual Report.

The
selected financial data has been prepared in accordance with Canadian generally
accepted accounting principles, which we refer to as "Canadian GAAP". The
financial statements included in Item 17 in this Annual Report are also prepared
under Canadian GAAP. Included within these financial statements in Note 20 is a
reconciliation between Canadian GAAP and United States generally accepted
accounting principals, referred to as "US GAAP", which differ, among other
things, in respect to the recording of the investments in marketable securities,
deferred exploration expenditures and recognition of future income tax benefits
on renouncement of Canadian exploration expenditures to flow-through investors.

Canadian GAAP

Year Ended January 31,2007
      
      
      2006
      
      
      2005
      
      
      2004
      
      
      2003Summary of Operations:Revenue
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -Interest Income
      $
      430,231
      
      $
      46,073
      
      $
      41,999
      
      $
      8,299
      
      $
      197ExpensesOperating and Administrative
      
      4,014,734
      
      
      1,416,788
      
      
      506,010
      
      
      331,446
      
      
      147,091Write-down of mining Properties
      
      -
      
      
      103,342
      
      
      -
      
      
      -
      
      
      -Equity losses in Cia Minera Mexicanade Avino, S.A. de C.V.
      
      33,5811
      
      
      342,596
      
      
      -
      
      
      -
      
      
      -Loss in sale of Joint Venture
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      40,097Write-down of investment
      
      -
      
      
      217,000
      
      
      -
      
      
      -
      
      
      -Due diligence review of Cia MineraMexicana de Avino, S.A. de
        C.V.
      
      -
      
      
      355,921
      
      
      391,899
      
      
      122,444
      
      
      -Future income tax benefit
      
      -
      
      
      19,750
      
      
      41,200
      
      
      -
      
      
      -Net Income (loss) for year
      
      (3,648,539
      )
      
      (2,369,724
      )
      
      (814,710
      )
      
      (445,591
      )
      
      (186,991
      )Income (loss) per share
      
      (0.20
      )
      
      (0.22
      )
      
      (0.08
      )
      
      (0.06
      )
      
      (0.03
      )Weighted Average Number of SharesOutstanding
      
      18,385,007
      
      
      10,965,718
      
      
      10,410,379
      
      
      7,015,604
      
      
      5,625,498


7

---

As at January 31,2007
      
      
      2006
      
      
      2005
      
      
      2004
      
      
      2003Balance Sheet Data:Total assets
      
      23,295,039
      
      
      3,901,160
      
      
      3,219,431
      
      
      3,522,548
      
      
      814,546Cash and cash equivalents
      
      11,045,106
      
      
      3,067,011
      
      
      2,283,535
      
      
      2,832,457
      
      
      20,104Total liabilities
      
      3,789,083
      
      
      586,714
      
      
      341,174
      
      
      305,170
      
      
      380,070Shareholders' equity
      
      19,505,956
      
      
      3,314,446
      
      
      2,878,257
      
      
      3,216,838
      
      
      434,476


United States GAAP:Year Ended January 31,2007
      
      
      2006
      
      
      2005
      
      
      2004
      
      
      2003Summary of Operations:Net Income (loss) per CanadianGAAP
      $
      (3,648,539
      )
      $
      (2,369,724
      )
      $
      (814,710
      )
      $
      (445,591
      )
      $
      (186,991
      )Adjustments
      
      (10,277,556
      )
      
      (74,147
      )
      
      (132,600
      )
      
      (20,100
      )
      
      (204,000
      )Net Income (loss) per USGAAP
      
      (13,962,095
      )
      
      (2,443,871
      )
      
      (947,310
      )
      
      (465,691
      )
      
      (390,991
      )Income (loss) per share per USGAAP
      
      (0.76
      )
      
      (0.22
      )
      
      (0.09
      )
      
      (0.07
      )
      
      (0.07
      )


As at January 31,2007
      
      
      2006
      
      
      2005
      
      
      2004
      
      
      2003Balance Sheet Data:Total assets under CanadianGAAP
      
      23,295,039
      
      
      3,901,160
      
      
      3,219,431
      
      
      3,522,548
      
      
      814,546Adjustments
      
      (10,747,339
      )
      
      (260,955
      )
      
      (60,088
      )
      
      624,675
      
      
      101,004Total assets under US GAAP
      
      12,547,000
      
      
      3,640,205
      
      
      3,159,343
      
      
      4,147,223
      
      
      915,550Total equity under CanadianGAAP
      
      19,505,956
      
      
      3,314,446
      
      
      2,878,257
      
      
      3,216,838
      
      
      434,476Adjustments
      
      (10,747,339
      )
      
      (260,955
      )
      
      (60,088
      )
      
      624,675
      
      
      101,004Total equity under US GAAP
      
      8,758,617
      
      
      3,053,491
      
      
      2,818,169
      
      
      3,841,513
      
      
      535,480


Exchange Rates

The following table sets forth information as to the period
end, average, the high and the low exchange rate for Canadian Dollars and U.S.
Dollars for the periods indicated based on the noon buying rate in New York City
for cable transfers in Canadian Dollars as certified for customs purposes by the
Federal Reserve Bank of New York (Canadian dollar = US$1).

Year EndedJanuary
      31,
    
    Average
    
    Period End
    
    High
    
    Low2003
    
    1.5655
    
    1.5286
    
    1.6112
    
    1.51082004
    
    1.3803
    
    1.3265
    
    1.5315
    
    1.26902005
    
    1.2961
    
    1.2396
    
    1.3970
    
    1.17752006
    
    1.2061
    
    1.1436
    
    1.2703
    
    1.14362007
    
    1.1357
    
    1.1792
    
    1.1824
    
    1.0989


The
following table sets forth the high and low exchange rate for the past six
months. As of July 25, 2007, the exchange rate was CDN$1.0423 for each US$1.

8

---

Month
    
    High
    
    LowJanuary 2007
    
    1.1824
    
    1.1647February 2007
    
    1.1852
    
    1.1586March 2007
    
    1.181
    
    1.153April 2007
    
    1.1583
    
    1.068May 2007
    
    1.1136
    
    1.0707June 2007
    
    1.0727
    
    1.0579


**B.**     **Capitalization
and Indebtedness**

Not
Applicable.

**C.**     **Reasons for the Offer and Use of Proceeds**

Not
Applicable.

**D.**     **Risk
Factors**

In
addition to the other information presented in this Annual Report, the following
should be considered carefully in evaluating the Company and its business. This
Annual Report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below and
elsewhere in this Annual Report.

We
will be required to raise additional capital to mine our properties.The
Company is currently in the exploration stage of its properties. If the Company
determines based on its most recent information that it is feasible to begin
operations on its properties, the Company will be required to raise additional
capital in order to develop and bring the properties into production.

We
have incurred net losses since our inception and expect losses to continue.We have not been profitable since our inception. For the fiscal year ended
January 31, 2007, we had a net loss of $3,648,539 and an accumulated deficit on
January 31, 2007 of $20,758,186. The Company has not generated revenues from
operations since 1998 and does not expect to generate revenues from operations
until one or more of its properties are placed in production. There is no
assurance that any of the Company's properties will be placed in production or
that the Company's operations will be profitable in the future.

The
mining industry is highly speculative and involves substantial risks.Even
when mining is conducted on properties known to contain significant quantities
of ore deposits it is generally accepted in the mining industry that most
exploration projects do not result in the discovery of mineable deposits of ore
in a commercially economical manner. There may be limited availability of water,
which is essential to milling operations, and interruptions may be caused by
adverse weather conditions. Operations are subject to a variety of existing laws
and regulations relating to exploration and development, permitting procedures,
safety precautions, property reclamation, employee health and safety, air
quality standards, pollution and other environmental protection controls. Mining
activities are subject to substantial operating hazards, some of which are not
insurable or may not be insured for economic reasons.

The
commercial quantities of ore cannot be accurately predicted.Whether an ore
body will be commercially viable depends on a number of factors including the
particular attributes of the deposit, such as size, grade and proximity to
infrastructure, as well as mineral prices and government regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of minerals and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in a mineral deposit being unprofitable.

9

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There
are no assurances that we can produce minerals on a commercially viable
basis. The Company's ability to generate revenue and profit is expected to
occur through exploration of its existing properties as well as through
acquisitions of interests in new properties. Substantial expenditures will be
incurred in an attempt to establish the economic feasibility of mining
operations by identifying mineral deposits and establishing ore reserves through
drilling and other techniques, developing metallurgical processes to extract
metals from ore, designing facilities and planning mining operations. The
economic feasibility of a project depends on numerous factors, including the
cost of mining and production facilities required to extract the desired
minerals, the total mineral deposits that can be mined using a given facility,
the proximity of the mineral deposits to a user of the minerals, and the market
price of the minerals at the time of sale. There is no assurance that existing
or future exploration programs or acquisitions will result in the identification
of deposits that can be mined profitably.

Mining
operations and exploration activities are subject to various federal, provincial
and local laws and regulations.Laws and regulation govern the development,
mining, production, importing and exporting of minerals, taxes, labour
standards, occupational health, waste disposal, protection of the environment,
mine safety, toxic substances, and other matters. In many cases, licenses and
permits are required to conduct mining operations. Amendments to current laws
and regulations governing operations and activities of mining companies or more
stringent implementation thereof could have a substantial adverse impact on the
Company. Applicable laws and regulations will require the Company to make
certain capital and operating expenditures to initiate new operations. Under
certain circumstances, the Company may be required to close an operation once it
is started until a particular problem is remedied or to undertake other remedial
actions.

Market
price is highly speculative.The market price of metals is highly
speculative and volatile. Instability in metal prices may affect the interest in
mining properties and the development of and production of such properties.

Penny
stock rules may make it more difficult to trade the Company's common shares.The SEC has adopted regulations which generally define a "penny stock" to be
any equity security that has a market price, as defined, less than US$5.00 per
share or an exercise price of less than US$5.00 per share, subject to certain
exceptions. Our securities may be covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors such as institutions
with assets in excess of US$5,000,000 or an individual with net worth in excess
of US$1,000,000 or annual income exceeding US$200,000 or US$300,000 jointly with
his or her spouse. For transactions covered by this rule, the broker-dealers
must make a special suitability determination for the purchase and receive the
purchaser's written agreement of the transaction prior to the sale.
Consequently, the rule may affect the ability of broker-dealers to sell our
securities and also affect the ability of our investors to sell their shares in
the secondary market.

Title
  risks.The validity and ownership of mining property holdings can be uncertain
  and may be contested. Although the Company's properties in Canada are currently
  wholly owned by the Company, there are currently a number of pending and potential
  native title or traditional land owner claims in Canada. Accordingly, there
  can be no assurance that the Company's properties in Canada will not be affected.

Competition
for mineral land. There is a limited supply of desirable mineral lands
available for acquisition, claim staking or leasing in the areas where the
Company contemplates expanding its operations and conducting exploration
activities. Many participants are engaged in the mining business, including
large, established mining companies. Accordingly, there can be no assurance that
the Company will be able to compete successfully for new mining properties.

Competition
for recruitment and retention of qualified personnel. We compete with other
exploration companies, many of which have greater financial resources than us or
are further in their development, for the recruitment and retention of qualified
employees and other personnel. Competition for exploration resources at all
levels is currently very intense, particularly affecting the availability of
manpower, drill rigs and supplies. If we require and are unsuccessful in acquiring
additional personnel or other exploration resources, we will not be able to grow
at the rate we desire or at all.

10

---

Uncertainty
of exploration and development programs. The Company's profitability is
significantly affected by the costs and results of its exploration and
development programs. As mines have limited lives based on proven and probable
mineral reserves, the Company actively seeks to expand its mineral reserves,
primarily through exploration, development and strategic acquisitions.
Exploration for minerals is highly speculative in nature, involves many risks
and is frequently unsuccessful. Among the many uncertainties inherent in any
gold and silver exploration and development program are the location of economic
ore bodies, the development of appropriate metallurgical processes, the receipt
of necessary governmental permits and the construction of mining and processing
facilities. Assuming the discovery of an economic deposit, depending on the type
of mining operation involved, several years may elapse from the initial phases
of drilling until commercial operations are commenced and, during such time, the
economic feasibility of production may change. Accordingly, the Company's
exploration and development programs may not result in any new economically
viable mining operations or yield new mineral reserves to expand current mineral
reserves.

Licenses
and permits. The operations of the Company require licenses and permits from
various governmental authorities. The Company believes that it holds all
necessary licenses and permits under applicable laws and regulations and
believes that it is presently complying in all material respects with the terms
of such licenses and permits. However, such licenses and permits are subject to
change in various circumstances. There can be no guarantee that the Company will
be able to obtain or maintain all necessary licenses and permits as are required
to explore and develop its properties, commence construction or operation of
mining facilities and properties under exploration or development or to maintain
continued operations that economically justify the cost.

*Political
or economic instability or unexpected regulatory change.*Certain of our
properties are located in countries, provinces and states more likely to be
subject to political and economic instability, or unexpected legislative change,
than is usually the case in certain other countries, provinces and states. Our
mineral exploration activities could be adversely effected by:

- political instability and violence;
- war and civil disturbances;
- expropriation or nationalization;
- changing fiscal regimes;
- fluctuations in currency exchange rates;
- high rates of inflation;
- underdeveloped industrial and economic infrastructure;
- changes in the regulatory environment governing mineral properties; and
- unenforceability of contractual rights;

any of which may adversely affect our business in that country.

We
  may be adversely affected by fluctuations in foreign exchange rates. We
  maintain our bank accounts mainly in Canadian and U.S. Dollars. Any appreciation
  in the currency of Mexico or other countries where we may carryout exploration
  activities against the Canadian or U.S. Dollar will increase our costs of carrying
  out operations in such countries. In addition, any decrease in the U.S. Dollar
  against the Canadian Dollar will result in a loss on our books to the extent
  we hold funds in U.S. Dollars.

Land
Reclamation requirements. Although variable depending on location and the
governing authority, land reclamation requirements are generally imposed on
mineral exploration companies (as well as companies with mining operations) in
order to minimize the long term effects of land disturbance. Reclamation may
include requirements to control dispersion of potentially deleterious effluents
and reasonably re-establish pre-disturbance land forms and vegetation. In order
to carry out reclamation obligations imposed on us in connection with our mineral
exploration we must allocate financial resources that might otherwise be spent
on further exploration programs.

11

---

Litigation.Cia Minera Mexicana de Avino, S.A. de C.V., referred to as "Cia Minera", a
subsidiary of the Company, leases four core mineral claims in consideration for
royalties. The lessor is currently contesting the underlying royalty agreement,
and has filed a legal action claiming royalties are owing from prior years in
the approximate amount of $3,487,223 plus interest. The Company has accrued
$738,302 on account of the royalties owing. Cia Minera has held the position
that it has fully provided for the royalty liability in its accounts and
continues to contest the action in court, however, negotiations are being held
as both parties are working towards an amicable settlement.The outcome of this
litigation is not determinable and may have a material adverse impact on the
Company. For further information regarding this litigation, please see Note 18
of the financial statements included with this Annual Report at Item 17. The
Company is not currently subject to any other litigation but it may become
involved in disputes with other parties in the future which may result in
litigation. Any litigation could be costly and time consuming and could divert
our management from our business operations. In addition, if the Company is
unable to resolve any litigation favorably, it may have a material adverse
impact on the Company's financial performance, cash flow and results of
operations.

Acquisitions.
The Company undertakes evaluations of opportunities to acquire additional gold
and silver mining properties. Any resultant acquisitions may be significant in
size, may change the scale of the Company's business, and may expose the Company
to new geographic, political, operating, financial and geological risks. The
Company's success in its acquisition activities depends on its ability to
identify suitable acquisition candidates, acquire them on acceptable terms, and
integrate their operations successfully. Any acquisitions would be accompanied
by risks, such as a significant decline in the price of gold or silver, the ore
body proving to be below expectations, the difficulty of assimilating the
operations and personnel of any acquired companies, the potential disruption of
the Company's ongoing business, the inability of management to maximize the
financial and strategic position of the Company through the successful
integration of acquired assets and businesses, the maintenance of uniform
standards, controls, procedures and policies, the impairment of relationships
with customers and contractors as a result of any integration of new management
personnel and the potential unknown liabilities associated with acquired mining
properties. In addition, the Company may need additional capital to finance an
acquisition. Historically, the Company has raised funds through equity financing
and the exercise of options and warrants. However, the market prices for natural
resources are highly speculative and volatile. Accordingly, instability in
prices may affect interest in resource properties and the development of and
production from such properties that may adversely affect the Company's ability
to raise capital to acquire and explore resource properties. There can be no
assurance that the Company would be successful in overcoming these risks or any
other problems encountered in connection with such acquisitions.

Conflict
of interest.Certain directors and officers of the Company are officers
and/or directors of, or are associated with, other natural resource companies
that acquire interests in mineral properties. Such associations may give rise to
conflicts of interest from time to time. The directors are required by law,
however, to act honestly and in good faith with a view to the best interests of
the Company and its shareholders and to disclose any personal interest which
they may have in any material transaction which is proposed to be entered into
with the Company and to abstain from voting as a director for the approval of
any such transaction.

Dependence
on management. We are dependent on the services of key executives including
our President and Chief Executive Officer and other highly skilled and
experienced executives and personnel focused on advancing our corporate
objectives as well as the identification of new opportunities for growth and
funding. Due to our relatively small size, the loss of these persons or our
inability to attract and retain additional highly skilled employees required for
our activities may have a material adverse effect on our business and financial
condition.

12

---

Uncertainty
of continuing as a going concern.The continuation of the Company depends
upon its ability to attain profitable operations and generate cash flow from
operations and/or to raise equity capital through the sale of its securities. As
a result, there is uncertainty about the Company's ability to continue as a
going concern. The Company's financial statements do not include the adjustments
that would be necessary if the Company were unable to continue as a going
concern.

Limited
and volatile trading volume.Although the Company's common shares are listed
on the TSX Venture Exchange, referred to as the "TSX-V" and the Frankfurt Stock
Exchange, referred to as the "FSE" and quoted in the United States on the OTC
Bulletin Board, referred to as the "OTC BB", the volume of trading has been
limited and volatile in the past and is likely to continue to be so in the
future, reducing the liquidity of an investment in the Company's common shares
and making it difficult for investors to readily sell their shares in the open
market. Without a liquid market for the Company's common shares, investors may
be unable to sell their shares at favorable times and prices and may be required
to hold their shares in declining markets or to sell them at unfavorable prices.

Volatility
of share price.In recent years, securities markets in Canada have
experienced a high level of price volatility. The market price of many resource
companies, particularly those, like the Company, that are considered speculative
exploration companies, have experienced wide fluctuations in price, resulting in
substantial losses to investors who have sold their shares at a low price point.
These fluctuations are based only in part on the level of progress of
exploration, and can reflect general economic and market trends, world events or
investor sentiment, and may sometimes bear no apparent relation to any objective
factors or criteria. During the 2007 fiscal year, the Company's common share
price fluctuated between a low of $1.50 and a high of $4.48. Subsequent to the
2007 fiscal year and as of July 1, 2007, the Company's common share price has
fluctuated between a low of $1.69 and a high of $2.75. Significant fluctuations
in the Company's common share price is likely to continue, and could potentially
increase in the future.

Difficulty
for United States investors to effect services of process against the Company.The Company is incorporated under the laws of the Province of British
Columbia, Canada. Consequently, it will be difficult for United States investors
to affect service of process in the United States upon the directors or officers
of the Company, 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 majority of the
Company's directors and officers are residents of Canada and all of the
Company's assets are located outside of the United States. A judgment of a
United States court predicated solely upon such civil liabilities would probably
be enforceable in Canada by a Canadian court if the United States 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 the Company
predicated solely upon such civil liabilities.

Item 4. Information on the Company

Cautionary Note to United States Investors

We
describe our properties utilizing mining terminology such as "measured
resources" and "indicated resources" that are required by Canadian regulations
but are not recognized by the SEC. United States investors are cautioned not
to assume that any part of the mineral deposits in these categories will ever be
converted into reserves.

**A.**     **History
and Development of the Company**

The
Company was incorporated by Memorandum of Association under the laws of the
Province of British Columbia on May 15, 1969, and on August 22, 1969, by virtue
of an amalgamation with Ace Mining Company Ltd., became a public company whose
common shares are registered under the United States Securities Exchange Act
of 1934, changing its name to Avino Mines & Resources Limited. On April
12, 1995, the Company changed its corporate name to International
Avino Mines Ltd. and affected a reverse stock split of one common share for
every five common shares outstanding. On August 29, 1997, the Company changed
its corporate name to Avino Silver & Gold Mines Ltd., its current name, to
better reflect the business of the Company of exploring for and mining silver
and gold.

13

---

We
are a natural resource company, primarily engaged in the acquisition,
exploration and development of natural resource properties. Our principal
business activities have been the exploration of certain mineral properties
located in Canada, specifically British Columbia and the Yukon Territory, and in
Mexico. Since fiscal 2001 we made aggregate principal capital expenditures of
$605,879 on the properties in Canada. These capital expenditures consist of
$103,243 which was spent on the Eagle property, $184,834on the Aumax
property, $159,575 on the Olympic-Kelvin property, $54,739 and on the Bralorne
property$103,488 on the Minto property. The Avino Mine in Mexico is
owned by Cia Minera of which the Company owns 88.25% of the issued and
outstanding securities and is accounted for using the equity method in the
financial statements. Since the suspension of operations at the Avino Mine,
$515,816 has been spent on the care and maintenance of the mine.

On
July 17, 2006, the Company completed the acquisition of Cia Minera, a Mexican
corporation, through the acquisition of an additional 39.25% interest in Cia
Minera which combined with the Company's pre-existing 49% share of Cia Minera,
brought the Company's ownership interest in Cia Minera to 88.25% . The
additional 39.25% interest in Cia Minera was obtained though the acquisition of
76.88% of the common shares of Promotora Avino S.A. De C.V., referred to as
"Promotora", which in turn owns 49.75% of Cia Minera's common shares, and the
direct acquisition of 1% of the common shares of Cia Minera.

The
July 17, 2006 acquisition was accomplished by a share exchange by which the
Company issued 3,164,702 shares as consideration, which we refer to as the
"Payment Shares", for the purchase of the additional 39.25% interest in Cia
Minera. The Payment Shares were valued based on the July 17, 2006 closing market
price of the Company's shares on the TSX-V.

The
Company has also acquired a further 1% interest in Cia Minera through the
acquisition from an estate subject to approval and transfer of the shares to the
Cmopany by the trustee for the estate.

The
principal executive office of the Company is located at Suite 400, 455 Granville
Street, Vancouver, British Columbia V6C 1T1, and its telephone number is
604-682-3701.

**B.**     **Business
Overview**

Operations and Principal Activities

The
Company is a Canadian-based resource firm focused on silver and gold
exploration. The Company has a long prior history of operation, beginning in
1968 with the development of the Avino Mine. From 1974 to 2001, the Avino Mine
produced silver, gold, copper and lead and provided hundreds of jobs for the
Durango region before closing due to depressed metal prices. Beginning in 2002,
the Company redirected its corporate strategy to focus almost entirely on silver
and began acquiring silver properties in North America. The Company's most
recent acquisitions, consisting of the Eagle property in Canada's Yukon
Territory and the Aumax property in British Columbia, have produced positive
assays for silver through drilling and sampling. The Avino Mine and surrounding
mineral leases continue to hold silver potential. These properties, along with
other silver and gold projects, will remain the Company's principal focus for
the foreseeable future.

Presently,
  the Company is an "exploration stage company", as all of the Company's properties
  are currently in the exploratory stage of development. In order to determine
  if a commercially viable mineral deposit exists in any of the Company's properties,
  further geological work will need to be done and a final evaluation based upon
  the results obtained to conclude economic and legal feasibility.

14

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Significant Acquisitions and Significant Dispositions

On
July 17, 2006, the Company completed the acquisition of Cia Minera, a Mexican
corporation, through the acquisition of an additional 39.25% interest in Cia
Minera which combined with the Company's pre-existing 49% share of Cia Minera,
brought the Company's ownership interest in Cia Minera to 88.25% . The
additional 39.25% interest in Cia Minera was obtained though the acquisition of
76.88% of the common shares of Promotora, which in turn owns 49.75% of Cia
Minera's common shares, and the direct acquisition of 1% of the common shares of
Cia Minera.

The
July 17, 2006 acquisition was accomplished by a share exchange by which the
Company issued 3,164,702 Payment Shares, for the purchase of the additional
39.25% interest in Cia Minera. The Payment Shares were valued based on the July
17, 2006 closing market price of the Company's shares on the TSX-V.

The
Company has also acquired a further 1% interest in Cia Minera through the
acquisition from an estate subject to approval and transfer of the shares to the
Cmopany by the trustee for the estate.

We
  have no other significant acquisitions or dispositions of property, other than
  as otherwise disclosed in this Annual Report.

Competition

The
mining industry in which the Company is engaged is highly competitive.
Competitors include well-capitalized mining companies, independent mining
companies and other companies having financial and other resources far greater
than those of the Company. The Company competes with other mining companies in
connection with the acquisition of gold, silver and other precious metal
properties. In general, properties with a higher grade of recoverable mineral
and/or which are more readily mined afford the owners a competitive advantage in
that the cost of production of the final mineral product is lower. In 2006,
demand for silver exceeded supply and worldwide demand is expected to increase
through 2007. This, in part, has fueled the increases in silver prices over the
same period. Thus, a degree of competition exists between those engaged in the
mining industry to acquire the most valuable properties. As a result, the
Company may eventually be unable to acquire attractive gold or silver mining
properties.

Seasonality

Certain
of our operations are conducted in British Columbia and the Yukon Territory. The
weather during the colder seasons in these areas can be extreme and can cause
interruptions or delays in our operations. As a result, the preferable time for
activities in these regions is the spring and summer when costs are more
reasonable and access to the properties is easier. In the summer months,
however, if the weather has been unusually hot and dry, access to the Company's
properties may be limited as a result of access restrictions being imposed to
monitor the risks of forest fires.

Governmental Regulation

The
current and anticipated future operations of the Company, including development
activities and commencement of production on its properties, require permits
from various federal, territorial and local governmental authorities and such
operations are and will be governed by laws and regulations governing
prospecting, development, mining, production, exports, taxes, labor standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. Companies engaged in the development
and operation of mines and related facilities generally experience increased
costs and delays in production and other schedules as a result of the need to
comply with applicable laws, regulations and permits. Such operations and
exploration activities are also subject to substantial regulation under these
laws by governmental agencies and may require that the Company obtain permits
from various governmental agencies. The Company believes it is in
substantial compliance with all material laws and regulations which currently
apply to its activities. There can be no assurance, however, that all permits
which the Company may require for construction of mining facilities and conduct
of mining operations will be obtainable on reasonable terms or that such laws
and regulations, or that new legislation or modifications to existing
legislation, would not have an adverse effect on any exploration or mining
project which the Company might undertake.

15

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Mineral
exploration and mining in Mexico is covered under the Mining Law as first
published in June 1992, and amended in April 2005. Mining operations in Mexico
are administered by the Ministry of Economy. Environmental regulations are
covered under "Ley General del Equilibrio Encologio y la Protection al Ambiente"
(General Law of Ecological Balance and Environmental Protection) and its
regulations. Certain other environmental laws, including "Ley de Aguas
Nacionales" (Law of National Waters) and "Ley Forestal" (Forestry Law) and their
associated regulations may also cover certain operations. The kind of permits or
authorizations required to conduct mining or mineral exploration operations in
Mexico depend upon the type of operation. Common exploration activities do not
require prior environmental authorization or licenses, but it is advisable to
request a confirmation from the National Water Commission that planned
operations will not affect the water table. It is also necessary to confirm that
any planned operations will not be conducted in protected natural areas.

The
Company has obtained all necessary permits and authorizations required for its
current and anticipated exploration. The Company has had no material costs
related to compliance and/or permits in recent years, and anticipates no
material costs in the next year. Unfavorable amendments to current laws,
regulations and permits governing operations and activities of resource
exploration companies, or more stringent implementation thereof, could have a
materially adverse impact on the Company and cause increases in capital
expenditures which could result in a cessation of operations by the Company.

Failure
to comply with applicable laws, regulations and permitting requirements may
result in enforcement actions thereunder, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may
include corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions. Parties engaged in exploration and
mining operations may be required to compensate those suffering loss or damage
by reason of the mining activities and may have civil or criminal fines or
penalties imposed for violation of applicable laws or regulations.

The
  enactment of new laws or amendments to current laws, regulations and permits
  governing operations and activities of mining companies, or more stringent implementation
  thereof, could have a material adverse impact on the Company and cause increases
  in capital expenditures or production costs or reduction in levels of production
  at producing properties or require abandonment or delays in the development
  of new mining properties.

**C.**     **Organizational
Structure**

The
Company's subsidiaries are the wholly-owned Oniva Silver and Gold Mines S.A.,
referred to as "Oniva", Promotora in which the Company has direct ownership of
76.88%, and Cia Minera in which the Company has a 50% direct ownership and an
additional 49.75% of Cia Minera is held through Promotora. The Company's total
ownership of Cia Minera is 88.25% . The Company has also acquired a further 1%
interest in Cia Minera through the acquisition from an estate subject to
approval and transfer of the shares to the Company by the trustee for the
estate.

All
of the above subsidiaries are incorporated under the laws of Mexico.

16

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**D.**     **Property,
Plants and Equipment**

The
Company is exploring five silver and gold projects in Canada and Mexico. All of
the Company's mineral property interests in Canada are wholly owned by the
Company. In Mexico, the Company has a 88.25% interest in Cia Minera, a Mexican
company which is involved in the mining of commercial ores and resource
exploration and development, including the operation of the Avino Mine.
Exploration in Canada has in recent years, has been limited to drill programs on
our Olympic-Kelvin Property.

Eagle Property

Ownership.The Eagle property is wholly owned by the Company and was acquired in 2003
when it acquired its 100% interest in 14 quartz leases by issuing 200,000 common
shares at a price of $0.50 per share for total consideration of $100,000. The
property was written down to a nominal value of $1 in fiscal 2006 by a charge to
operations of $103,242.

Property
Description and Location.This property is located in the Yukon Territory
approximately eight kilometers west of Keno City. The property covers
approximately 516 hectares. It is currently in its Phase I stage of exploration.
The property is accessed by road. Whitehorse, the nearest major city, is
approximately 380 kilometres to the south of the village of Mayo. The village of
Mayo is 60 kilometers to the southeast of Keno City. The Eagle property lies on
the south-east facing slope of Galena Hill where the elevations range from about
1350 to 1540 m. Permafrost, while thin to non-existent in places, is reported to
be found under accumulations of surface rubble left from glaciation.

History.The Eagle property has produced positive assays for silver since exploration
first occurred there in 1964. The initial drill program, consisting of 29 holes,
encountered assays as high as 6,900 grams per tonne of silver over 1.2 metres in
hole #23 and 1,708 grams per tonne of silver over 2.1 metres in hole JB1.
Follow-up drilling in 1978, designed to expand on the discoveries of hole #23,
encountered 18.7 metres of mineralization with values ranging from 11 to 132
grams per tonne of silver. This discovery became known as the Eagle vein. The
Eagle property is part of the historic Keno Hill mining camp. The Keno Hill
mining camp has historically been one of Canada's most productive for silver,
lead and zinc. Between 1920 and 1988, the total reported production was
4,787,423 tonnes with recovered grades of 1.3 kilograms per tonne of silver,
5.6% lead and 3.1% zinc. Subsequent exploration in the district has discovered
additional mineral deposits which may become productive.

Proposed
Work Program.A study carried out in August of 2002 recommended geochemical
and geophysical exploration to examine the continuity of the Eagle vein.
Drilling and underground exploration would follow based on the success of the first work. A budget
of $160,000 has been proposed to carry out further work on the Eagle property.
Our management is presently considering this proposal.

17

---

Aumax Property

Ownership.The Aumax Property is wholly owned by the Company and was acquired in 2003
when it acquired a 100% interest in six unpatented mineral claims by issuing
200,000 common shares at a price of $0.50 per share and paying $4,000 in cash
for total consideration of $104,000.

Property
Description and Location.The property is located in southern British
Columbia approximately 16 kilometers southwest of the town of Lillooet. The
property can be accessed from Lillooet by a logging road. The upper zone of the
Aumax property can be accessed by hiking a further 1.5 km to the southwest. The
property covers approximately 975 hectares and is located between Cayoosh Creek
and Phair Creek. The showings were discovered in 1999. The showings have
economically interesting gold and silver values.

History.Cayoosh Creek has a history of limited placer gold production starting in
the 1860's. Some of this production occurred immediately downstream of the
property, near the mouth of Downtown Creek.

A
limited exploration program of prospecting, rock and soil sampling and
mechanized trenching was carried out in October of 1999. Trenching on the Aumax
showing was inconclusive. Many highly anomalous quartz-carbonate boulders, up to
2.2 grams per tonne of gold and 305 grams per tonne of silver, were excavated
but bedrock was not reached in critical areas. Chip samples of veins exposed in
the trenches were highly anomalous, generally in the hundreds of parts per
billion gold, with one sample over one gram per tonne of gold over 0.5 metres.
Further prospecting and soil sampling of the southeast (upslope) of the Aumax
showing was recommended.

18

---

Limited
soil sampling and prospecting in 1999 on the Upper Zone returned extremely
anomalous soil samples to 4,560 parts per billion gold. A grid geochemical
sampling and further prospecting in this area was recommended.

The
Company has placed a deposit of $1,500 at January, 2007 (2006:$1,500),
registered in the name of the Ministry of Finance of British Columbia, as
security for estimated future reclamation costs.

Proposed
  Work Program.Geological studies conducted late in 2002 concluded that the
  discoveries to date lie downslope of the mineral source. A subsequent report
  in November 2004 recommended a Phase 1 program of more prospecting, geological
  mapping and additional soil sampling to determine the source of the mineralization.
  Based on the results of this program, Phase 2 exploration would include trenching
  and possible diamond drilling but to date, no work program has been proposed.

Olympic-Kelvin Property

Ownership.The Olympic-Kelvin property is wholly owned by the Company and was acquired
in 1987 when it acquired a 100% interest in 20 reverted Crown granted mineral
claims, one located mineral claim and three fractions. The property was written
down entirely in fiscal 2002.

Property
Description and Location.The Olympic-Kelvin property totals approximately
662.5 hectares and is located on the south side of Carpenter Lake, five
kilometers northeast of Goldbridge in the Lillooet Mining Division, British
Columbia.

The
Olympic-Kelvin property is easily accessible by the all-weather, publicly
maintained, Grey Rock logging road which runs northeast from Goldbridge. Access
on the Olympic-Kelvin property is possible on a number of cat trails built by
the Company and previous operators.

The
Olympic-Kelvin property covers rocks of the Pioneer Formation and Bridge River
Terrane. These rocks are cut by northwest trending regional scale structures
sub-parallel to the Ferguson and Cadwallader Structures. The structures on the
Olympic-Kelvin property are roughly the same distance from the Upper
Cretaceous-Tertiary granitic Bendor Intrusions as the Bralorne/Pioneer mines.
These mines are the largest past producers in the Canadian Cordillera (4.1
million ounces). The Bendor Intrusions are a postulated source for the gold
mineralization at Bralorne, which is thought to be localized by a northwest to
north flexure in the Cadwallader structure. A similar flexure is present in the
northwest trending structures on the Olympic-Kelvin property. These structures
on the property are mineralized with gold and silver and have received
considerable past work, including at least four adits.

History.The Company recommenced exploration on the Olympic-Kelvin property in
January 2004, following up on work completed in 1988 that outlined two
prospective areas for gold and silver, the Margarita Zone and the Enigma
Zone.

In
the Margarita Zone, hole OLY 88-4 returned 24 grams per tonne of gold over 0.85
metres within a much wider intersection of 8.2 grams per tonne of gold over 3.48
metres. The true width of this zone is estimated to be 1.47 metres. A large part
of the zone is listwanite, indicating the potential for better grade
mineralization immediately below this intersection. Hole OLY 88-6 cut the same
zone 75 metres to the northwest and returned 4.26 grams per tonne of gold over
1.34 metres within an eight metre section (5.6 m true width) of mainly
listwanite. The area of these intersections is approximately 50 metres off of
the Gray Rock Road and could be accessed for mining purposes by an underground
ramp from the road.

The
Enigma Zone is a colour anomaly on the south shore of Carpenter Lake on Lot
6280, approximately 700 metres east, north-east of the Margarita Zone. Trenching
revealed a quartz stock work zone with areas of abundant stibnite. Sampling
returned 1.7 grams per ton of gold over 21 metres within a 75 metre mineralized zone. This is a very wide zone for the Bridge
River Camp and, if the zone has significant strike length, it could be amenable
to open pit mining. Hole 04-0k-04 was drilled 154 metres under the Enigma Zone.
This hole returned highly anomalous gold values to 0.38 grams per tonne.
Detailed geological mapping and geochemical sampling has been recommended.

19

---

Drilling
  in January of 2005 was unsuccessful in intersecting the Margarita Zone. One
  hole was drilled from the east to attempt to intersect the zone. This hole was
  abandoned at 21.3 metres because of bad ground conditions. No values of economic
interest were returned from samples taken from the hole.

The
Company has placed a deposit of $1,500 at January, 2007 (2006:$1,500),
registered in the name of the Ministry of Finance of British Columbia, as
security for estimated future reclamation costs.

No
drilling on the Olympic Property was completed in 2006.

*Proposed
  Work Program.*No further work is proposed at this time.

Minto Property

Ownership.The Minto Property is wholly owned by the Company and was acquired in early
1985 when it acquired its 100% interest in eight Crown granted mineral claims,
eight reverted Crown granted mineral claims and one located mineral claim. In
fiscal 2002, the property was written down to a nominal value of $1.

Property
Description and Location.The Minto Property is situated about tenkilometers east of Goldbridge in the Bridge River gold district of British
Columbia and adjoins the Olympic-Kelvin Property. The property covers
approximately 204 hectares. The Minto property is situated in the Bralorne gold
camp, about 160 kilometers, by air, north of Vancouver. The claims occupy the
lake bed and north flank of Carpenter Lake. Access from Goldbridge is made via
an all-weather gravel road which skirts the north shore of Carpenter Lake.

Gold
Bridge itself can be reached from Vancouver via Hope and Lillooet, a distance of
445 kilometers, or via Pemberton using the four-wheel-drive Hurley Pass route, a
distance of 225 km.

The
terrain is rugged, typical of the eastern margin of the Coast Range Mountains.
The claim group ranges in elevation from 650 meters on Carpenter Lake to a
maximum of 1020 meters.

The
climate of the Bridge River District is transitional between humid coastal belt
and more arid interior plateau. Annual precipitation is modest with a
significant proportion falling as snow in the winter. Summers tend to be warm to
hot depending on the altitude, and winters are moderately cold.

History.The claim group has been explored intermittently for over sixty years and
several gold-bearing structures are known on the property. Production from the
Minto mine between 1934 and 1940 amounted to 88,900 tons of ore returning 17,558
ounces of gold and 50,582 ounces of silver. During 1985, geological,
geochemical, and geophysical (VLF-EM) surveys were conducted and trenches were
excavated in anomalous areas. In-fill soil geochemistry and further trenching
were undertaken in 1987.

A
mechanized trenching program was carried out on the Minto Property in June, 2005
to test the Minto North and Jumper Zones. Seven trenches were excavated,
sampled, mapped and reclaimed, usually in a one day period. Chip samples from
all the trenches returned values from anomalous to economic levels in gold.

20

---

In
December 2006, the Company announced the results of the 2006 drilling program on
the Minto Property. The four diamond core holes were drilled to explore down dip
extensions of gold bearing structures originally discovered in trench 827 on the
Minto North Zone.

Holes
MO-06-01 and 02 were drilled from a site approximately 10 metres west of trench
827. Hole MO-06-03 was drilled from a site approximately 2 metres north and 7
metres east of MO-06-01 and 02. Hole MO-06-04 was drilled from the same
set-up.

The
gold bearing structures consist of sets of parallel narrow (1-2 mm) fractures
containing quartz, carbonate, grey sulphide veinlets. Assay samples from the
four holes drilled conveyed from 1.04 grams per ten to 45.4 grams per ton.

The
Company has placed a deposit of $2,500 at January, 2007 (2006: Nil), registered
in the name of the Ministry of Finance of British Columbia, as security for
estimated future reclamation costs.

Proposed
  Work Program.One hole has been drilled to a depth of approximately 1,647
  feet and the assay results are still pending. No further work program has been
  proposed.

Avino Mine

Ownership.The Company owns 88.25% of the issued and outstanding securities of Cia
  Minera, a company incorporated under the laws of Mexico. Cia Minera owns the
  Avino Mine. The Company acquired its 49% interest in Cia Minera in 1968 and
  the additional interest of 39.25% in July 2006. The Company continues to consider
  its options with relation to the remaining equity interest.

Cia
Minera leases four core mineral claims in consideration for royalties. The
lessor is currently contesting the underlying royalty agreement and has filed a
legal action claiming for royalties owing in the amount of approximately
$3,531,731. Cia Minera has accrued $755,140 and has paid an additional $244,000
into trust on account of the royalties owing for past mineral production. The
Company has been in discussions with the lessor to settle the accrued liability
based on the fact that the mine has not operated since shut down in 2001 and it
may not re-open if a settlement is not reached. The Company is also in
discussions with the remaining royalty holders.

Property
Description and Location.The Avino Mine is located approximately 74
kilometers to the northeast of the city of Durango and covers approximately
4,364 hectares. The mine is accessible via road. The Avino Mine had been an open
pit operation until March 1993, at which time Cia Minera commenced underground
operations. Mineralized rock is broken by ripping, drilling and blasting and is
trucked to the concentrator, approximately 415 meters from the pit, where it is
processed. The Avino Mine was an underground operation at the time of
closure.

21

---



History.On July 17, 2006, the Company completed the acquisition of an additional
39.25% equity interest on Cia Minera in consideration of the issuance of an
aggregate of 3,164,702 common shares of the Company. As a result of this
transaction, the Company increased its ownership in Cia Minera to 88.25% of
total issued shares. There was no change in the effective control of the Company
as a result of this transaction. The Company has also acquired a further 1%
interest in Cia Minera through the acquisition from an estate subject to
approval and transfer of the shares to the Cmopany by the trustee for the
estate.

The
Avino Mine operated from 1974 to 2001, producing about 497 tons of silver, three
tons of gold, and 11,000 tons of copper until the suspension of mining
operations in November 2001. Since that time, the mine plant and equipment have
been on care and maintenance and the Company has spent $515,816 on the care and
maintenance of the mine.

The
Avino Mine and mill were historically serviced by a heavy equipment repair shop,
a mechanical and electrical shop, an assay office, a metallurgical laboratory, a
warehouse and other auxiliary facilities. Electric power can be supplied by the
government-owned Federal Electricity Commission, referred to as the "FEC" which
presently is capable of supplying up to 2500 HP to the Avino Mine and mill. As
the mill is expanded, additional power must be obtained from the FEC. In order
to obtain the additional electric power, it has been necessary for the FEC in
1983 to construct a new power line approximately 12 miles in length which is
capable of supplying an additional 2750 HP, sufficient for the maximum proposed
increase in mill capacity.

Water
for use at the mill is primarily obtained from: (i) wells; (ii) old underground
workings; and (iii) earth dams. In prior years, the water supply has been
insufficient to increase the capacity of the mill. In 1989, Cia Minera
constructed a dam in hope of storing water for use in the dry season. The dam
has a capacity of 1,000,000 cubic meters. Cia Minera had entered into an
agreement with the Federal Government of Mexico for the repair and improvement
of a government dam located approximately five and one-half kilometers from the
mine. The contract provides that the Government and Cia Minera will each
contribute 50% of the cost of repairing the dam and raising the height by six
meters and to construct a new spillway. The work was substantially completed
during 1989, and Cia Minera installed a pipeline system allowing water to flow
from the Government dam to the mill. The contract provides that Cia Minera will
share the use of the Government dam with local farmers. The local farmers have
priority for the use of a specific volume of the water and the balance is available for use by the mine. The water can be
transmitted to the mine by means of five kilometers of pipe which has been
installed by Cia Minera. In early 1996, Cia Minera also drilled a well 400
meters in depth on a property owned by Cia Minera, ten kilometers from the mill
site. A pipeline has been constructed, and Cia Minera has sufficient water for
its own needs. Further, from 1995 to 1998, Mexico experienced a drought. While
the drought adversely affected operations in late 1995 until April 1996, Cia
Minera believes that the new well will adequately meet its water requirements.
In addition, Cia Minera utilizes water conservation practices, such as
recirculation of water and capturing rain water in earth dams.

22

---

In
April 2006, Wardrop Engineering Inc., which we refer to as "Wardrop", completed
the study on "Tailings Retreatment Process Options for the Avino Tailings
Project in Durango, Mexico", referred to as the "Wardrop Report". The Wardrop
Report concluded the oxide tailing is amenable to cyanidation with agglomerated
heap leach as the method of choice followed by Merril Crowe precipitation of the
silver and gold. The sulphide tailing would require sampling and further
metallurgical test work before a proper assessment can be made.

The
preliminary evaluation of the oxide tailings suggested the capital cost for a
500,000 ton per year, 4 year operation is US$16,200,000 and the cost to operate
per ton of tailings is US$8.64. Capital Costs for a plant twice the size and
half the life was US$22,700,000. The internal rate of return and the net present
value favoured the 4 year operation.

The
capital cost estimate includes a 25% contingency and it is based on new
equipment. A reduction in capital cost can be accomplished with good used
equipment.

The
disclosure of the implied values is preliminary in nature and includes inferred
mineral resources that are considered to be too speculative geologically to have
the economic considerations applied to them that would enable them to be
categorized as mineral reserves, and there is no certainty that the preliminary
assessment will be realized.

The
heap leach process design in the study was based on a column test performed at
Process Research Associates Limited from a composite of samples from the lower
and middle bench. These samples were collected and documented in the October
2005 report entitled "A Tailings Resource" by Minestart Management Inc. for whom
the qualified person was Bryan Slim, MBA, P. Eng. Recovery of silver and gold
from the column test was 73% and 78.9% respectively after 81 days.

Mr.
Rick Alexander P. Eng., an independent qualified person as defined by applicable
Canadian rules has prepared the capital cost estimate and co-coordinated
Wardrop's work on the Avino Tailings Project.

In
December 2006, the Company announced results of the first 6 diamond core drill
holes exploring the Avino silver, gold and copper deposit at its wholly owned
property 80 km northeast of Durango, Mexico.

The
Company operated the mine from 1976 to 2001 when closure was caused by low
silver, gold and copper prices and the local smelter closing for toll
processing. The 2006 drill program was designed to test for continuity down dip
below the existing workings of the three principal areas of mineralization (San
Luis, Elena-Tolosa, and Chirumbo). The Avino vein system strikes principally
east west over 1.2 km and dips south at 60 - 70°.

The
initial hole CH-06-03 intersected the Avino vein system 180 m below the original
Chirumbo workings. The hole intersected both the main Vein/Breccia zone and the
footwall breccias as follows:

CH-06-03 Azimuth 340° Dip - 50° length
453.75 m Avino Vein 182.8  194.8 m, (12 m), 32.61 g/t Ag, 0.29% Cu
Footwall Breccia 204.8 m  216.8 m, (12 m), 52.41 g/t Ag, 0.31% Cu

23

---

(Down
Hole Lengths) True widths are not known.

The
four holes ET-06-01, 02, 03, 04 explored the down dip and down plunge, extension
of the main ore shoot (Elena-Tolosa) on which most underground mining has
occurred in the past. Holes ET-06-01 and ET-06-02 intersected the Avino Vein
System approximately 40 m below Level 11 1⁄2 (the last level in production when
the mine closed in November 2001). Holes ET-06-03 and ET-06-04 intersected the
ore-zone approximately 180 m below Level 11 1⁄2. Results from the four holes were
as follows:

(All
lengths are down hole) True widths are not known.

•
      ET-06-01     
          AZ 340      Dip  50     
          Length 431.2 mo
      Avino Vein 401.25  415.90 (14.65
          m) 26.33 g/t Ag, 0.29% Cuo
      (Intersects west of the ET shoot and
          is below ore grade but it contains 409.80  411.85, 2.05 m, 109
          g/t Ag, 0.5% Cu•
      ET-06-02      AZ
          340      Dip  50      Length
          416.70 mo
      Avino Vein 375.80  392.80 (17
          m) 35.13 g/t Ag, 0.43% Cu•
      ET-06-03     
          AZ 340      Dip  50      Length
          421.15 mo
      Avino Vein 368.25  386.65 (18.4
          m) 0.18 g/t Au, 90 g/t Ag, 0.8% Cu•
      ET-06-04      AZ
          340      Dip  50      Length
          444.05 mo
      Avino Vein 318.5  339.5 (21 m)
          0.24 g/t Au, 89.4 g/t Ag, 1.12% Cuo
      Includes 318.45  321-45 m (3 m)
          0.14 g/t Au, 238 g/t Ag, 0.73% Cu


Hole SL-06-01 was drilled below
the San Luis workings at the western end of the Avino Vein System. Details were
as follows:

| | • | SL-06-01 Azimuth 000 Dip - 90°, Length 219.2 m
| | - | ----------------------------------------------
| |   | o                                             
| |   | o                                             

Drill
core from the holes was assayed by Inspectorate Labs at their facilities in
Durango Mexico and Sparks Nevada U.S.A. The assay methods were gold (Au) fire
assay with AA finish, silver (Ag) fire assay with gravimetric finish and copper
(Cu) by 30 element ICP package. Sampling procedures, chain of custody etc. are
compliant with NI 43-101.

To
  date in 2007, the Company has drilled 42 holes on the Avino Property totaling
  8,643 metres. Significant intersections are as follows:

24

---

Vein or 
        Structure
      Total 
        Depth 
        (m)
      From 
        (m)
      To (m)
      Intersection 
        (m)
      Au g/t
      Ag g/t
      Cu 
        ppm
      Pb 
        ppm
      Zn 
        ppmLA ESTELA VEINLE-06-01
      200.00
      Did
        not intersect vein structureLE-06-02
      238.25
      215.05
      219.1
      4.05
      0.73
      239Includes: Footwall LaEstela Vein
      
      215.05
      216.0
      0.95
      0.869
      52.5216.05
      217.10
      1.05
      0.025
      9.0217.10
      218.10
      1.00
      0.015
      14.8218.10
      218.60
      0.50
      0.052
      18.0Hangingwall La Estela
      
      218.60
      219.10
      0.50
      3.95
      1744.1
      9460
      24600
      5500LE-06-03
      251.85
      221.85
      223.70
      1.85
      0.85
      80Includes
      
      221.85
      222.85
      1.00
      1.37
      132.1222.85
      223.70
      0.85
      0.24
      18.4CERRO SAN JOSEThe two drill holes did not intersect the structure.SJ-06-01
      320.55SJ-06-02
      373.70LOS ANGELESLA-07-01
      358.90
      327.25
      329.65
      2.40
      0.39
      119Includes
      
      
      
      
      13.64327.25
      327.25
      0.30
      5
      711.9
      5602
      8259
      4220327.55
      328.35
      0.80
      0.368
      5.5
      141
      1192
      1490328.35
      329.25
      0.90
      0.044
      1.1
      29
      317
      1217329.25
      329.65
      0.40
      0.649
      168.7
      3346
      61700
      59000LA-07-02
      358.90
      100.35
      101.35
      1.00
      0.052
      15.5
      9
      76
      356101.35
      102.35
      1.00
      0.015
      3.3
      9
      301
      644102.35
      103.35
      1.00
      0.085
      7.2
      35
      259
      849103.35
      104.35
      1.00
      0.480
      45.5
      49
      229
      487LA-07-03
      185.30
      123.30
      124.30
      1.00
      0.130
      59.7
      135
      1994
      15800127.10
      127.75
      0.65
      0.040
      43.1
      602
      2952
      26000130.35
      131.30
      0.95
      0.319
      59.1
      1143
      1330
      3580132.15
      132.30
      0.15
      1.783
      71.2
      445
      64200
      60000LA-07-04
      140.40
      100.70
      107.4
      6.7100.70
      101.70
      1.00
      0.404
      48.8
      48
      402
      2189101.70
      102.80
      1.10
      0.630
      >200
      555
      1277
      3660102.80
      103.80
      1.00
      0.373
      45.3
      35
      470
      589103.80
      104.75
      0.95
      0.149
      20.9
      36
      258
      403104.75
      105.80
      1.05
      3.444
      67.9
      42
      285
      589105.80
      106.80
      1.00
      0.830
      >200
      210
      2519
      7532106.80
      107.40
      0.60
      0.329
      168.5
      78
      1103
      2762


25

---

LA-07-05
      115.25
      95.80
      96.60
      0.80
      0.093
      54.4
      1836
      806
      130099.80
      100.15
      0.35
      0.992
      87
      103
      248
      337100.55
      101.25
      0.70
      0.418
      174.2
      304
      2563
      13500SANTIAGO STRUCTUREST-07-01
      309.05
      51.00
      51.25
      0.25
      7.260
      37
      108
      >10000
      >1000055.45
      56.45
      1.00
      0.040
      55.9
      9940
      1038
      402ST-07-02
      200.05
      120.80
      121.10
      0.30
      0.09
      59.1
      2652
      14100
      37800SANTA ANA, SAN PEDRO & SAN PAUL: No significant interceptsSTA-07-01
      315.30SP&P-07-01
      181.25NUESTRA SENORANS-07-01
      167.10
      99.40
      99.85
      0.45
      0.045
      258.2
      7184
      65500
      77800159.90
      161.05
      1.15
      3.291
      53.6
      14700
      157
      661161.05
      161.95
      0.90
      1.195
      33.8
      8469
      133
      359NS-07-02
      134.05NS-07-03
      121.35HOLES NS-07-02, AND 03 did not intersect the Nuestra Senora Vein (probably
        due to faulting).NS-07-04
      101.60
      68.90
      69.55
      0.65
      0.115
      38.8
      1669
      2968
      142990.55
      91.25
      0.70
      0.02
      53.9
      225
      518
      121391.25
      91.90
      0.65
      0.01
      22
      50
      763
      133591.90
      94.15
      2.25
      0.04
      143Includes:
      
      91.90
      92.90
      1.00
      0.03
      146
      233
      829
      226292.90
      93.40
      0.50
      0.015
      196.5
      578
      1728
      332193.40
      94.15
      0.75
      0.065
      103.4
      875
      >10000
      >10000NS-07-05
      124.85
      61.05
      61.45
      0.40
      0.195
      27.4
      126
      1115
      24561.45
      62.45
      1.00
      0.115
      19.6
      49
      1485
      60062.45
      63.15
      0.70
      0.150
      58.9
      314
      1189
      337GEOPHYSICAL  IP TARGETDepth (m)
      From (m)
      To (m)
      Intersection (m)
      Au g/t
      Ag g/t
      Cu ppm
      Pb ppm
      Zn ppmGFA-07-01
      360.75
      260.30
      262.355
      2.05260.30
      261.20
      0.90
      0.055
      10.6
      33
      421
      1908261.20
      261.95
      0.75
      0.030
      4.7
      14
      286
      1668261.95
      262.35
      0.40
      0.790
      209.2
      554
      751
      3657


Sample
lengths of the NQ drill core were diamond sawed into halves by mine staff and
shipped to Inspectorate Labs in Durango, Mexico, for preparation into pulps and
rejects. Pulps were analyzed at Inspectorate Labs in Sparks, Nevada. Gold and
silver were analyzed by fire assay using Aqua Regia Leach and AA finish. Other
elements are reported from a 29 element I.C.P. package.

Sample
lengths of the NQ drill core were diamond sawed into halves by mine staff and
shipped to Inspectorate Labs in Durango, Mexico, for preparation into pulps and
rejects. Pulps were analyzed at Inspectorate Labs in Sparks, Nevada. Gold and
silver were analyzed by fire assay using Aqua Regia Leach and AA finish. Other
elements are reported from a 29 element I.C.P. package.

26

---

The
Company is now focusing on drilling the San Gonzalo vein system in order to
establish a drill indicated resource for San Gonzalo. The Company has also
recently completed building a new drill core storage facility which will store
in excess of 40,000 metres of core.

Subsequent
to the year end, the Company announced the results of a seven hole diamond drill
program on the San Gonzalo gold, silver, lead, zinc structure situated 2 km
northeast of its former producing Avino mine (1976  2001).

The
San Gonzalo structure strikes northwest/southeast and dips very steeply (85-90°)
towards the southwest. The principal intersections are:

Vein or Structure
      From 
        (metres)
      To 
        (metres)
      Down Hole 
        Lengths (m)
      Au 
        (g/t)
      Ag 
        (g/t)
      Pb%
      Zn(%)Hole
      SG-07-01Santiago Vein
      147.0
      149.7
      2.70
      1.19
      227
      >
        1%
      >
        1%San Gonzalo Vein Hanging Wall Zone
      357.3
      362.15
      4.85
      0.64
      343.2
      0.36%
      0.63%San Gonzalo Vein Foot Wall Zone
      372.65
      375.05
      2.4
      2.41
      712.4
      0.5%
      0.13%Hole
      SG-07-02San Gonzalo Vein Hanging Wall Zone
      214.65
      219.10
      4.45
      6.11
      583.8
      1.4
      2.54San Gonzalo Vein Foot Wall Zone
      252.65
      256.00
      3.35
      6.91
      21.1
      1.55
      2.33Hole
      SG-07-03San
      Gonzalo Vein
      187.45
      188.70
      1.25
      3.57
      341
      0.6
      0.87Hole
      SG-07-04Santiago Vein
      18.55
      25.00
      6.45
      0.21
      364
      NS
      NS(includes)
      20.85
      21.9
      1.05
      0.29
      990
      0.21
      NS21.90
      22.8
      0.90
      0.49
      433
      0.16
      NSCross Vein
      31.00
      34.05
      3.05
      0.18
      86
      0.17
      NSSan
      Gonzalo HW
      248.15
      249.25
      1.10
      0.43
      58
      0.25
      0.26FW
      258.75
      259.00
      0.25
      2.66
      114
      4.8
      4.22Hole
      SG-07-05Santiago Vein
      28.70
      31.80
      3.10
      0.49
      201
      NS
      NSIncludes
      31.10
      31.80
      0.70
      1.54
      272
      NS
      NSHole
      SG-07-06Santiago Vein
      24.80
      28.30
      3.50
      0.40
      226
      NS
      NSCross Vein
      280.65
      280.90
      0.25
      0.50
      2,120
      7.82
      NSSan
      Gonzalo Vein
      367.35
      371.5
      3.85
      0.10
      11
      NS
      NSHole
      SG-07-07San
      Gonzalo Vein
      247.75
      250.35
      2.60
      2.85
      351
      1.04
      0.66


Hole
SG-07-08 missed the ore shoot and encountered only low gold and silver values.
For holes SG-07-09, 10 and 11 only gold results have been received to date. We
will release results when silver and base metal assays are received.

The
Company also announced significant intersections from holes SG-07-12 and
SG-07-13 as follows:

SG-07-12 (Dip 53 total length 175.45 m)

27

---

Down
hole intersection length 165.65 -- 169.45 m (3.80 m) 9.5 g/t gold, 655 g/t
silver, 574 ppm copper, 2,872 ppm lead, 2503 ppm zinc.

Includes:

From
    To
    Metres
    Au g/t
    Ag g/t
    Cu ppm
    Pb ppm
    Zn ppm165.65
    166.40
    0.75
    22.902
    1,609.6
    840
    2,106
    3,692166.40
    167.05
    0.65
    8.366
    898.0
    262
    974
    2,266167.05
    167.75
    0.70
    13.508
    427.6
    261
    1,188
    1,282167.75
    168.55
    0.80
    1.890
    283.6
    1,169
    9,356
    4,652168.55
    169.45
    0.90
    2.792
    194.4
    293
    427
    723


SG-07-13 (Dip 50 total length 160.55)

Down Hole Intersection Lengths 147.45
-- 153.00 m (5.55m) 1.12 g/t gold, 189 g/t silver, 0.28% lead, 0.43% zinc.

Or

149.05 -- 153.00 m (3.59m) 1.39 g/t
gold, 230 g/t silver 544 ppm Copper, 3,211 ppm Lead and 4368 Zinc

Includes:

From
    To
    Metres
    Au g/t
    Ag g/t
    Cu ppm
    Pb ppm
    Zn ppm147.45
    148.45
    1.00
    0.550
    91.5
    3,199
    2,205
    2,436148.45
    149.05
    0.60
    0.155
    77.9
    326
    724
    7,039149.05
    149.70
    0.65
    1.209
    150.8
    192
    1,284
    1,670149.70
    150.70
    1.00
    0.778
    500.6
    264
    1.779
    3,037150.70
    151.50
    0.80
    3.153
    238.9
    1,910
    11,000
    10,700151.50
    152.20
    0.70
    0.822
    121.3
    241
    922
    4,552152.20
    153.00
    0.80
    1.057
    44.5
    91
    783
    1,730


In
September 2006, the Company commissioned an independent plant audit by Herb
Osborne and Associates, a widely recognized expert in process plant evaluations,
to conduct a full review of the plant, including the condition of all equipment,
the capacity of each circuit, and the efficiency of plant. The report was an
order of magnitude cost estimate for the processing plant and is not NI 43-101
compliant as it does not include underground development work.

The
Avino process plant was built initially in the 1970s refurbished and capacity
increased in 1993. Most of the infrastructure is in place for an ongoing 1000
TPD operation. Some of the buildings will require cleanup and repair and
refurbishment. The plant was fully permitted but remains in temporary closure.
Permits will have to be brought current.

At
the time of shutdown in 2001 with low commodity prices the mill was operating at
an average rate of 1130 TPD. The concentration ratio (weight) ranged from 2.5 to
3.5% i.e. producing 25-30 TPD of concentrate at a 20-25 g/t Au, 2-4 Kg/t Ag and
22-24% Cu. Prior to shut down the average cost per ton milled was approximately
US $16/ton and about US $7/ton for freight treatment and refining charges from
the smelter. A new mining value cut off grade was determined to be around US
$30/ton. This followed a review of the historical production and financial
figures.

28

---

The
report concluded that the process plant can be brought back into operation in as
little as three months contingent upon the availability of operators and
mechanics for about US $1 million for an operating life of 5 to 10 years. A more
realistic schedule would be nine months to accommodate the time required to
ready the mine for continuous production. The operating life of 5 to 10 years
refers to the operating life of the processing plant after the capital
expenditures and not the operating life of the mine. The Company has not
completed a feasibility study and this should not be perceived as a
projection.

The
report also concluded that the existing tailings pond is near capacity and that
there is adequate space with reasonable gradients adjacent to the existing
tailings to construct a new tailings area as well as space for a future heap
leach operation on previously disturbed ground. Order of magnitude cost estimate
for this tailings facility is based on a starter dam and monitoring devices
necessary for a ten year life is a little over US $2 million.

Total
capital expenditure to achieve a 10 year operating plan is therefore estimated
to be around US $3 million and a reasonable valuation of the property as an
operating entity is US $40 million. The valuation of US $40 million by Herb
Osborne and Associates is the construction value for a new 1,000 TPD plant with
new equipment and is not a value of the property as an operating entity.

The
Company is also considering dewatering the main trackless decline ramp in 2007.
This will allow access for development of underground workings and drilling to
bring the ore blocks into NI 43-101 compliance.

In
December 2006, the Company contracted Peter E. Walcott and Associates to carry
out a 80 km line deep penetrating IP Survey at its Avino property in Mexico. IP
Geophysics will help identify drill targets for the upcoming year.

The
survey explored several areas of Avinos extensive holdings in the district. Of
particular interest was the Gap Zone between the former producing mine (1976 
2001) and the Cerro San Jose area. In addition the area west of the former
producing mine will be explored at depth.

Proposed
  Work Program.We are currently completing a preliminary feasibility study
  for the recovery and processing of the oxide mine tailings deposited between
  1974 and 1993. The Wardrop Report recommends perimeter test work on tailings
  and advance to pre-feasibility study. We are proposing to drill approximately
  20 holes at San Gonzalo to a depth of approximately 2,400 meters at a cost of
  approximately US$0.6 million and a further 11 holes on the Main ET Vein to a
  depth of approximately 3,700 meters at a cost of approximately US$0.5 million.

Bralorne Mine Property

On
November 26, 1991, the Company acquired a 100% interest in a property consisting
of 154 Crown granted mineral claims, five reverted Crown granted claims, four
located mineral claims and two placer leases. These interests are collectively
referred to as the "Bralorne Property". Pursuant to an option and joint venture
agreement with Bralorne dated July 21, 1993 and amended on July 12, 1994,
referred to as the "JV Agreement", Bralorne acquired the right to acquire a 50%
interest in the Bralorne Property. We then entered into a further agreement with
Bralorne Gold Mines Ltd., referred to as "Bralorne", dated July 21, 1995 under
which the original JV Agreement was amended. Under the terms of the amended
agreement, Bralorne acquired its 50% interest in the Bralorne Property. The
Bralorne Property was then operated as a joint venture between the Company and
Bralorne.

Effective
June 20, 2002, the Company transferred its interest in the Bralorne Property to
Bralorne for a nominal amount of $1 and the assumption by Bralorne of the full
amount of the principal of US$2,000,000 and interest payable under the mortgage
bonds originally issued for a loan obtained by the Company and Bralorne in 1995,
the proceeds of which were to be used for further development of the Bralorne
Property. As a result of the disposition of the Bralorne Property, the
Company recognized a loss of $40,097 and removed certain assets and liabilities
from proportionate consolidation in 2003.

29

---

Item 5. Operating and Financial Review and Prospects

This
discussion and analysis of the operating results and the financial position of
the Company for the years ended January 31, 2007, 2006 and 2005 should be read
in conjunction with the financial statements and the related notes attached
hereto (item17).

Our
financial statements are prepared in accordance with Canadian GAAP which has
several notable differences from US GAAP. Canadian GAAP permits the deferral of
acquisition and exploration costs, subject to periodic adjustments for
impairment, whereas US GAAP requires that such costs be expensed in the period
incurred. Canadian GAAP also requires that investments available for sale be
recorded at the lower of cost and market with long-term investments in
marketable securities being written down to market when impairment is considered
other than temporary, in which case the written down value becomes the new cost
base. US GAAP requires investments available for sale to be recorded at market
and unrealized holding gains or losses to be charged to comprehensive income or
loss. See. Note 20 to the financial statements which sets out a reconciliation
between Canadian and US GAAP.

**A.**     **Operating
Results**

Fiscal year ended January 31, 2007 compared to fiscal year
ended January 31, 2006

Operating and administrative expenses

General
and administrative expenses totaled $4,014,734 for the year ended January 31,
2007 compared with $1,416,797 for the year ended January 31, 2006, an increase
of $2,597,937. The largest individual expense increase for the period is due to
the recognition of stock based compensation for options to employees. The amount
charged to operations in the fiscal 2007 year was $2,860,603 compared to
$725,125 in fiscal 2006, a difference of $2,135,478. The stock-based
compensation is not a cash expense. It is the fair value attributed to the stock
options granted in a particular period to employees and directors of the Company
based on the Black-Scholes pricing model. In fiscal 2007, there were a higher
number of options granted compared to the previous year, thus resulting in a
higher stock-based compensation. Once the fair value of the stock options is
determined, the amount is charged to operations over the vesting period along
with a corresponding value applied to contributed surplus.

The
balance of the increase in operation and administrative costs for fiscal 2007
over fiscal 2006 is due to increases in amortization of $1,697, general
exploration of $106,899, management fees of $27,000, office and miscellaneous
costs of $26,484, regulatory and compliance fees of $12,726, salaries and
benefits of $14,284, shareholder and investor relations of $267,476 and travel
and entertainment of $19,457. The only reduction in operating and administrative
expenses in fiscal 2007 was to professional fees for $13,564. The higher general
exploration costs, management fees, office and miscellaneous costs, salaries and
benefits and travel and entertainment expenses in fiscal 2007 are due to the
same reasons discussed above for the three month period comparison. Regulatory
and compliance fees were higher in fiscal 2007 due to the filing fees associated
with the $10 million private placement. In regards to significantly higher
shareholder and investor relations costs in fiscal 2007, part of the reason was
increased promotional and advertising efforts and investor relations service
agreements that did not exist in fiscal 2006. Another reason is that some
investor relations service providers received more stock options in fiscal 2007
than fiscal 2006 as per terms of their agreements. As described above for
stock-based compensation on options granted to employees and directors, the
value of these options are determined in the same manner but instead are charged
to shareholder and investor relations as the options become vested. Within the
$464,806 in shareholder and investor relations expenses in fiscal 2007, $195,600
is for stock based compensation which is not paid in cash. In comparison, in
fiscal 2006 the shareholder and investor relations expense included an amount of
$103,981 that was due to stock based compensation, a difference of
$91,619.

30

---

Loss for the period

Loss
for the year ended January 31, 2007 was $3,648,539 compared with a loss of
$2,369,724 for the year ended January 31, 2006, an increase of $1,278,815. This
increase was due to larger operating and administrative expenses discussed
above. One factor that reduced the overall loss in fiscal 2007 was an increase
of $384,158 in interest income over fiscal 2006 which partially offset the
increase in operating and administrative expenses. Other changes were an
increase of $30,464 in foreign exchange losses in fiscal 2007 over fiscal 2006,
and the year ended January 31, 2006 had several other expense items that were
either not incurred or were much less in fiscal 2007. These were the write-downs
of marketable securities and mineral properties and a significantly higher
equity loss in Cia Minera that were noted earlier in the fourth quarter loss
comparison.

Fiscal year ended January 31, 2006
  compared to fiscal year ended January 31, 2005

Operating and administrative expenses

Operating
and administrative expenses totaled $1,416,788 for the year ended January 31,
2006 compared with $506,010 for the year ended January 31, 2005, an increase of
$910,778. In 2006 there was stock options granted to employees, directors and
consultants of the Company which resulted in a stock-based compensation expense
of $829,106 charged to operations compared to $ 81,540 in the 2005 fiscal year.
When stock-based compensation is removed from both periods, the increase in
operating and administrative expenses for fiscal 2006 becomes $163,212. This
increase was primarily a result of an increase of $106,012 in professional fees,
office and miscellaneous costs of $23,455, salary and benefit of $4,219,
shareholder and investor relations of $34,305 and $13,269 in travel and
entertainment. There was a decrease in regulatory in compliance fees of $17,773.

Professional
fees were extraordinarily high in year ended January 31, 2006 due to legal fees
associated with completing SEC form 20-F filing requirements for each year
dating back to 2001. As well there were legal fees associated with the Company
being listed on the Frankfurt Stock Exchange. Share holder investor relations
expense was higher due to the increased amount of distribution of shareholder
information. Travel costs were higher due to efforts associated with Cia Minera
in Mexico and trips to Europe to attend trade shows and meet with potential
investors.

Loss for the period

The
loss for the year ended January 31, 2006 was $2,369,724 compared with a loss of
$814,710 for the year ended January 31, 2005, an increase of $1,555,014. Higher
operating and administrative expenses in YTD-2006 as discussed above accounted
for $910,778 of the increase. In addition, there were write-downs of $217,000 in
marketable securities and $103,242 on the Eagle property. Because of less costs
concerning the feasibility study in regards to the proposed acquisition of the
remaining 51% interest in Cia Minera, due diligence costs went from $391,899 in
fiscal 2005 to $355,921 in fiscal 2006, a decrease of $35,978. Due diligence
charged to operations during the year ended January 31, 2006 is comprised of
$133,915 for geological and metallurgical services, $26,054 in professional fees
and $195,952 for advances to Cia de Minera on account of its operations compared
to $128,419 for geological and metallurgical services, $22,964 in professional
fees and $240,516 for advances to Cia de Minera on account of its operations
during the year ended January 31, 2005. Interest income increased from $41,999
in fiscal 2005 to $46,073 in fiscal 2006 as approximately $525,000 more cash was
held in guaranteed investment certificates at January 31, 2006 compared to 2005.
The difference is also attributed to slightly higher interest rates.

31

---

**B.**     **Liquidity
and Capital Resources**

During
the year ended January 31, 2007 the Company incurred expenditures that increased
its mineral property carrying value on their British Columbian properties by
$51,751 and $10,225,805 on their Mexican properties. At this time the Company
has no operating revenues but did earn interest income of $430,231 in fiscal
2007 compared to $46,073 in fiscal 2006.

At
January 31, 2007, the Company had working capital of $9,780,917 and cash and
cash equivalents of $11,045,106. During the fiscal 2007 year, the Company raised
gross proceeds of $10,000,000 through a private placement of 5,000,000 shares at
a price of $2.00 per share. The Company also raised proceeds of $585,866 from
the exercising of 456,700 stock options and $3,125 from the exercising of 1,250
warrants. The Company is continuing its exploration programs in Mexico and
British Columbia and the estimated drilling costs for the following year is
$1,250,000 and $70,000 respectively. The Company has sufficient cash on hand at
this time to finance their planned exploration work on its mineral properties
and maintain administrative operations through January 31, 2008.

The
Company is in the exploration stage until such time that the Avino mine is
opened again. The investment in and expenditures on the mineral property
comprise most of the Companys assets along with a lesser asset amount in
regards to the Avino mine facilities and equipment. The recoverability of
amounts shown for its mineral property interest and related deferred costs and
the Companys ability to continue as a going concern is dependent upon the
continued support from its directors, the discovery of economically recoverable
reserves and the ability of the Company to obtain the financing necessary to
complete development and achieve profitable operations in the future. The
outcome of these matters cannot be predicted at this time.

Mineral
exploration and development is capital extensive, and in order to re-commence
operations at Cia Minera, the Company may be required to raise new equity
capital in the future. There is no assurance that the Company will be successful
in raising additional new equity capital.

The
  Company feels it has sufficient working capital to meet its current obligations
  and operating expenses. The Company has sufficient cash on hand at this time
  to finance planned exploration work on its mineral properties and maintain administrative
  operations. Mineral development is capital intensive, and in order to re-commence
  operations at Cia Minera, the Company may be required to raise new equity capital
  in the future. There is no assurance that the Company will be successful in
  raising new equity capital.

**C.**     **Research
and Development, Patents and Licenses, etc.**

As
the Company is a mineral exploration company with no research and development,
the information required by this section is not applicable.

**D.**     **Trend
Information**

As
the Company is a mineral exploration company with no currently producing
properties, the information required by this section is not applicable.

**E.**     **Off-balance
sheet arrangements**

The
Company does not have any off-balance sheet arrangements.

**F.**     **Tabular
disclosure of contractual obligations**

As
at January 31, 2007, the Company had the following contractual obligations:

32

---

Total
    
    
      <1 year
    
    
      1-3 years
    
    
      3-5 years
    
    
      More than 5 yearsInvestor Relations
    
      26,613
    
    
      26,613
    
    
      -
    
    
      -
    
    
      -Drilling Contract
    
      416,022
    
    
      416,022
    
    
      -
    
    
      -
    
    
      -Total
    
      442,635
    
    
      442,635


**G.**     **Safe
Harbor**

Certain
statements in this Annual Report, including those appearing under this Item 5,
constitute "forward-looking statements" within the meaning of the United States
Private Securities Litigation Reform Act of 1995, Section 21E of the
United States Securities Exchange Act of 1934, as amended, and Section
27A of the United States Securities Act of 1933, as amended.
Additionally, forward-looking statements may be made orally or in press
releases, conferences, reports, on our website or otherwise, in the future, by
us or on our behalf. Such statements are generally identifiable by the
terminology used such as "plans", "expects", "estimates", "budgets", "intends",
"anticipates", "believes", "projects", "indicates", "targets", "objective",
"could", "may", or other similar words.

The
forward-looking statements are subject to known and unknown risks and
uncertainties and other factors that may cause actual results, levels of
activity and achievements to differ materially from those expressed or implied
by such statements. Such factors include, among others: market prices for
metals; the results of exploration and development drilling and related
activities; economic conditions in the countries and provinces in which we carry
on business, especially economic slowdown; actions by governmental authorities
including increases in taxes, changes in environmental and other regulations,
and renegotiations of contracts; political uncertainty, including actions by
insurgent groups or other conflict; the negotiation and closing of material
contracts; and the other factors discussed in Item 3 Key Information  "Risk
Factors", and in other documents that we file with the SEC. The impact of any
one factor on a particular forward-looking statement is not determinable with
certainty as such factors are interdependent upon other factors; our course of
action would depend upon our assessment of the future considering all
information then available. In that regard, any statements as to future
production levels; capital expenditures; the allocation of capital expenditures
to exploration and development activities; sources of funding of our capital
program; drilling; expenditures and allowances relating to environmental
matters; dates by which certain areas will be developed or will come on-stream;
expected finding and development costs; future production rates; ultimate
recoverability of reserves; dates by which transactions are expected to close;
cash flows; uses of cash flows; collectability of receivables; availability of
trade credit; expected operating costs; expenditures and allowances relating to
environmental matters; debt levels; and changes in any of the foregoing are
forward-looking statements, and there can be no assurances that the expectations
conveyed by such forward-looking statements will, in fact, be realized.

Although
we believe that the expectations conveyed by the forward-looking statements are
reasonable based on information available to us on the date such forward-looking
statements were made, no assurances can be given as to future results, levels of
activity, achievements or financial condition.

Readers
should not place undue reliance on any forward-looking statement and should
recognize that the statements are predictions of future results, which may not
occur as anticipated. Actual results could differ materially from those
anticipated in the forward-looking statements and from historical results, due
to the risks and uncertainties described above, as well as others not now
anticipated. The foregoing statements are not exclusive and further information
concerning us, including factors that could materially affect our financial
results, may emerge from time to time. We do not intend to update
forward-looking statements to reflect actual results or changes in factors or
assumptions affecting such forward-looking statements.

33

---

Item 6. Directors, Senior Management and Employees

**A.**     **Directors
and Senior Management**

The
following is a list of the Company's directors and senior management as at July
18, 2007. The directors were re-elected by the Company's shareholders on July
17, 2007 and are elected for a term of one year, which term expires at the
election of the directors at the next annual meeting of shareholders.

|Name and Present Position         |  |                                                                                                                                                                                                                                                                                                                                      |  |                       
|--------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------
|with the
      Company            |  | Principal Occupation                                                                                                                                                                                                                                                                                                                 |  | Director/Officer Since
|                                  |  |                                                                                                                                                                                                                                                                                                                                      |  |                       
|Lloyd Andrews Director/Chairman   |  | Chairman and Director of Berkley Resources
      Inc., Bralorne Gold Mines Ltd., Coral Gold Resources Ltd.                                                                                                                                                                                                                           |  | June 2005(1)          
|                                  |  |                                                                                                                                                                                                                                                                                                                                      |  |                       
|Michael Baybak Director           |  | A Business Consultant.                                                                                                                                                                                                                                                                                                               |  | June 1990             
|                                  |  |                                                                                                                                                                                                                                                                                                                                      |  |                       
|Gary Robertson                    |  | Certified Financial Planner, Director of
      Bralorne Gold Mines Ltd., Coral Gold Resources Ltd., Levon Resources Ltd.,
      Mill Bay Ventures Inc. and Sage Gold Inc.                                                                                                                                                            |  | August 2005(2)        
|                                  |  |                                                                                                                                                                                                                                                                                                                                      |  |                       
|David Wolfin(3)Director/President |  | Director and VP Finance of Berkley Resources
      Inc., Director and VP Finance of Bralorne Gold Mines Ltd., Director and
      VP, Finance, of Levon Resources Ltd., President and Director of Coral Gold
      Resources Ltd. and Gray Rock Resources Ltd. and Director of Mill Bay
      Ventures Ltd. and Cresval Capital Corp. |  | October 1995          
|                                  |  |                                                                                                                                                                                                                                                                                                                                      |  |                       
|Louis Wolfin(3)Director           |  | Director and Chief Executive Officer of
      Bralorne Gold Mine Ltd., Coral Gold Resources Ltd. and Levon Resources
      Ltd. and Director of Cresval Capital Corp.                                                                                                                                                                |  | August 1969           
|                                  |  |                                                                                                                                                                                                                                                                                                                                      |  |                       
|Connie Lillico Secretary          |  | Secretary of Berkley Resources Inc., Bralorne
      Gold Mines Ltd., Coral Gold Resources Ltd., Gray Rock Resources Ltd.,
      Levon Resources Ltd. and Mill Bay Ventures Inc.; formerly an office
      administrator and paralegal                                                                                                |  | July 2004             

|(1) | Lloyd Andrews was elected as a director of the Company on
      June 24, 2005.
|--- | ------------------------------------------------------------------------------
|(2) | Director since August 2, 2005.                                                
|(3) | Mr. David Wolfin is the son of Mr. Louis
  Wolfin.                            

**B.**     **Compensation**

Beginning
  in the third quarter of the 2007 fiscal year, the independent directors of the
  Company have been compensated $750 per quarter by the Company in their capacities
  as directors. The Chairman of each committee is also paid $250 per quarter.
  During the year ended January 31, 2007 ,
  the Company paid an aggregate of $87,000 to Intermark Capital Corp., a private
  company controlled by David Wolfin, president and director of the Company for
  management advisory services. The Company paid an aggregate of $53,837 to ABC
  Drilling Services Inc., a private company whose common directors include Louis
  Wolfin and David Wolfin for drilling services, referred to as "ABC Drilling".
  The Company paid an aggregate of $84,279 to National Media Associates Inc.,
  referred to as "National Media", a business significantly influenced by Michael
  Baybak, a director of the Company for investor relations services. Incentive
  stock have been granted to non-executive directors and other insiders of the
  Company and are outstanding to purchase an aggregate of 180,000 common shares
  at a price of $1.20 per share exercisable on or before October 21, 2008, of
  which 138,200 have been exercised, 180,000 shares of the Company at a price
  of $1.35 per share exercisable on or before April 5, 2010 and September 26,
  2010, of which 7,500 have been exercised and 380,000 shares of the Company at
  a price of $3.99 per share exercisable on or before April 26, 2011, none of
  which have been exercised.

34

---

The
following table sets forth particulars concerning the compensation paid or
accrued for services rendered to the Company in all capacities during each of
the last three financial years of the Company to its Chief Executive Officer,
Chief Financial Officer and to the other executive officers of the Company who
received a combined salary and bonus in excess of $150,000 (the Named Executive
Officers during the financial year ended January 31, 2006).

Summary Compensation Table(1)Long-TermAnnual Compensation
      
      
      
      Compensation
        AwardsSecuritiesBonus
      
      
      
      Under
      
      Restrictedfor
      
      Other Annual
      
      Options/SARs
      
      Shares/Units
      
      All OtherName/Principal
      
      
      
      Salary(2)
      
      the Year
      
      Compensation
      
      Granted
      
      Awarded
      
      CompensationPosition
      
      Year
      
      $
      
      $
      
      $
      
      (#)(3)
      
      $
      
      $David Wolfin
      
      2007
      
      87,000
      
      -
      
      17,500
      
      240,000
      
      -
      
      1,479President and
      
      2006
      
      60,000
      
      -
      
      -
      
      100,000
      
      -
      
      1,389Director
      
      2005
      
      60,000
      
      -
      
      -
      
      80,000
      
      -
      
      1,082Louis Wolfin
      
      2007
      
      -
      
      -
      
      -
      
      291,800
      
      -
      
      1,320Chief Executive
      
      2006
      
      2,000
      
      -
      
      -
      
      228,000
      
      -
      
      1,718Officer and
      
      2005
      
      -
      
      -
      
      -
      
      150,000
      
      -
      
      859Director


|(1) | Certain columns are omitted because there has been no
      compensation awarded to, earned by or paid to any of the named executives
      required to be reported in this table.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | No employee earned in excess of $100,000.                                                                                                                                         
|(3) | Represents total common shares under options as of the
      end of the fiscal year.                                                                                              

During
  the most recent fiscal year, stock options have been granted to the Named Executive
  Officers as follows:

Market Value of% of Total
    
    
    
    SecuritiesOptions
    
    
    
    underlyingName of
    
    Securities
    
    Granted to
    
    Executive or
    
    Options on DateExecutive
    
    Under Option
    
    Employees in
    
    base Price
    
    of GrantOfficer
    
    Granted
    
    Financial Year
    
    ($/Security)
    
    ($/Security)
    
    Expiration DateDavid Wolfin
    
    200,000
    
    20%
    
    $3.99
    
    $3.99
    
    April 26, 2011Louis Wolfin
    
    180,000
    
    18%
    
    $3.99
    
    $3.99
    
    April 26, 2011


The
Company currently maintains a formal stock option plan, referred to as the
"Plan", under which stock options have been granted and may be granted to
purchase a number equal to 10% of the Company's issued capital from time to
time. To date, stock options to purchase a total of up to 1,451,300 shares have
been granted and remain outstanding under the Plan, leaving options for 607,173
available for issuance.

Termination of Employment, Changes in Responsibilities and
Employment Contracts

There
are no employment contracts between the Company and its executive officers and
the Company has no compensatory plan or arrangement with respect to its
executive officers in the event of the resignation, retirement or any other
termination of the executive officers' employment with the Company or in the
event of a change of control of the Company or in the event of a change
in the executive officers' responsibilities following a change in control, where
in respect of the executive officers the value of such compensation exceeds
$100,000.

35

---

**C.**     **Board
Practices**

The
  board of directors is currently comprised of five directors. The size and experience
  of the board is important for providing the Company with effective governance
  in the mining industry. The board's mandate and responsibilities can be effectively
  and efficiently administered at its current size. The chairman of the board
  is not a member of management. The board has functioned, and is of the view
  that it can continue to function, independently of management as required. At
  the Annual General Meeting, held on July 17, 2007, the shareholders elected
  Messrs. Andrews, Baybak, Robertson, Wolfin and Wolfin as directors.

The
board has considered the relationship of each director to the Company and
currently considers three of the five directors to be "unrelated" (Messrs.
Andrews, Baybak and Robertson). "Unrelated director" means a director who is
independent of management and free from any interest and any business or other
relationship which could reasonably be perceived to materially interfere with
the director's ability to act with a view to the best interest of the Company,
other than interests and relationships arising solely from shareholdings.

Two
of the directors (Messrs. Wolfin and Wolfin) are related family members.

Procedures
are in place to allow the board to function independently. At the present time
the board has experienced directors that have made a significant contribution to
the Company's success, and are satisfied that it is not constrained in its
access to information, in its deliberations or in its ability to satisfy the
mandate established by law to supervise the business and affairs of the Company.
Committees meet independent of management and other directors.

Mandate of the Board of Directors, its Committees and
Management

The
role of the board is to oversee the conduct of the Company's business, including
the supervision of management, and determining the Company's strategy.
Management is responsible for the Company's day to day operations, including
proposing its strategic direction and presenting budgets and business plans to
the board of directors for consideration and approval. The strategic plan takes
into account, among other things, the opportunities and risks of the Company's
business. Management provides the board with periodic assessments as to those
risks and the implementation of the Company's systems to manage those risks. The
board reviews the personnel needs of the Company from time to time, having
particular regard to succession issues relating to senior management. Management
is responsible for the training and development of personnel. The board assesses
how effectively the Company communicates with shareholders, but has not adopted
a formal communications policy. Through the audit committee, and in conjunction
with its auditors, the board assesses the adequacy of the Company's internal
control and management information systems. The board looks to management to
keep it informed of all significant developments relating to or effecting the
Company's operations. Major financings, acquisitions, dispositions and
investments are subject to board approval. A formal mandate for the board of
directors and the chief executive officer has not been considered necessary
since the relative allocation of responsibility is well understood by both
management and the board. The board meets as required. The board and committees
may take action at these meetings or at a meeting by conference call or by
written consent.

36

---

Committees

Audit Committee

The
audit committee assists the board in its oversight of the Company's financial
statements and other related public disclosures, the Company's compliance with
legal and regulatory requirements relating to financial reporting, the external
auditors, qualifications and independence and the performance of the internal
audit function and the external auditors. The committee has direct
communications channels with the Company's auditors. The committee reviews the
Company's financial statements and related management's discussion and analysis
of financial and operating results. The committee can retain legal, accounting
or other advisors.

The
audit committee currently consists of three directors (Messrs. David Wolfin,
Lloyd Andrews and Gary Robertson). Two of the members are unrelated and all of
whom are financially literate, and have accounting or related financial
expertise. "Financially literate" means the ability to read and understand a
balance sheet, an income statement, and a cash flow statement. "Accounting or
related financial expertise" means the ability to analyze and interpret a full
set of financial statements, including the notes attached thereto, in accordance
with Canadian GAAP.

The
board has adopted a charter for the audit committee which is reviewed annually
and sets out the role and oversight responsibilities of the audit committee with
respect to:

|- | its relationship with and expectation of the external
      auditors, including the establishment of the independence of the external
      auditor and the approval of any non-audit mandates of the external
      auditor;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                              
|- | determination of which non-audit services the external
      auditor is prohibited from providing;                                                                                                                           
|  |                                                                                                                                                                                                                              
|- | the engagement, evaluation, remuneration, and termination
      of the external auditors;                                                                                                                                    
|  |                                                                                                                                                                                                                              
|- | appropriate funding for the payment of the auditor's
      compensation and for any advisors retained by the audit committee;                                                                                                
|  |                                                                                                                                                                                                                              
|- | its relationship with and expectation of the internal
      auditor;                                                                                                                                                         
|  |                                                                                                                                                                                                                              
|- | its oversight of internal control;                                                                                                                                                                                           
|  |                                                                                                                                                                                                                              
|- | disclosure of financial and related information; and                                                                                                                                                                         
|  |                                                                                                                                                                                                                              
|- | any other matter that the audit committee feels is
      important to its mandate or that which the board chooses to delegate to
      it.                                                                                   

Compensation Committee

The
compensation committee recommends to the board of directors the compensation of
the Company's directors and the Chief Executive Officer which the compensation
committee feels is suitable. Its recommendations are reached primarily by
comparison of the remuneration paid by the Company with publicly available
information on remuneration paid by other reporting issuers that the
compensation committee feels are similarly placed within the same business of
the Company.

The
compensation committee consists of two unrelated directors (Messrs. Robertson
and Andrews) and one related director (Mr. D. Wolfin). It is intended that the
compensation committee will eventually be comprised of solely unrelated
directors.

37

---

Corporate Governance Committee

The
corporate governance committee assists the board in establishing the Companys
corporate governance policies and practices generally, identifying individuals
qualified to become members of the board, reviewing the composition and
functioning of the board and its committees and making recommendations to the
board of directors as appropriate. When considering nominees to the board the
committees mandate requires that it consider the current composition of the
board and give consideration to candidates having experience in the industry,
life experience and background. The committee is also responsible for the
Companys corporate governance guidelines. The committee may retain legal or
other advisors.

The
corporate governance committee currently consists of three directors (Messrs.
Lloyd Andrews, Gary Robertson and Louis Wolfin). Messrs. Andrews and Robertson
are unrelated directors. It is intended that this committee will eventually be
comprised solely of unrelated and independent directors.

**D.**     **Employees**

The
Company has one employee located in Mexico.

**E.**     **Share
Ownership**

The
following table sets forth the share ownership of the directors and officers of
the Company as of July 10, 2007.

Name of Beneficial Owner
    
    Number of Shares
    
    PercentLloyd Andrews
    
    2,500
    
    *Michael Bayback
    
    2,400
    
    *Gary Robertson
    
    20,000
    
    *David Wolfin
    
    61,184
    
    *Louis Wolfin
    
    4,345
    
    *Connie Lillico
    
    2,500
    
    *


* Less than one percent

Outstanding Options

The
following information, as of July 10, 2007, reflects outstanding options held by
the Named Executive Officers:

ExerciseNo. of Shares
    
    Date of Grant
    
    Price
    
    Expiration DateLouis Wolfin
    11,800
    
    October 21, 2003
    
    $1.20
    
    October 23, 2008David Wolfin
    40,000
    
    April 5, 2005
    
    $1.35
    
    April 5,2010Louis Wolfin
    100,000
    
    April 5, 2005
    
    $1.35
    
    April 5,2010David Wolfin
    200,000
    
    April 26, 2006
    
    $3.99
    
    April 26, 2011Louis Wolfin
    180,000
    
    April 26, 2006
    
    $3.99
    
    April 26, 2011


38

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Item 7. Major Shareholders and Related Party
Transactions

**A.**     **Major
Shareholders**

As
far as it is known to the Company, it is not directly or indirectly owned or
controlled by any other corporation or by the Canadian Government, or any
foreign government, or by any other natural or legal person.

As
of July 11, 2007 the Company knew of no person who owned more than five (5%)
percent of the outstanding shares of each class of the Company's voting
securities.

**B.**     **Related
Party Transactions**

During
  the twelve months ended January 31, 2007, the Company paid, or made provision
  for the future payment, of the following amounts to related parties:

| | i)   | $119,857 (2006 - $163,328; 2005 - $124,146) for
      administrative services and expenses to Oniva International Services Corp,
      referred to as "Oniva International", a private company that is 16.67%
      owned by the Company and with the remaining 83.33% shared equally between
      five other companies that are related by common directors and
      management;
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                    
| | ii)  | $87,000 (2006 - $60,000; 2005 - $60,000) to a private
      company controlled by the President for management fees;                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                    
| | iii) | $30,000 (2006 - $30,000; 2005 - $12,500) to a private
      company controlled by a Director of a related company for consulting
      fees;                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                    
| | iv)  | $84,279 (2006 - $Nil; 2005 - $Nil) for investor relations
      services to National Media, a business significantly influenced by a
      Director of the Company.                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                    
| | v)   | The Company paid or accrued $53,837 (2006 - $146,092;
      2005 - $Nil) to ABC Drilling, a private company that is a 100% owned
      subsidiary of Oniva International for drilling services and $6,854 (2006 -
      $20,433; 2005 - $Nil) to Bralorne, a public company with common directors
      and management, for exploration services.                                  

There
is an amount due from a related party of $64,933 (2006 - $83,000) from ABC
Drilling. The amount due is non-interest bearing, unsecured and has no stated
terms of repayment. The Company had also paid an exploration advance of $39,000
in a prior period of which the entire amount has been applied to drilling
services performed during the current period.

Amounts
due to related parties consist of $105 (2006 - $16,710) due to a private company
controlled by a Director of the Company, $7,500 (2006 - $Nil) due to a directors
and $133,919 (2006 - $161,563) due to Oniva.

**C.**     **Interests
of Experts and Counsel**

Not
Applicable.

39

---

Item 8. Financial Information

**A.**     **Statements and Other Financial Information**

The following financial statements of the Company are attached
to this Annual Report:

| | Auditors Report.                                                                              
| | ----------------------------------------------------------------------------------------------
| |                                                                                               
| | Balance Sheet for years
      ended January 31, 2007 and 2006.                                
| |                                                                                               
| | Statement of Operations
      and Deficit for the years ended January 31, 2007, 2006 and 2005.
| |                                                                                               
| | Statement of Cash flows
      for the years ended January 31, 2007, 2006, and 2005.           
| |                                                                                               
| | Notes to Financial
      Statements for the years ended January 31, 2007, 2006, and 2005.     

Dividend Policy

The
Company has never paid any dividends and does not intend to in the near future.

**B.**     **Significant
Changes**

None.

Item 9. The Offer and Listing

**A.**     **Offer
and Listing Details**

The
common shares of the Company are listed on the TSX-V under the symbol "ASM", on
the FSE under the symbol "GV6" and quoted in the United States on the OTC BB,
under the symbol "ASGMF".

As
of July 6, 2007, there were 706 holders of record in the United States holding
68.88% of the Company's outstanding common shares representing approximately
23.43% of the total shareholders. The Company's common shares are issued in
registered form and the percentage of shares reported to be held by record
holders in the United States is taken from the records of the Pacific Corporate
Trust Company in the City of Vancouver, the registrar and transfer agent for the
common shares.

The
following sets forth the high and low prices expressed in Canadian Dollars on
the TSX-V for the Company's common shares for the past five years, for each
quarter for the last two fiscal years, and for the last six months.

TSX-V(Canadian
        Dollars)Last Six Months
      
      High
      
      LowJune 2007
      
      2.00
      
      1.69May 2007
      
      2.24
      
      1.90April 2007
      
      2.75
      
      2.05March 2007
      
      2.33
      
      2.00February 2007
      
      2.44
      
      1.83January 2007
      
      2.23
      
      1.852006-2007
      
      High
      
      LowFourth Quarter ended January 31, 2007
      
      2.66
      
      1.80Third Quarter ended October 31, 2006
      
      2.45
      
      1.50Second Quarter ended July 31, 2006
      
      4.48
      
      1.70First Quarter ended April 30, 2006
      
      4.35
      
      2.00


40

---

TSX-V(Canadian
        Dollars)2006-2005
      
      High
      
      LowFourth Quarter ended January 31, 2006
      
      2.29
      
      1.38Third Quarter ended October 31, 2005
      
      1.57
      
      1.20Second Quarter ended July 31, 2005
      
      1.66
      
      1.11First Quarter ended April 30, 2005
      
      1.99
      
      1.18Last Five Fiscal Years
      
      High
      
      Low2007
      
      4.48
      
      1.502006
      
      2.29
      
      1.112005
      
      2.50
      
      1.002004
      
      3.00
      
      0.332003
      
      1.74
      
      0.32


**B.**     **Plan
of Distribution**

Not
Applicable.

**C.**     **Markets**

The
common shares of the Company are listed on the TSX-V under the symbol "ASM", on
the FSE under the symbol "GV6" and quoted in the United States on the OTC BB,
under the symbol "ASGMF".

**D.**     **Selling
Shareholders**

Not
Applicable.

**E.**     **Dilution**

Not
Applicable.

**F.**     **Expenses
of the Issue**

Not
Applicable.

Item 10. Additional Information

**A.**     **Share
Capital**

Not
Applicable.

**B.**     **Memorandum
and Articles of Association**

Common Shares

All
issued and outstanding common shares are fully paid and non-assessable. Each
holder of record of common shares is entitled to one vote for each common share
so held on all matters requiring a vote of shareholders, including the election
of directors. The holders of common shares will be entitled to dividends on a
pro-rata basis, if and when as declared by the board of directors. There are no
preferences, conversion rights, preemptive rights, subscription rights, or
restrictions or transfers attached to the common shares. In the event of liquidation, dissolution, or winding up of the
Company, the holders of common shares are entitled to participate in the assets
of the Company available for distribution after satisfaction of the claims of
creditors.

41

---

Powers and Duties of Directors

The
directors shall manage or supervise the management of the affairs and business
of the Company and shall have authority to exercise all such powers of the
Company as are not, by the British Columbia Business Corporations Actor
by the Memorandum or the Articles, required to be exercised by the Company in a
general meeting.

Directors
will serve as such until the next annual meeting. In general, a director who is,
in any way, directly or indirectly interested in an existing or proposed
contract or transaction with the Company whereby a duty or interest might be
created to conflict with his duty or interest as a director, shall declare the
nature and extent of his interest in such contract or transaction or the
conflict or potential conflict with his duty and interest as a director. Such
director shall not vote in respect of any such contract or transaction with the
Company in which he is interested and if he shall do so, his vote shall note be
counted, but he shall be counted in the quorum present at the meeting at which
such vote is taken. However, notwithstanding the foregoing, directors shall have
the right to vote on determining the remuneration of the directors.

The
directors may from time to time on behalf of the Company: (a) borrow money in
such manner and amount from such sources and upon such terms and conditions as
they think fit; (b) issue bonds, debentures and other debt obligations; and (c)
mortgage, charge or give other security on the whole or any part of the property
and assets of the Company.

The
directors of the Company must be persons of the full age of 18 years. There is
no minimum share ownership to be a Director. No person shall be a Director of
the Company who is not capable of managing their own affairs; is an undischarged
bankrupt; convicted of an offense in connection with the promotion, formation or
management of a corporation or involved in fraud within the last five years; or
a person that has had a registration in any capacity under the British Columbia
Securities Act or the British Columbia Mortgage Brokers Act
canceled within the last five years.

Shareholders

An
annual general meeting shall be held once in every calendar year at such time
and place as may be determined by the directors. A quorum at an annual general
meeting and special meeting shall be two shareholders or one or more proxy
holders representing two shareholders, or one shareholder and a proxy holder
representing another shareholder. There is no limitation imposed by the laws of
Canada or by the charter or other constituent documents of the Company on the
right of a non-resident to hold or vote the common shares, other than as
provided in the Investment Canada Act, referred to as the "Investment
Act", discussed below under "Item 10. Additional Information, D. Exchange
Controls."

In
accordance with British Columbia law, directors shall be elected by an "ordinary
resolution" which means: (a) a resolution passed by the shareholders of the
Company at a general meeting by a simple majority of the votes cast in person or
by proxy; or (b) a resolution that has been submitted to the shareholders of the
Company who would have been entitled to vote on it in person or by proxy at a
general meeting of the Company and that has been consented to in writing by such
shareholders of the Company holding shares carrying not less than the requisite
majority of the votes entitled to be cast on it.

Under
British Columbia law certain items such as an amendment to the Company's
articles or entering into a merger requires approval by a special resolution
which means: (a) a resolution passed by a majority of not less than the
requisite majority of the votes cast by the shareholders of the Company who,
being entitled to do so, vote in person or by proxy at a general meeting of the
company; or (b) a resolution consented to in writing by every shareholder of the
Company who would have been entitled to vote in person or by proxy at a general meeting of the Company, and a resolution so consented
to is deemed to be a special resolution passed at a general meeting of the
Company.

42

---

**C.**     **Material Contracts**

The
Company entered into a share exchange agreement dated for reference the
9th day of June, 2004 with Pedro Sanchez Mejorada, Fernando Ysita Del
Hoyo, Francisco Ysita del Hoyo, Bernardo Ysita del Hoyo, Carlos Ysita del Hoyo,
Manuel Ysita del Hoyo, Eduardo Ysita del Hoyo, Mercedes Ysita del Hoyo, Cia
Minera and Promotora in connection with the acquisition of the remaining 51%
interest in Cia Minera. The consideration to be paid by the Company for the 51%
interest consists of four million common shares of the Company. This agreement
was subject to a number of conditions including a satisfactory due diligence
review and final regulatory approval. The TSX-V approved the agreement on
October 18, 2005 and the acquisition of an additional 39.25% interest in Cia
Minera was completed on July 17, 2006 for consideration of 3,164,702 common
shares of the Company. The Company now owns 88.25% of the total issued shares of
Cia Minera and continues to consider its options with relation to the balance of
the interest.

The
Company entered into a cost sharing agreement dated October 1, 1997, and amended
November 1, 2003 to reimburse Oniva International for a variable percentage of
its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred
on behalf of the company, and to pay a percentage fee based on the total
overhead and corporate expenses. The agreement may be terminated with one-month
notice by either party.

The
Company entered into a 12 month agreement in with National Media to provide
financial relations, media relations and public market development services. The
Company has agreed to pay National Media US$6,000 per month, and the contract
can be terminated after September 15, 2006 upon 30 days' notice by the Company.
The agreement with National Media expired on March 15, 2007, and the Companys
commitment under the agreement as at January 31, 2007 totaled $10,613
(US$9,000).

The
Company entered into a 12 month Investor Relations Agreement with Investor
Relations Group Inc., formerly called Investors Relations Services Group John
Mullen & Partners, referred to as "IRS", to provide investor relations
services in Europe. In consideration for the services rendered, the Company has
agreed to pay IRS fees of $2,000 per month plus expenses. The agreement with IRS
expires on October 5, 2007, and the Companys commitment under the agreement as
at January 31, 2007 totaled $16,000.

The
Company has a contractual minimum drilling commitment for the exploration of its
mineral properties in Durango, Mexico. As at January 31, 2007 the Company is
committed to drilling services at an estimated cost of $416,022, which is
denominated in U.S. dollars (US$352,800). Management has determined that the
Companys exploration in fiscal 2008 will likely exceed the minimum commitment,
and thus the minimum drilling cost will be paid in fiscal 2008.

Please
  refer to note 19 of the financial statements included elsewhere in this Annual
  Report (Item 17) for further disclosure regarding material commitments.

**D.**     **Exchange
Controls**

Canada
has no system of exchange controls. There are no Canadian restrictions on the
repatriation of capital or earnings of a Canadian public company to non-resident
investors. There are no laws in Canada or exchange restrictions affecting the
remittance of dividends, profits, interest, royalties and other payments to
non-resident holders of the Issuers securities, except as discussed in
10.E. Taxation below.

There
are no limitations under the laws of Canada or in the organizing documents of
the Company on the right of foreigners to hold or vote securities of the
Company, except that the Investment Canada Act may require review and approval
by the Minister of Industry (Canada) of certain acquisitions of control
of the Company by a non-Canadian. The threshold for
acquisitions of control is generally defined as being one-third or more of the
voting shares of the Company. Non-Canadian generally means an
individual who is not a Canadian citizen, or a corporation, partnership, trust
or joint venture that is ultimately controlled by non-Canadians.

43

---

**E.**     **Taxation**

Canadian Federal Income Tax Consequences

The
following summarizes the principal Canadian federal income tax consequences
applicable to the holding and disposition of common shares in the capital of the
Company by a United States resident, and who holds common shares solely as
capital property, referred to as a "U.S. Holder". This summary is based on the
current provisions of the Income Tax Act (Canada), referred to as the
"Tax Act", the regulations thereunder, all amendments thereto publicly proposed
by the government of Canada, the published administrative practices of Revenue
Canada, Customs, Excise and Taxation, and the current provisions of the
Canada-United States Income Tax Convention, 1980, as amended, referred to
as the "Treaty". Except as otherwise expressly provided, this summary does not
take into account any provincial, territorial or foreign (including without
limitation, any United States) tax law or treaty. It has been assumed that all
currently proposed amendments will be enacted substantially as proposed and that
there is no other relevant change in any governing law or practice, although no
assurance can be given in these respects.

Each
U.S. Holder is advised to obtain tax and legal advice applicable to such U.S.
Holder's particular circumstances.

Every
U.S. Holder is liable to pay a Canadian withholding tax on every dividend that
is or is deemed to be paid or credited to the U.S. Holder on the U.S. Holder's
common shares. The statutory rate of withholding tax is 25% of the gross amount
of the dividend paid. The Treaty reduces the statutory rate with respect to
dividends paid to a U.S. Holder for the purposes of the Treaty. Where
applicable, the general rate of withholding tax under the Treaty is 15% of the
gross amount of the dividend, but if the U.S. Holder is a company that owns at
least 10% of the voting stock of the Company and beneficially owns the dividend,
the rate of withholding tax is 5% for dividends paid or credited after 1996 to
such corporate U.S. Holder. The Company is required to withhold the applicable
tax from the dividend payable to the U.S. Holder, and to remit the tax to the
Receiver General of Canada for the account of the U. S. Holder.

Pursuant
to the Tax Act, a U.S. Holder will not be subject to Canadian capital gains tax
on any capital gain realized on an actual or deemed disposition of a common
share, including a deemed disposition on death, provided that the U.S. Holder
did not hold the common share as capital property used in carrying on a business
in Canada, and that neither the U.S. Holder nor persons with whom the U.S.
Holder did not deal at arms length (alone or together) owned or had the right or
an option to acquire 25% or more of the issued shares of any class of the
Company at any time in the five years immediately preceding the disposition.

United States Federal Income Tax Consequences

Passive Foreign Investment Company

The
Company believes that it is a passive foreign investment company, referred to as
a "PFIC" for United States federal income tax purposes with respect to a United
States Investor. The Company will be a PFIC with respect to a United States
Investor if, for any taxable year in which such United States Investor held the
Company's shares, either (i) at least 75 % of the gross income of the Company
for the taxable year is passive income, or (ii) at least 50% of the Company's
assets are attributable to assets that produce or are held for the production of
passive income. In each case, the Company must take into account a pro-rata
share of the income and the assets of any company in which the Company owns,
directly or indirectly, 25% or more of the stock by value (the "look-through"
rules). Passive income generally includes dividends, interest, royalties, rents (other than rents and royalties derived from the active
conduct of a trade or business and not derived from a related person), annuities
and gains from assets that produce passive income. As a publicly traded
corporation, the Company would apply the 50% asset test based on the value of
the Company's assets.

44

---



Because
the Company believes it qualifies as a PFIC, unless a United States Investor who
owns shares in the Company (i) elects (a section 1295 election) to have the
Company treated as a "qualified electing fund", referred to as a "QEF"
(described below), or (ii) marks the stock to market (described below), the
following rules apply:

| | 1. | Distributions made by the Company during a taxable year
      to a United States Investor who owns shares in the Company that are an
      "excess distribution" (defined generally as the excess of the amount
      received with respect to the shares in any taxable year over 125% of the
      average received in the shorter of either the three previous years or such
      United States Investor's holding period before the taxable year) must be
      allocated ratably to each day of such shareholder's holding period. The
      amount allocated to the current taxable year and to years when the
      corporation was not a PFIC must be included as ordinary income in the
      shareholder's gross income for the year of distribution. The remainder is
      not included in gross income but the shareholder must pay a deferred tax
      on that portion. The deferred tax amount, in general, is the amount of tax
      that would have been owed if the allocated amount had been included in
      income in the earlier year, plus interest. The interest charge is at the
      rate applicable to deficiencies in income taxes.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 2. | The entire amount of any gain realized upon the sale or
      other disposition of the shares will be treated as an excess distribution
      made in the year of sale or other disposition and as a consequence will be
      treated as ordinary income and, to the extent allocated to years prior to
      the year of sale or disposition, will be subject to the interest charge
      described above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

A
shareholder that makes a section 1295 election will be currently taxable on his
or her pro-rata share of the Company's ordinary earnings and net capital gain
(at ordinary income and capital gain rates, respectively) for each taxable year
of the Company, regardless of whether or not distributions were received. The
shareholder's basis in his or her shares will be increased to reflect taxed but
undistributed income. Distributions of income that had previously been taxed
will result in a corresponding reduction of basis in the shares and will not be
taxed again as a distribution to the shareholder.

A
shareholder may make a section 1295 election with respect to a PFIC for any
taxable year of the shareholder (shareholder's election year). A section 1295
election is effective for the shareholder's election year and all subsequent
taxable years of the shareholder. Procedures exist for both retroactive
elections and filing of protective statements. Once a section 1295 election is
made it remains in effect, although not applicable, during those years that the
Company is not a PFIC. Therefore, if the Company re-qualifies as a PFIC, the
section 1295 election previously made is still valid and the shareholder is
required to satisfy the requirements of that election. Once a shareholder makes
a section 1295 election, the shareholder may revoke the election only with the
consent of the Commissioner.

If
the shareholder makes the section 1295 election for the first tax year of the
Company as a PFIC that is included in the shareholder's holding period, the PFIC
qualifies as a pedigreed QEF with respect to the shareholder. If a QEF is an
unpedigreed QEF with respect to the shareholder, the shareholder is subject to
both the non-QEF and QEF regimes. Certain elections are available which enable
shareholders to convert an unpedigreed QEF into a pedigreed QEF thereby avoiding
such dual application.



45

---

A
shareholder making the section 1295 election must make the election on or before
the due date, as extended, for filing the shareholder's income tax return for
the first taxable year to which the election will apply. A shareholder must make
a section 1295 election by completing Form 8621, attaching said Form to its
federal income tax return, and reflecting in the Form the information provided
in the PFIC Annual Information Statement, or if the shareholder calculated the
financial information, a statement to that effect. The PFIC Annual Information
Statement must include the shareholder's pro-rata shares of the ordinary
earnings and net capital gain of the PFIC for the PFIC's taxable year or
information that will enable the shareholder to calculate its pro-rata shares.
In addition, the PFIC Annual Information Statement must contain information
about distributions to shareholders and a statement that the PFIC will permit
the shareholder to inspect and copy its permanent books of account, records, and
other documents of the PFIC necessary to determine that the ordinary earnings
and net capital gain of the PFIC have been calculated according to federal
income tax accounting principles. A shareholder may also obtain the books,
records and other documents of the foreign corporation necessary for the
shareholder to determine the correct earnings and profits and net capital gain
of the PFIC according to federal income tax principles and calculate the
shareholder's pro-rata shares of the PFIC's ordinary earnings and net capital
gain. In that case, the PFIC must include a statement in its PFIC Annual
Information Statement that it has permitted the shareholder to examine the
PFIC's books of account, records, and other documents necessary for the
shareholder to calculate the amounts of ordinary earnings and net capital gain.
A shareholder that makes a Section 1295 election with respect to a PFIC held
directly or indirectly for each taxable year to which the Section 1295 election
applies must comply with the foregoing submissions.

Because
the Company's stock is "marketable" under section 1296(e), a United States
Investor may elect to mark the stock to market each year. In general, a PFIC
shareholder who elects under section 1296 to mark the marketable stock of a PFIC
includes in income each year an amount equal to the excess, if any, of the fair
market value of the PFIC stock as of the close of the taxable year over the
shareholder's adjusted basis in such stock. A shareholder is also generally
allowed a deduction for the excess, if any, of the adjusted basis of the PFIC
stock over the fair market value as of the close of the taxable year. Deductions
under this rule, however, are allowable only to the extent of any net mark to
market gains with respect to the stock included by the shareholder for prior
taxable years. While the interest charge regime under the PFIC rules generally
does not apply to distributions from and dispositions of stock of a PFIC where
the United States Investor has marked to market, coordination rules for limited
application will apply in the case of a United States Investor that marks to
market PFIC stock later than the beginning of the shareholder's holding period
for the PFIC stock.

Special
rules apply with respect to the calculation of the amount of the foreign tax
credit with respect to excess distributions by a PFIC or inclusions under a QEF.

Controlled Foreign Corporations

Sections
951 through 964 and Section 1248 of the Internal Revenue Code, referred
to as the "Code", relate to controlled foreign corporations, referred to as
"CFCs". A foreign corporation that qualifies as a CFC will not be treated as a
PFIC with respect to a shareholder during the portion of the shareholder's
holding period after December 31, 1997, during which the shareholder is a 10%
United States shareholder and the corporation is a CFC. The PFIC provisions
continue to apply in the case of a PFIC that is also a CFC with respect to
shareholders that are less than 10% United States shareholders.

The
10% United States shareholders of a CFC are subject to current United States tax
on their pro-rata shares of certain income of the CFC and their pro-rata shares
of the CFC's earnings invested in certain United States property. The effect is
that the CFC provisions may impute some portion of such a corporation's
undistributed income to certain shareholders on a current basis and convert into
dividend income some portion of gains on dispositions of stock, which would
otherwise qualify for capital gains treatment.

The
Company does not believe that it will be a CFC. It is possible that the Company
could become a CFC in the future. Even if the Company were classified as a CFC
in a future year, however, the CFC rules referred to above would apply only with
respect to 10% shareholders.

46

---

Personal Holding Company/Foreign Personal Holding
Company/Foreign Investment Company

A
  corporation will be classified as a personal holding company, or a "PHC", if at
  any time during the last half of a tax year (i) five or fewer individuals
  (without regard to their citizenship or residence) directly or indirectly or by
  attribution own more than 50% in value of the corporation's stock and (ii) at
  least 60% of its ordinary gross income, as specially adjusted, consists of
  personal holding company income (defined generally to include dividends,
  interest, royalties, rents and certain other types of passive income). A PHC is
  subject to a United States federal income tax of 39.6% on its undistributed
  personal holding company income (generally limited, in the case of a foreign
  corporation, to United States source income).

A
corporation will be classified as a foreign personal holding company, or an
"FPHC", and not a PHC if at any time during a tax year (i) five or fewer
individual United States citizens or residents directly or indirectly or by
attribution own more than 50% of the total combined voting power or value of the
corporation's stock and (ii) at least 60% of its gross income consists of
foreign personal holding company income (defined generally to include dividends,
interest, royalties, rents and certain other types of passive income). Each
United States shareholder in a FPHC is required to include in gross income, as a
dividend, an allocable share of the FPHC's undistributed foreign personal
holding company income (generally the taxable income of the FPHC, as specially
adjusted).

A
corporation will be classified as a foreign investment company, or an "FIC", if
for any taxable year it: (i) is registered under the Investment Company Act of
1940, as amended, as a management company or share investment trust or is
engaged primarily in the business of investing or trading in securities or
commodities (or any interest therein); and (ii) 50% or more of the value or the
total combined voting power of all the corporation's stock is owned directly or
indirectly (including stock owned through the application of attribution rules)
by United States persons. In general, unless an FIC elects to distribute 90% or
more of its taxable income (determined under United States tax principles as
specially adjusted) to its shareholders, gain on the sale or exchange of FIC
stock is treated as ordinary income (rather than capital gain) to the extent of
such shareholder's ratable share of the corporation's earnings and profits for
the period during which such stock was held.

The
Company believes that it is not and will not be a PHC, FPHC or FIC. However, no
assurance can be given as to the Company's future status.

United States Information Reporting and Backup
Withholding

Dividends
are generally subject to the information reporting requirements of the Code.
Dividends may be subject to backup withholding at the rate of 31% unless the
holder provides a taxpayer identification number on a properly completed Form
W-9 or otherwise establishes an exemption.

The
amount of any backup withholding will not constitute additional tax and will be
allowed as a credit against the United States Investor's federal income tax
liability.

Filing of Information Returns

Under
a number of circumstances, a United States Investor acquiring shares of the
Company may be required to file an information return. In particular, any United
States Investor who becomes the owner, directly or indirectly, of 10% or more of
the shares of the Company will be required to file such a return. Other filing
requirements may apply and United States Investors should consult their own tax
advisors concerning these requirements.

F.      Dividends and Paying Agents

Not
Applicable.

G.      Statement by Experts

Not
  Applicable.

47

---



H.      Documents on Display

The
Company files annual reports and furnishes other information with the SEC. You
may read and copy any document that we file at the SEC's Public Reference Room
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or by accessing the
Commission's website (http://www.sec.gov). The Company also files its annual
reports and other information with the Canadian Securities Administrators via
SEDAR (www.sedar.com).

Copies
of the Company's material contracts are kept in the Company's administrative
headquarters.

I.      Subsidiary Information

None.

Item 11. Quantitative and Qualitative Disclosures about
Market Risk

Not
Applicable.

Item 12. Description of Securities Other than Equity
Securities

Not
Applicable.

Part II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

The
Chief Executive Officer and the Chief Financial Officer of the Company are
responsible for designing internal controls over financial reporting, or causing
them to be designed under their supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with Canadian GAAP. The
Company assessed the design of the internal controls over financial reporting as
at January 31, 2007 and concluded that there are material weaknesses in internal
controls over financial reporting, which are as follows:

| | a) | Due to the limited number of staff resources, the Company
      believes there are instances where a lack of segregation of duties exist
      to provide effective controls; and       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                         
| | b) | The Company is evaluating the effectiveness of its staff
      resources, as currently the Company seeks outside guidance to address
      complex accounting and tax issues that arise.

The
weaknesses and their related risks are not uncommon in a company the size of
Avino because of limitations in size and number of staff. The Company believes
it has taken initial steps to mitigate these risks by consulting outside
advisors and involving the Audit Committee and Board of Directors in reviews and
consultations where necessary. However, these weaknesses in internal controls
over financial reporting could result in a more than remote likelihood that a
material misstatement would not be prevented or detected. The Company believes that it must take additional steps to further
mitigate these risks by consulting outside advisors on a more regular and timely
basis.

48

---

There
have been no changes in the Companys internal controls over financial reporting
that occurred during the quarter ended January 31, 2007 that have materially
affected, or are reasonably likely to materially affect, the Companys internal
controls over financial reporting.

Item 16A. Audit Committee Financial Expert

The
board of directors determined that Mr. Gary Robertson is qualified as an Audit
Committee Financial Expert. Mr. Robertson is independent as determined by the
National Association of Securities Dealers listing standards.

Item 16B. Code of Ethics

The
Company has not currently adopted a code of ethics but is evaluating its
internal procedures to determine the necessity of same. In the event that it is
determined a code of ethics is necessary, an appropriate code will be
implemented.

Item 16C. Principal Accountant Fees and Services

The
  independent auditor for the last fiscal year was Manning Elliot LLP. For the
  fiscal years ending January 31, 2006 and 2005 the independent auditor was I
  Vellmer Inc., Chartered
  Accountants ( formerly Vellmer
  & Chang ), Chartered Accountants).

Audit Fees

The
  aggregate fees billed by Manning Elliot LLP for professional services rendered
  for the audit of the Company's annual financial statements for the fiscal year
  ended January 31, 2007 was $101,800. The aggregate fees billed by
  I Vellmer Inc. for professional services rendered for the audit of the
  Company's annual financial statements for the fiscal year ended January 31,
  2006 was $40,780.

Audit-Related Fees

There
were no audit-related fees for the fiscal years ended January 31, 2007 and 2006.

Tax Fees

The
aggregate tax fees billed by the Company's independent auditors for the 2007
fiscal year was $2,180, which is related to the preparation of the corporate tax
return for the 2006 fiscal year. The aggregate tax fees billed by the Company's
independent auditors for the 2006 fiscal year was $1,315, which is related to
the preparation of the corporate tax return for the 2005 fiscal year.

All Other Fees

There
were no aggregate fees billed for any other professional services rendered by
the Company's independent auditors for the year ended January 31, 2007. The
aggregate fees billed by the Company's independent auditors for advisory and
review services relating to the Company's annual report on Form 20-F was $3,600
for the year ended January 31, 2006.

The
audit committee approved 100% of the fees paid to the principal accountant for
audit-related, tax and other fees in the fiscal year 2006. The audit committee
pre-approves all non-audit services to be performed by the auditor in accordance
with the audit committee Charter. There were no hours expended on the principal
accountant's engagement to audit the Company's financial statements for the most
recent fiscal year that were attributed to work performed by persons other
than the principal accountant's full-time, permanent employees.

49

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Item 16D. Exemptions from the Listing Standards for Audit
Committees

Not
applicable.

Item 16E. Purchases of Equity Securities by the Issuer and
Affiliated Purchasers

None.

Part III

Item 17. Financial Statements

The
following financial statements pertaining to the Company are filed as part of
this annual report:

Auditors Report
    52Balance Sheets
    54Statements of Operations
      and Deficit
    55Statements of Cash Flows
    56Notes to Financial
      Statements
    57 thru 77


Item 18. Financial Statements

See
Item 17.

Item 19. Exhibits

|Exhibit Number | Name                                                                                   
|-------------- | ---------------------------------------------------------------------------------------
|               |                                                                                        
|1.1            | Memorandum of Avino Silver &
      Gold Mines Ltd.*                                    
|1.2.           | Articles of Avino Silver & Gold Mines Ltd.*                                            
|4.1            | Share Purchase Agreement dated
      March 22, 2004*                                   
|8.1            | List of Subsidiaries                                                                   
|12.1           | Certification
      of the Principal Executive Officer                                 
|12.2           | Certification of the
      Principal Financial Officer                                 
|13.1           | Certificate
      under the Sarbanes-Oxley Act
      of the Principal Executive Officer
|13.2           | Certificate
      under the Sarbanes-Oxley Act of the Principal Financial Officer      
|15.1           | Form 43 -101F1 Technical Report: Tailings Retreatment
       Process Options*         

_____________________________* Previously filed.

50

---

AVINO SILVER & GOLD MINES LTD.Consolidated Financial StatementsFor the Years EndedJanuary 31, 2007, 2006 and 2005


51

---



|AUDITORS REPORT
|----------------

To the Shareholders of

Avino Silver & Gold Mines Ltd.

We have audited the consolidated balance sheet of Avino Silver
& Gold Mines Ltd. as at January 31, 2007, and the consolidated statements of
operations and deficit, and cash flows for the year ended January 31, 2007.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

We conducted our audit in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
January 31, 2007 and the results of its operations and its cash flows for the
year then ended in accordance with Canadian generally accepted accounting
principles.

The balance sheet figures as at January 31, 2006 and the
statements of operations and deficit, and cash flows for the years ended January
31, 2006 and 2005 were audited by another firm of chartered accountants, which
expressed an opinion without reservation on those financial statements in their
report dated May 31, 2006.

MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS Vancouver, British Columbia May
7, 2007

|COMMENTS BY AUDITORS ON CANADA AND UNITED STATES REPORTING
      DIFFERENCES
|----------------------------------------------------------------------------

The standards of the Public Company Accounting Oversight Board
(U.S.) require the addition of an explanatory paragraph when the financial
statements are affected by conditions and events that cast substantial doubt on
the Companys ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Although we conducted audits in accordance
with both Canadian generally accepted auditing standards and the standards of
the Public Company Accounting Oversight Board (U.S.), our report to the
shareholders dated May 7, 2007 is expressed in accordance with Canadian
reporting standards which do not permit a reference to such conditions and
events in the auditors report when these are adequately disclosed in the
financial statements.

MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS Vancouver, British Columbia May
7, 2007

52

---

|I Vellmer Inc.                                 |                                                                             
|---------------------------------------------- | ----------------------------------------------------------------------------
|C h a r t e r e
      d  A c c o u n t a n t * |                                                                             
|                                               | 7 2 1 - 6 0 2  W .  H a s t i n g s 
      S t r e e t                      
|                                               | V a n c o u v e r , B . C . ,   V 6
      B   1 P 2                         
|                                               | T e l :                      
       6 0 4 - 6 8 7 - 3 7 7 3                
|                                               | F a x :                       6
      0 4 - 6 8 7 - 3 7 7 8                 
|                                               |                                                                             
|                                               | E-mail: v e l l m e r @ i - v e l l m e r . c
      a                       
|                                               | * d e n o t e s  a n  i n c o r p o
      r a t e d  p r o f e s s i o n a l

AUDITORS REPORT

To the Shareholders ofAvino Silver & Gold Mines Ltd.

We have audited the balance sheets of Avino Silver & Gold
  Mines Ltd.as at January 31, 2006 and the statements of operations and
  deficit and cash flows for the years ended January 31, 2006 and 2005. These
  financial statements are the responsibility of the Companys management.
  Our responsibility is to express an opinion on these financial statements based
  on our audits.

We conducted our audits in accordance with generally accepted
  auditing standards in Canada and the standards of the Public Company Accounting
  Oversight Board (United States). Those standards require that we plan and perform
  an audit to obtain reasonable assurance whether the financial statements are
  free of material misstatement. An audit includes examining, on a test basis,
  evidence supporting the amounts and disclosures in the financial statements.
  An audit also includes assessing the accounting principles used and significant
  estimates made by management, as well as evaluating the overall financial statement
  presentation.

In our opinion, these financial statements present fairly, in
  all material respects, the financial position of the Company as at January 31,
  2006 and the results of its operations and its cash flows for the years ended
  January 31, 2006 and 2005 in accordance with Canadian generally accepted accounting
  principles.



|Vancouver, Canada | I Vellmer Inc.    
|----------------- | --------------------
|                  |                     
|May 31, 2006      | Chartered Accountant



COMMENTS BY AUDITORS ONCANADA - UNITED STATES OF AMERICA REPORTING DIFFERENCES

In the United States of America reporting standards for auditors
  require the addition of an explanatory paragraph (following the opinion paragraph)
  when the financial statements are affected by conditions that cast substantial
  doubt on the Companys ability to continue as a going concern, such as
  those described in Note 1 to the financial statements. Our report to the shareholders
  dated May 31, 2006 is expressed in accordance with Canadian reporting standards
  which do not permit a reference to such conditions in the auditors report
  when these are adequately disclosed in the financial statements.



|Vancouver, Canada | I
      Vellmer Inc.
|----------------- | ----------------------
|July 26, 2006     | Chartered Accountants 

53

---

AVINO SILVER
  & GOLD MINES LTD. 
  Consolidated Balance Sheets 
  As at January 31, 2007 and 2006 
  (Expressed in Canadian Dollars)

|                                                                              |   | 2007        |   |   | 2006        |  
|----------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|ASSETS                                                                        |   |             |   |   |             |  
|                                                                              |   |             |   |   |             |  
|Current                                                                       |   |             |   |   |             |  
|Cash and cash equivalents                                                     | $ | 11,045,106  |   | $ | 3,067,011   |  
|Interest receivable                                                           |   | 38,179      |   |   |            |  
|Taxes recoverable                                                             |   | 96,674      |   |   | 35,009      |  
|Prepaid expenses and amounts
      receivable                                 |   | 54,042      |   |   | 13,544      |  
|                                                                              |   |             |   |   |             |  
|                                                                              |   | 11,234,001  |   |   | 3,115,564   |  
|                                                                              |   |             |   |   |             |  
|Property, Plant and Equipment (Note
      4)                                  |   | 1,015,228   |   |   | 2,611       |  
|Reclamation Bonds                                                             |   | 5,500       |   |   | 3,000       |  
|Mineral Properties (Note 5)                                                   |   | 10,764,455  |   |   | 486,900     |  
|Advances to Related Companies (Note 14 (a))                                   |   | 65,770      |   |   | 83,000      |  
|Investments in Related Companies (Note 6)                                     |   | 210,085     |   |   | 210,085     |  
|                                                                              |   |             |   |   |             |  
|                                                                              | $ | 23,295,039  |   | $ | 3,901,160   |  
|LIABILITIES                                                                   |   |             |   |   |             |  
|                                                                              |   |             |   |   |             |  
|Current                                                                       |   |             |   |   |             |  
|Accounts payable and
      accrued liabilities                                | $ | 1,311,560   |   | $ | 62,700      |  
|Due to related parties (Note 14(b))                                           |   | 141,524     |   |   | 181,418     |  
|                                                                              |   | 1,453,084   |   |   | 244,118     |  
|                                                                              |   |             |   |   |             |  
|Future Income Tax
      Liability (Note 13)                                   |   | 2,335,999   |   |   |            |  
|                                                                              |   |             |   |   |             |  
|Commitment towards
      equity loss in Cia Minera Mexicana de Avino, S.A. de |   |             |   |   |             |  
|C.V (Note 8)                                                                  |   |            |   |   | 342,596     |  
|                                                                              |   | 3,789,083   |   |   | 586,714     |  
|SHAREHOLDERS' EQUITY                                                          |   |             |   |   |             |  
|Share Subscriptions Received in
      Advance                                 |   |            |   |   | 247,730     |  
|Share Capital (Note 9(a))                                                     |   | 33,112,072  |   |   | 19,264,265  |  
|Shares Issued For Proceeds Receivable                                         |   | (5,940      | ) |   | (56,732     | )
|Contributed Surplus (Note 10)                                                 |   | 7,259,879   |   |   | 1,070,699   |  
|Treasury Shares (14,180 shares, at
      cost)                                |   | (101,869    | ) |   | (101,869    | )
|Deficit                                                                       |   | (20,758,186 | ) |   | (17,109,647 | )
|                                                                              |   | 19,505,956  |   |   | 3,314,446   |  
|                                                                              | $ | 23,295,039  |   | $ | 3,901,160   |  
|                                                                              |   |             |   |   |             |  
|NATURE AND CONTINUANCE OF OPERATIONS  NOTE 1                                 |   |             |   |   |             |  
|CONTINGENT LIABILITY AND COMMITMENTS 
      NOTES 18 AND 19                  |   |             |   |   |             |  

Approved by the Board of Directors:

|Louis
      Wolfin | Director |  | David Wolfin | Director
|-------------------- | -------- |  | -------------- | --------

54

---

AVINO SILVER & GOLD MINES LTD.Consolidated
Statements of Operations and Deficit Years Ended January 31, 2007, 2006 and
2005 (Expressed in Canadian Dollars)

|                                                                   |   | 2007        |   |   | 2006        |   |   | 2005        |  
|------------------------------------------------------------------ | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                                   |   |             |   |   |             |   |   |             |  
|Revenue                                                            | $ |            |   | $ |            |   | $ |            |  
|                                                                   |   |             |   |   |             |   |   |             |  
|Operating and Administrative
      Expenses                        |   |             |   |   |             |   |   |             |  
|Amortization                                                       |   | 2,677       |   |   | 980         |   |   | 1,210       |  
|General exploration                                                |   | 106,899     |   |   |            |   |   |            |  
|Interest                                                           |   |            |   |   |            |   |   | 65          |  
|Management fees                                                    |   | 87,000      |   |   | 60,000      |   |   | 60,000      |  
|Office and miscellaneous                                           |   | 146,348     |   |   | 119,864     |   |   | 96,409      |  
|Professional fees                                                  |   | 127,441     |   |   | 141,005     |   |   | 34,993      |  
|Regulatory and compliance fees                                     |   | 34,416      |   |   | 21,690      |   |   | 39,463      |  
|Salaries and benefits                                              |   | 87,813      |   |   | 73,529      |   |   | 69,310      |  
|Shareholder and investor relations (Note 11)                       |   | 464,806     |   |   | 197,330     |   |   | 59,044      |  
|Stock-based compensation (Note
      12)                           |   | 2,860,603   |   |   | 725,125     |   |   | 81,540      |  
|Travel and entertainment                                           |   | 96,731      |   |   | 77,274      |   |   | 64,005      |  
|                                                                   |   |             |   |   |             |   |   |             |  
|                                                                   |   | 4,014,734   |   |   | 1,416,797   |   |   | 506,039     |  
|                                                                   |   |             |   |   |             |   |   |             |  
|                                                                   |   | (4,014,734  | ) |   | (1,416,797  | ) |   | (506,039    | )
|                                                                   |   |             |   |   |             |   |   |             |  
|Other income (expenses)                                            |   |             |   |   |             |   |   |             |  
|Interest income                                                    |   | 430,231     |   |   | 46,073      |   |   | 41,999      |  
|Foreign exchange gain (loss)                                       |   | (30,455     | ) |   | 9           |   |   | 29          |  
|Write-down of investment in
      related company                  |   |            |   |   | (217,000    | ) |   |            |  
|Write-down of mineral property                                     |   |            |   |   | (103,242    | ) |   |            |  
|Site assessment costs for Cia
      Minera Mexicana de Avino, S.A. |   |             |   |   |             |   |   |             |  
|de C.V (Note 8)                                                    |   |            |   |   | (355,921    | ) |   | (391,899    | )
|Equity losses in Cia Minera
      Mexicana de Avino, S.A. de C.V   |   |             |   |   |             |   |   |             |  
|(Note 8)                                                           |   | (33,581     | ) |   | (342,596    | ) |   |            |  
|                                                                   |   |             |   |   |             |   |   |             |  
|LOSS BEFORE INCOME TAXES                                           |   | (3,648,539  | ) |   | (2,389,474  | ) |   | (855,910    | )
|                                                                   |   |             |   |   |             |   |   |             |  
|Future income tax benefit recognized on renouncement of            |   |             |   |   |             |   |   |             |  
|Canadian exploration expenditures (Note 13)                        |   |            |   |   | 19,750      |   |   | 41,200      |  
|                                                                   |   |             |   |   |             |   |   |             |  
|NET LOSS FOR THE YEAR                                              |   | (3,648,539  | ) |   | (2,369,724  | ) |   | (814,710    | )
|                                                                   |   |             |   |   |             |   |   |             |  
|DEFICIT, beginning of year                                         |   | (17,109,647 | ) |   | (14,739,923 | ) |   | (13,925,213 | )
|                                                                   |   |             |   |   |             |   |   |             |  
|DEFICIT, end of year                                               | $ | (20,758,186 | ) | $ | (17,109,647 | ) | $ | (14,739,923 | )
|                                                                   |   |             |   |   |             |   |   |             |  
|BASIC AND DILUTED LOSS PER SHARE                                   | $ | (0.20       | ) | $ | (0.22       | ) | $ | (0.08       | )
|                                                                   |   |             |   |   |             |   |   |             |  
|BASIC WEIGHTED AVERAGE NUMBER OF SHARES                            |   |             |   |   |             |   |   |             |  
|OUTSTANDING                                                        |   | 18,385,007  |   |   | 10,965,718  |   |   | 10,410,379  |  

55

---

AVINO SILVER & GOLD MINES LTD.Consolidated
Statements of Cash Flows Years Ended January 31, 2007, 2006 and 2005
(Expressed in Canadian Dollars)

|                                                                        |   | 2007       |   |   | 2006       |   |   | 2005      |  
|----------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | --------- | -
|CASH PROVIDED BY (USED IN):                                             |   |            |   |   |            |   |   |           |  
|                                                                        |   |            |   |   |            |   |   |           |  
|OPERATING ACTIVITIES                                                    |   |            |   |   |            |   |   |           |  
|Loss for the year                                                       | $ | (3,648,539 | ) | $ | (2,369,724 | ) | $ | (814,710  | )
|Adjustments for
      non-cash items:                                   |   |            |   |   |            |   |   |           |  
|Amortization                                                            |   | 2,677      |   |   | 980        |   |   | 1,210     |  
|Stock-based
      compensation                                          |   | 2,860,603  |   |   | 725,125    |   |   | 81,540    |  
|Fair value of options issued for
      investor relations services      |   | 195,600    |   |   | 103,981    |   |   |          |  
|Write-down of
      investment in related company                       |   |           |   |   | 217,000    |   |   |          |  
|Write-down of mineral property interest                                 |   |           |   |   | 103,242    |   |   |          |  
|Equity loss on Cia
      Minera prior to acquisition of control         |   | 33,581     |   |   | 342,596    |   |   |          |  
|Future income tax benefit recognized on
      the renouncement of       |   |            |   |   |            |   |   |           |  
|Canadian
      exploration expenditures                                 |   |           |   |   | (19,750    | ) |   | (41,200   | )
|                                                                        |   |            |   |   |            |   |   |           |  
|                                                                        |   | (556,078   | ) |   | (896,550   | ) |   | (773,160  | )
|                                                                        |   |            |   |   |            |   |   |           |  
|Net change in non-cash working capital
      (Note 16)                  |   | 61,750     |   |   | (91,529    | ) |   | 14,849    |  
|                                                                        |   |            |   |   |            |   |   |           |  
|                                                                        |   | (494,328   | ) |   | (988,079   | ) |   | (758,311  | )
|FINANCING ACTIVITIES                                                    |   |            |   |   |            |   |   |           |  
|Share subscriptions
      received in advance                           |   |           |   |   | 247,730    |   |   |          |  
|Receipt of share proceeds receivable                                    |   | 56,732     |   |   |           |   |   |          |  
|Shares issued for cash, net                                             |   | 9,511,593  |   |   | 1,748,827  |   |   | 435,789   |  
|                                                                        |   |            |   |   |            |   |   |           |  
|                                                                        |   | 9,568,325  |   |   | 1,996,557  |   |   | 435,789   |  
|INVESTING ACTIVITIES                                                    |   |            |   |   |            |   |   |           |  
|Reclamation bonds                                                       |   | (2,500     | ) |   | (3,000     | ) |   |          |  
|Property, plant and equipment purchases                                 |   | (18,331    | ) |   | (768       | ) |   |          |  
|Mineral property
      exploration expenditures                         |   | (777,586   | ) |   | (273,234   | ) |   | (91,400   | )
|Advances to a related party                                             |   |           |   |   | 52,000     |   |   | (135,000  | )
|Advances to Cia Minera prior to
      acquisition of control            |   | (297,485   | ) |   |           |   |   |          |  
|                                                                        |   |            |   |   |            |   |   |           |  
|                                                                        |   | (1,095,902 | ) |   | (225,002   | ) |   | (226,400  | )
|                                                                        |   |            |   |   |            |   |   |           |  
|Increase (decrease) in cash and cash
      equivalents                  |   | 7,978,095  |   |   | 783,476    |   |   | (548,922  | )
|                                                                        |   |            |   |   |            |   |   |           |  
|CASH AND CASH EQUIVALENTS, beginning of year                            |   | 3,067,011  |   |   | 2,283,535  |   |   | 2,832,457 |  
|                                                                        |   |            |   |   |            |   |   |           |  
|CASH AND CASH EQUIVALENTS,end of year                                   | $ | 11,045,106 |   | $ | 3,067,011  |   | $ | 2,283,535 |  
|                                                                        |   |            |   |   |            |   |   |           |  
|SUPPLEMENTARY CASH FLOW DISCLOSURES                                     |   |            |   |   |            |   |   |           |  
|Cash paid for:                                                          |   |            |   |   |            |   |   |           |  
|Interest expense                                                        | $ | 16         |   | $ |           |   | $ | 65        |  
|Income taxes                                                            |   |           |   |   |           |   |   |          |  
|Non-cash investing activity:                                            |   |            |   |   |            |   |   |           |  
|3,164,702 shares issued in acquisition
      of controlling interest in |   |            |   |   |            |   |   |           |  
|Cia Minera                                                              |   | 7,215,520  |   |   |           |   |   |          |  

56

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in
      Canadian Dollars)      

NOTE 1 - NATURE OF OPERATIONS

Avino Silver & Gold Mines Ltd. (the Company or Avino)
was incorporated in 1969 under the laws of the Province of British Columbia,
Canada. The Companys principal business activities include the acquisition,
exploration and development of mineral properties. The Company owns interests in
mineral properties located in Durango, Mexico and in British Columbia and Yukon,
Canada.

The Company is in the exploration stage with its mineral
properties and has not yet determined whether these properties contain ore
reserves which are economically recoverable.

The recoverability of amounts shown for mineral properties and
related deferred costs is dependent upon the discovery of economically
recoverable reserves, confirmation of the Companys legal interest in mineral
claims, obtaining further financing for exploration of its mineral claims,
re-development of its mining and processing operations and commencement of
future profitable production, or receiving proceeds from the sale of all or an
interest in its mineral properties.

These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern, which assume that the Company will realize its assets and discharge its
liabilities in the normal course of business. The Company will likely be
required to raise new financing through the sale of shares to continue with the
exploration for and development of its mineral properties. Management intends to
secure additional financing through the issuance of common stock. However, there
can be no assurance that management will be successful in its efforts to secure
additional financing through the issuance of common stock, or that it will ever
develop a self-supporting business. These factors together raise substantial
doubt about the Companys ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

|i)  | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | These financial statements have been prepared in
      accordance with Canadian generally accepted accounting principles on a
      consolidated basis and include the accounts of the Company and its Mexican
      subsidiaries. All significant inter-company balances and transactions have
      been eliminated upon consolidation. The Companys Mexican subsidiaries are
      the wholly-owned Oniva Silver and Gold Mines S.A., Promotora Avino, S.A.
      De C.V. (Promotora) in which the Company has direct ownership of 76.88%,
      and Compania Minera Mexicana de Avino, S.A. de C.V. (Cia Minera) in
      which the Company has a 50% direct ownership and an additional 49.75% of
      Cia Minera is held through Promotora.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company acquired control of Promotora and Cia Minera
      on July 17, 2006 (see Note 3) and prior to the acquisition of control the
      Company accounted for its 49% ownership of Cia Minera using the equity
      method. Under the equity method, the Companys original investment in Cia
      Minera was initially recorded at cost, and subsequently adjusted to
      reflect the Companys share of earnings or loss in Cia Minera.                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | These consolidated financial statements include the
      operations of Promotora and Cia Minera subsidiaries on a consolidated
      basis beginning on July 17, 2006 and cover the period ending on December
      31, 2006, which is a different period end date than the Companys fiscal
      year-end, since the subsidiaries prepare annual financial statements
      following Mexican law requiring a December 31 year-end.                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|ii) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company considers all highly liquid instruments with
      maturities of three months or less on the date of purchase to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

57

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|iii) | Property, plant and equipment                                                                                                                                                                                   
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                 
|     | Property, plant and equipment is stated at cost less
      accumulated amortization. Amortization is recorded over the useful lives
      of the assets on the declining balance basis at the following
  rates:

Office equipment, furniture and fixtures
    20%Computer equipment
    30%Mine mill, machinery and plant
    12%Mine facilities and equipment
    6% to 10%


|    | The mine mill, machinery and plant were acquired on July
      17, 2006 (see Note 3) and are not in active use, as the Company is in the
      process of evaluating the re-activation of the mine. Accordingly, the mine
      mill, machinery and plant are considered to be under reconstruction and no
      amortization is recorded on these assets during the 2007
  year-end.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|iv) | Mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Mineral property acquisition, exploration and development
      costs are deferred until the property to which they relate is placed into
      production, sold, allowed to lapse or abandoned. Mineral property
      acquisition costs include cash consideration and the fair market value of
      common shares issued for mineral property interests based on the trading
      price of the shares. These costs will be amortized over the estimated life
      of the property following commencement of commercial production, or
      written off if the property is sold, allowed to lapse or
  abandoned.                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Once commercial production has commenced, the net costs
      of the applicable property will be charged to operations using the
      unit-of-production method based on estimated reserves. On an ongoing
      basis, the Company evaluates each property based on results to date to
      determine the nature of exploration work that is warranted in the
      future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Impairment may occur in the carrying value of mineral
      properties when one of the following conditions exists:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Once impairment has been determined then a portion of the
      carrying value will be written-down to net realizable value. Amounts shown
      for mineral properties reflect costs incurred to date, less write-downs,
      and are not intended to reflect present or future values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|v)  | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | Investments in the shares of companies over which Avino
      has the ability to exercise significant influence, but not control, are
      accounted for using equity method. Accordingly, the Company includes its
      share of the investees net income or loss for the year in operations. The
      investment is initially recorded at cost and increased or decreased for
      the Companys share of income or loss respectively. In those instances
      where the Companys share in the investees cumulative net losses exceeds
      the carrying amount of the Companys investment, the Company records its
      share of the investees losses as a liability only if it has determined
      that it has ongoing obligations or commitments towards the investee. In
      those circumstances where the Company has no ongoing obligations or
      commitments to support the investee, the Company records cumulative losses
      only to the extent of the carrying amount of the
  investment.

58

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|v)    | Investments (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | Investments in the shares of companies over which Avino
      does not have control or exercises significant influence are accounted for
      at cost. These investments are written down when there is a decline in
      value that is considered other than temporary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|vi)   | Translation of foreign currencies and foreign
      subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | The Companys integrated Mexican foreign subsidiaries are
      financially and operationally dependent on the Company. The Company uses
      the temporal method to translate the accounts of its integrated foreign
      operations into Canadian dollars. Monetary assets and liabilities are
      translated at the exchange rates in effect at the balance sheet date.
      Non-monetary assets and liabilities are translated at historical rates.
      Revenues and expenses are translated at rates in effect during the period,
      except for amortization, which is translated on the same basis as the
      related assets. The resulting exchange gains or losses are recognized in
      income.                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|vii)  | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|viii) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | The preparation of financial statements in conformity
      with Canadian generally accepted accounting principles requires management
      to make estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reported periods. Significant
      areas requiring the use of estimates relate to recoverability or valuation
      of amounts receivable, property, plant, equipment, and mineral properties,
      the valuation of asset retirement obligations, useful lives for
      amortization, recognition of future income tax assets and liabilities, and
      stock-based compensation. Actual results could differ from those
      estimates.

59

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|ix) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company follows the asset and liability method of
      accounting for income taxes. Future income tax assets and liabilities are
      determined based on temporary differences between the accounting and taxes
      bases of existing assets and liabilities, and are measured using the tax
      rates expected to apply when these differences reverse. A valuation
      allowance is recorded against any future tax asset if it is more likely
      than not that the asset will not be realized.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company follows CICA Emerging Issues Committee
      Abstract 146 Flow-Through Shares. Canadian tax legislation permits
      a company to issue securities referred to as flow-through shares whereby
      the Company assigns the tax deductions arising from the related resource
      expenditures, to the shareholders. When resource expenditures are
      renounced to the investors and the Company has reasonable assurance that
      the expenditures will be completed, a future income tax liability is
      recognized for the net tax effect of the deductions renounced, and share
      capital is reduced.                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | If the Company has sufficient unrecognized tax losses
      carried forward or other unrecognized future income tax assets to offset
      all or part of this future income tax liability, a portion of such
      unrecognized future income tax assets is recorded as a future income tax
      recovery up to the amount of the future income tax liability that would
      otherwise be recognized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|x)  | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The Company follows CICA Handbook Section 3870 Stock
      Based Compensation and Other Stock-Based Payments. Accordingly the
      Company recognizes stock-based compensation expense for the estimated fair
      value of stock-based payments. Compensation costs attributable to stock
      options or similar equity instruments granted to employees are measured at
      the fair value at the grant date using the Black-Scholes option pricing
      model, and are expensed over the expected vesting period. Transactions in
      which goods or services are received from non- employees in exchange for
      the issuance of equity instruments are accounted for based on the fair
      value of the consideration received or the fair value of the equity
      instruments issued, whichever is more reliably measurable. Consideration
      received on the exercise of stock options is recorded as share
    capital.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|xi) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Basic loss per share is calculated using the weighted
      average number of common shares outstanding during the year. Diluted loss
      per share is calculated giving effect to the potential dilution that would
      occur if securities or other contracts to issue common shares were
      exercised or converted to common shares using the treasury method. The
      treasury method assumes that proceeds received from the exercise of stock
      options and warrants are used to repurchase common shares at the
      prevailing market rate. Stock options and warrants are dilutive when the
      average market prices of the common shares during the year exceed the
      exercise prices of the options and warrants.                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | For the years ended January 31, 2007, 2006 and 2005, the
      existence of warrants and options affects the calculation of loss per
      share on a fully diluted basis. As the affect of this dilution is to
      reduce the reported loss per share (anti-dilutive), fully diluted loss per
      share information has not been shown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

60

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|xii)  | Site restoration obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      | The Company recognizes the fair value of its liability
      for asset retirement obligations, including site restoration costs in the
      year in which such liabilities are incurred and can be estimated. Upon
      recognition of an asset retirement obligation, the site restoration costs
      are capitalized as a part of the mineral property. In periods subsequent
      to initial measurement, the asset retirement obligation is adjusted for
      both the passage of time and revisions to the original estimates. If the
      obligation is settled for other than the carrying amount of the liability,
      a gain or loss on the settlement is recognized. The Company estimated its
      site restoration costs to be $nil as at January 31, 2007 (2006 - $nil) as
      significant disturbance of sites giving rise to restoration obligations
      had not yet occurred.   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|xiii) | Long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      | The recoverability of long-lived assets, which includes
      property, plant, equipment, and mineral properties is assessed for
      impairment annually or whenever events or changes in circumstances
      indicate that the carrying amount may not be recoverable. Recoverability
      is based on factors such as future asset utilization and the future
      undiscounted cash flows expected to result from the use or sale of the
      related assets. An impairment loss is recognized when the carrying amount
      of an asset that is held and used exceeds the projected undiscounted
      future net cash flows expected from its use and disposal less costs to
      sell, and is measured as the amount by which the carrying amount of the
      asset exceeds its fair value, which is measured based on discounted cash
      flows when quoted market prices are not available.

NOTE 3 - ACQUISITION OF COMPANIA MINERA MEXICANA DE AVINO,
S.A. DE C.V.

On July 17, 2006 the Company acquired control of Compania
Minera Mexicana de Avino, S.A. de C.V. (Cia Minera) through the acquisition of
an additional 39.25% interest in Cia Minera which combined with the Companys
pre-existing 49% share of Cia Minera, brought the Companys ownership interest
in Cia Minera to 88.25% . The additional 39.25% interest in Cia Minera was
obtained through the acquisition of 76.88% of the common shares of Promotora
Avino S.A. De C.V. (Promotora) which in turn owns 49.75% of Cia Mineras
common shares, and the direct acquisition of 1% of the common shares of Cia
Minera.

The historic operations of Cia Minera involved the mining of
commercial grade ores which produced silver, gold and copper. This plant and
mine ceased operations in November 2001 due to low metal prices and the closure
of a smelter. The Company is evaluating the re-activation of the mine and has
commenced exploration activities on Cia Mineras mineral properties in the state
of Durango, Mexico (see Note 5).

The July 17, 2006 acquisition was accomplished by a share
exchange by which the Company issued 3,164,702 shares as consideration for the
purchase of the additional 39.25% interest in Cia Minera. The shares issued as
consideration were valued based on the July 17, 2006 closing market price per
share of $2.28. The acquisition was accounted for using the purchase method and
these consolidated financial statements include the assets, liabilities and
operations of these subsidiaries beginning on July 17, 2006, the date of
acquisition of control. The acquisition of the 39.25% interest described above
does not include a 1% interest acquired from an estate subject to approval and
transfer of the shares to the Company by the trustee for that estate.

The cost of the acquisition of Cia Minera was comprised as
follows:

|Issuance of 3,164,702 shares issued as
      consideration              | $ | 7,215,521 |  
|----------------------------------------------------------------------- | - | --------- | -
|Direct acquisition costs                                                |   | 24,705    |  
|Cash advances to Cia Minera prior to July
      17, 2006                |   | 297,485   |  
|Assumption of
      equity based commitment made prior to July 17, 2006 |   | (376,177  | )
|                                                                        | $ | 7,161,534 |  

61

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 3 - ACQUISITION OF COMPANIA MINERA MEXICANA DE AVINO,
S.A. DE C.V. (continued)

The cost of Cia Minera was allocated to the estimated fair
values of the assets acquired and liabilities assumed as at July 17, 2006 as
follows:

|Cash                                     | $ | 21,154     |  
|---------------------------------------- | - | ---------- | -
|Taxes and other amounts recoverable      |   | 27,977     |  
|Mine mill and processing plant           |   | 934,654    |  
|Mine facilities, machinery and equipment |   | 62,310     |  
|Mineral properties                       |   | 9,525,575  |  
|Accounts payable and accrued liabilities |   | (864,816   | )
|Future income tax liability              |   | (2,335,999 | )
|Taxes payable                            |   | (209,321   | )
|                                         | $ | 7,161,534  |  

Prior to the July 17, 2006 acquisition of the additional 39.25%
in Cia Minera, the Company accounted for its original 49% interest using the
equity method.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

|                                          |   |           |  |   |              |  |   | 2007      |  |   | 2006     | 
|----------------------------------------- | - | --------- |  | - | ------------ |  | - | --------- |  | - | -------- | 
|                                          |   |           |  |   | Accumulated  |  |   | Net Book  |  |   | Net Book | 
|                                          |   | Cost      |  |   | Amortization |  |   | Value     |  |   | Value    | 
|                                          |   |           |  |   |              |  |   |           |  |   |          | 
|Office equipment, furniture and fixtures  | $ | 5,512     |  | $ | 3,684        |  | $ | 1,828     |  | $ | 2,611    | 
|Computer equipment                        |   | 19,015    |  |   | 684          |  |   | 18,331    |  |   |         | 
|Mine mill, machinery and processing plant |   | 934,654   |  |   |             |  |   | 934,654   |  |   |         | 
|Mine facilities
      and equipment       |   | 62,310    |  |   | 1,895        |  |   | 60,415    |  |   |         | 
|                                          | $ | 1,021,491 |  | $ | 6,263        |  | $ | 1,015,228 |  | $ | 2,611    | 

NOTE 5 - MINERAL PROPERTIES

|                                        |   |            |  |   | British  |  |   |        |  |   |            | 
|--------------------------------------- | - | ---------- |  | - | -------- |  | - | ------ |  | - | ---------- | 
|                                        |   | Durango    |  |   | Columbia |  |   | Yukon  |  |   |            | 
|                                        |   | Mexico     |  |   | Canada   |  |   | Canada |  |   | Total      | 
|2007                                    |   |            |  |   |          |  |   |        |  |   |            | 
|Carrying amounts, beginning of year     | $ |           |  | $ | 486,900  |  | $ | 1      |  | $ | 486,900    | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Acquisition costs                       |   | 9,525,575  |  |   |         |  |   |       |  |   | 9,525,575  | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Exploration costs incurred during year: |   |            |  |   |          |  |   |        |  |   |            | 
|Assays                                  |   |           |  |   | 2,001    |  |   |       |  |   | 2,001      | 
|Assessment and taxes                    |   |           |  |   | 2,410    |  |   |       |  |   | 2,410      | 
|Drilling                                |   | 609,518    |  |   | 14,837   |  |   |       |  |   | 624,355    | 
|Field supplies and services             |   |           |  |   | 11,242   |  |   |       |  |   | 11,242     | 
|Geological                              |   | 90,712     |  |   | 21,260   |  |   |       |  |   | 111,972    | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Mineral properties, end of year         | $ | 10,225,805 |  | $ | 538,650  |  | $ | 1      |  | $ | 10,764,455 | 

62

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 5 - MINERAL PROPERTIES (continued)

|                                        |   |         |  |   | British  |  |   |          |   |   |          |  
|--------------------------------------- | - | ------- |  | - | -------- |  | - | -------- | - | - | -------- | -
|                                        |   | Durango |  |   | Columbia |  |   | Yukon    |   |   |          |  
|                                        |   | Mexico  |  |   | Canada   |  |   | Canada   |   |   | Total    |  
|2006                                    |   |         |  |   |          |  |   |          |   |   |          |  
|Carrying amounts, beginning of year     | $ |        |  | $ | 212,258  |  | $ | 103,243  |   | $ | 315,501  |  
|                                        |   |         |  |   |          |  |   |          |   |   |          |  
|Exploration costs incurred during year: |   |         |  |   |          |  |   |          |   |   |          |  
|Assays                                  |   |        |  |   | 11,158   |  |   |         |   |   | 11,158   |  
|Assessment and taxes                    |   |        |  |   | 2,965    |  |   |         |   |   | 2,965    |  
|Drilling                                |   |        |  |   | 193,396  |  |   |         |   |   | 193,396  |  
|Field supplies and services             |   |        |  |   | 25,835   |  |   |         |   |   | 25,835   |  
|Geological                              |   |        |  |   | 35,560   |  |   |         |   |   | 35,559   |  
|Surface work                            |   |        |  |   | 5,727    |  |   |         |   |   | 5,728    |  
|                                        |   |         |  |   |          |  |   |          |   |   |          |  
|Less: write-down                        |   |        |  |   |         |  |   | (103,242 | ) |   | (103,242 | )
|Mineral properties, end of year         | $ |        |  | $ | 486,899  |  | $ | 1        |   | $ | 486,900  |  

Additional information on the Companys mineral properties by
region is as follows:

|(a) | Durango, Mexico                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company acquired the Durango mineral properties
        through the acquisition of Cia Minera during the 2007 year-end (see Note
        3). The Companys subsidiary Cia Minera owns 43 mineral claims in
        the state of Durango, Mexico.                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In addition four core mineral claims are under
        leased concessions  exploitation rights to and for the Unification
        La Platosa, are granted by a lease agreement, to Cia Minera from Minerales
        de Avino SA de CV. The two concessions, Primer Rey and Avino y Emma, are
        included in the lease agreement, but are discrete and lie under the town
        of San Jose de Avino. The agreement is valid until October 31, 2010. An
        ongoing dispute regarding royalties on the leased mineral claims exists
        (see Note 18).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Companys mineral claims in Mexico
        are divided into the following three properties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

63

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 5 - MINERAL PROPERTIES (continued)

|(b) | British Columbia, Canada                                                                                                                                                                                                                                                                                                                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    | The Companys mineral claims in British Columbia are
      divided into the following three properties:                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    | (i)                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    | (iii)                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                      
|(c) | Yukon, Canada                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    | In 2003 the Company acquired a 100% interest in 14 quartz
      leases, located in the Mayo Mining Division of the Yukon, Canada by
      issuing 200,000 common shares at a price of $0.50 per share for total
      consideration of $100,000. The property was written down to a nominal
      value of $1 in fiscal 2006 by a charge to operations of
  $103,242.

NOTE 6 - INVESTMENTS IN RELATED COMPANIES

Investments carried at cost are comprised as follows:

|                                         |   | 2007    |  |   | 2006    | 
|---------------------------------------- | - | ------- |  | - | ------- | 
|Bralorne Gold Mines Ltd.                 | $ | 205,848 |  | $ | 205,848 | 
|Levon Resources Ltd.                     |   | 4,236   |  |   | 4,236   | 
|Oniva International Services Corporation |   | 1       |  |   | 1       | 
|                                         | $ | 210,085 |  | $ | 210,085 | 

Bralorne Gold Mines Ltd. (Bralorne)

The Companys investment in Bralorne consists of 179,149 common
shares with a quoted market value of $206,021 as at January 31, 2007 (2006 -
$324,259). Bralorne is a public company with common directors.

64

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 6 - INVESTMENTS IN RELATED COMPANIES (continued)

Levon Resources Ltd. (Levon)

The Companys investment in Levon consists of 141,200 common
shares with a quoted market value of $21,180 as at January 31, 2007 (2006 -
$7,766). Levon is a public company with common directors.

Oniva International Services Corporation (Oniva)

The Company owns a 16.67% interest in Oniva, a private company
with common management, which provides office and administration services to the
Company. The remaining 83.33% is shared equally between five other companies
that are related by common directors and management. See Note 19 for disclosure
on the Companys commitment to Oniva.

NOTE 7 - NON-CONTROLLING INTEREST

The Company has an 88.25% interest in its subsidiary Cia
Minera, and the remaining 11.75% portion is presented as a non-controlling
interest. The non-controlling interest has been recorded as a net obligation to
the Company by Cia Minera, net of a valuation allowance, as the owners of the
11.75% minority interest in Cia Minera do not have a demonstrated commitment
towards funding Cia Mineras net losses. Accordingly, the non-controlling
portion of Cia Minera operating losses are not recognized as an asset in these
financial statements.

The carrying amount of the non-controlling interest is as
follows:

|Non-controlling interest portion in Cia
      Mineras net obligation to the Company on July 17, 2006, the |   |          |  
|---------------------------------------------------------------------------------------------------------- | - | -------- | -
|date of acquisition                                                                                        | $ | 111,874  |  
|Non-controlling interest in Cia Mineras
      net loss since acquisition                                  |   | 20,437   |  
|Loss valuation
      allowance                                                                             |   | (132,311 | )
|Non-controlling interest - net carrying amount                                                             | $ |         |  

NOTE 8 - COMMITMENT AND SITE ASSESSMENT COSTS RELATED TO CIA
MINERA

The Company incurred the following site assessment costs in
contemplation of its additional 39.25% acquisition of Cia Minera:

|                              |   | 2007 |  |   | 2006    |  |   | 2005    | 
|----------------------------- | - | ---- |  | - | ------- |  | - | ------- | 
|Geological assessment         | $ |     |  | $ | 133,915 |  | $ | 128,419 | 
|Professional fees             |   |     |  |   | 26,054  |  |   | 22,964  | 
|Site overhead and maintenance |   |     |  |   | 195,952 |  |   | 240,516 | 
|                              | $ |     |  | $ | 355,921 |  | $ | 391,899 | 

Prior to fiscal 2006, the Company had determined that it did
not have a commitment or obligation to Cia Minera and accordingly did not record
its equity interest in the losses of Cia Minera. During fiscal 2006 the Company
determined that it had a commitment to Cia Minera. Accordingly, it began to
recognize in operations its equity interest in the losses of Cia Minera. In
fiscal 2006, Avino recognized into operations its interest in previously
unrecorded equity losses of Cia Minera in the amount $342,596. During fiscal
2007 the company recorded a further $33,581 of equity losses in Cia Minera,
resulting in a total of $376,177 in equity based losses in Cia Minera prior to
the acquisition of control on July 17, 2006 (see Note 3).

65

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 9 - SHARE CAPITAL

|(a) | Authorized: Unlimited common shares without par value
      Issued:
|--- | -------------------------------------------------------------------

|                                           |  | 2007       |  |   | 2006       |  
|------------------------------------------ |  | ---------- |  | - | ---------- | -
|                                           |  | Shares     |  |   | Amount     |  
|Balance, beginning of year                 |  | 11,962,075 |  | $ | 19,264,265 |  
|Shares issued for cash:                    |  |            |  |   |            |  
|Private placement                          |  | 5,000,000  |  |   | 10,000,000 |  
|Less value of warrants on private          |  |            |  |   |            |  
|placement
      transferred to contributed |  |            |  |   |            |  
|surplus                                    |  |           |  |   | (3,578,383 | )
|Exercise of stock options                  |  | 456,700    |  |   | 585,866    |  
|Exercise of warrants                       |  | 1,250      |  |   | 3,125      |  
|Shares issued for Cia Minera acquisition   |  |            |  |   |            |  
|(Note 3)                                   |  | 3,164,702  |  |   | 7,215,521  |  
|Transferred from contributed surplus on    |  |            |  |   |            |  
|exercise of stock options                  |  |           |  |   | 443,831    |  
|Exercise of warrants                       |  |           |  |   | 1,575      |  
|Future income tax liability on issuance of |  |            |  |   |            |  
|flow-through shares (Note
      13)        |  |           |  |   |           |  
|Share issuance costs                       |  |           |  |   | (823,728   | )
|                                           |  | 8,622,652  |  |   | 13,847,807 |  
|Balance, end of year                       |  | 20,584,727 |  | $ | 33,112,072 |  

Private placement

During the year ended January 31, 2007, the Company completed a
private placement of 5,000,000 units at a price of $2.00 per unit, each unit
consisted of one common share and one-half of a non-transferable share purchase
warrant. Each whole warrant entitles the holder to purchase one additional share
at a price of $2.50 until March 20, 2008. The gross proceeds from the private
placement was $10,000,000 and share issuance costs were $823,728 consisting of
finders fees of $778,795 paid in cash and $44,933 in other costs. Consideration
of $3,578,383 was allocated to contributed surplus for the warrants issued under
the placement.

|(b) | Warrants
|--- | --------

| |                                              |  |                   |   |  | Weighted Average | 
| | -------------------------------------------- |  | ----------------- | - |  | ---------------- | 
| |                                              |  | Underlying Shares |   |  | Exercise Price   | 
| | Warrants outstanding, January 31, 2005       |  | 2,433,250         |   |  | $1.44            | 
| | Exercised                                    |  | (1,190,800        | ) |  | $1.30            | 
| | Expired                                      |  | (1,242,450        | ) |  | $1.58            | 
| |                                              |  |                   |   |  |                  | 
| | Warrants outstanding, January 31, 2006       |  |                  |   |  |                 | 
| | Issued                                       |  | 2,500,000         |   |  | $2.50            | 
| | Exercised                                    |  | (1,250            | ) |  | $2.50            | 
| | Warrants
      outstanding, January 31, 2007 |  | 2,498,750         |   |  | $2.50            | 

66

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 9 - SHARE CAPITAL (continued)

|(b) | Warrants (continued)                             
|--- | -------------------------------------------------
|    |                                                  
|    | Details of share purchase warrants
  outstanding:

| |                |  |                |  |  | 2007        |  |  | 2006        | 
| | -------------- |  | -------------- |  |  | ----------- |  |  | ----------- | 
| |                |  |                |  |  | Warrants    |  |  | Warrants    | 
| | Expiry Date    |  | Exercise Price |  |  | Outstanding |  |  | Outstanding | 
| |                |  |                |  |  |             |  |  |             | 
| | March 20, 2008 |  | $ 2.50         |  |  | 2,498,750   |  |  |            | 

|(c) | Stock options
|--- | -------------

| |                                                   |  |                   |   |  | Weighted Average | 
| | ------------------------------------------------- |  | ----------------- | - |  | ---------------- | 
| |                                                   |  | Underlying Shares |   |  | Exercised Price  | 
| | Stock options outstanding, January 31, 2005       |  | 450,000           |   |  | $1.01            | 
| | Granted                                           |  | 642,500           |   |  | $1.35            | 
| | Exercised                                         |  | (249,500          | ) |  | $1.05            | 
| | Expired or cancelled                              |  | (30,000           | ) |  | $1.20            | 
| |                                                   |  |                   |   |  |                  | 
| | Stock options outstanding, January 31, 2006       |  | 813,000           |   |  | $1.31            | 
| | Granted                                           |  | 1,120,000         |   |  | $3.85            | 
| | Exercised                                         |  | (456,700          | ) |  | $1.28            | 
| |                                                   |  |                   |   |  |                  | 
| | Stock options
      outstanding, January 31, 2007 |  | 1,476,300         |   |  | $3.25            | 

Details of stock options outstanding:

| |                    |  |                |  |  | 2007          |  |  | 2006          | 
| | ------------------ |  | -------------- |  |  | ------------- |  |  | ------------- | 
| |                    |  |                |  |  | Stock Options |  |  | Stock Options | 
| | Expiry Date        |  | Exercise Price |  |  | Outstanding   |  |  | Outstanding   | 
| | October 21, 2008   |  | $1.20          |  |  | 41,800        |  |  | 233,000       | 
| | April 5, 2010      |  | $1.35          |  |  | 262,000       |  |  | 510,000       | 
| | September 26, 2010 |  | $1.35          |  |  | 52,500        |  |  | 70,000        | 
| | March 15, 2011     |  | $2.72          |  |  | 120,000       |  |  |              | 
| | April 26, 2011     |  | $3.99          |  |  | 1,000,000     |  |  |              | 
| |                    |  |                |  |  | 1,476,300     |  |  | 813,000       | 

As at January 31, 2007 1,443,800 stock
options were exercisable and as at January 31, 2006 798,000 stock options were
exercisable.

The Company amended its stock option
plan in fiscal 2007, under which it may grant stock options up to 10% of the
Companys total number of shares issued and outstanding on a non-diluted basis.
The stock option plan provides for the granting of stock options to regular
employees and persons providing investor-relation or consulting services up to a
limit of 5% and 2% respectively of the Companys total number of issued and
outstanding shares per year. The stock options vest on the date of grant, except
for those issued to persons providing investor-relation or consulting services,
which vest over a period of one year. The option price must be greater or equal
to the discounted market price on the grant date and the option term cannot
exceed five years from the grant date.

67

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 9 - SHARE CAPITAL (continued)

|(d) | Flow-through common shares                                                                                                                                                                                                                                                                                               
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                          
|    | The Company issues flow-through common shares to finance
      part of its exploration expenditures. The income tax deductions related to
      the exploration expenditures renounced may be claimed only by the
      investors of the flow-through common shares.                                                     
|    |                                                                                                                                                                                                                                                                                                                          
|    | As at January 31, 2007, the Company has a commitment to
      incur a further $29,650 in qualifying Canadian exploration expenditures,
      as defined in the Canadian Income Tax Act, pursuant to which the Company
      must incur and renounce these qualifying expenditures to the flow-through
      shareholders.
|    |                                                                                                                                                                                                                                                                                                                          
|(e) | Flow-through warrants                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                          
|    | Included in the warrants described in Note 9(c) are the
      following flow-through share purchase warrants as
  follows:                                                                                                                                                                                               

| |                                                                    |  | Underlying |   |   | Weighted Average | 
| | ------------------------------------------------------------------ |  | ---------- | - | - | ---------------- | 
| |                                                                    |  | Shares     |   |   | Exercise Price   | 
| |                                                                    |  |            |   |   |                  | 
| | Flow-through warrants outstanding, January
      31, 2005          |  | 170,000    |   | $ | 0.52             | 
| | Exercised                                                          |  | (170,000   | ) | $ | 0.52             | 
| |                                                                    |  |            |   |   |                  | 
| | Flow-through
      warrants outstanding, January 31, 2006 and 2007 |  |           |   |   |                 | 

NOTE 10  CONTRIBUTED SURPLUS

|                                                               |   | 2007      |   |   | 2006      |  
|-------------------------------------------------------------- | - | --------- | - | - | --------- | -
|Balance, beginning of year                                     | $ | 1,070,699 |   | $ | 689,965   |  
|Value of stock options granted during
      the year (Note 12) |   | 2,860,603 |   |   | 725,125   |  
|Value of stock options
      issued for services (Note 11)     |   | 195,600   |   |   | 103,981   |  
|Value of warrants on private placement
      (Note 9(a))       |   | 3,578,383 |   |   |          |  
|Value of stock options
      exercised                         |   | (443,831  | ) |   | (448,372  | )
|Value of warrants exercised                                    |   | (1,575    | ) |   |          |  
|Balance, end of year                                           | $ | 7,259,879 |   | $ | 1,070,699 |  

68

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 11  SHAREHOLDER AND INVESTOR RELATIONS
EXPENSES

The fair values of stock options granted to investor relations
consultants are included in shareholder and investor relations expenses. The
fair values of the stock options is calculated using the Black-Scholes option
pricing model and is measured and expensed over the 12 month period over which
services are provided and the options vest. During fiscal 2007 investor
relations consultants were granted 130,000 stock options ((2006  95,000) (2005
 nil)) which are included in the stock options described in Note 9(c), and
these options are exercisable at a price of $2.72 (2006 - $1.35) per share. The
shareholder and investor relations expense for fiscal 2007 includes $195,600
((2006 - $103,981) (2005 - $nil)) for the fair value of stock options granted to
investor relations consultants. The fiscal 2007 weighted average fair value of
these options on date of grant was $1.74 (2006 - $1.33) . The fair value of
these options were calculated using the Black-Scholes model with following
weighted average assumptions:

|                                    |  | 2007 |  |  | 2006 |  |  | 2005 | 
|----------------------------------- |  | ---- |  |  | ---- |  |  | ---- | 
|Assumptions:                        |  |      |  |  |      |  |  |      | 
|Risk-free interest rate (%)         |  | 4.1  |  |  | 3.4  |  |  |     | 
|Expected dividend yield
      (%)   |  |     |  |  |     |  |  |     | 
|Expected option life (years)        |  | 4.7  |  |  | 3    |  |  |     | 
|Expected stock price volatility (%) |  | 90   |  |  | 180  |  |  |     | 

NOTE 12  STOCK-BASED COMPENSATION

In fiscal 2007 the Company granted 990,000 (2006  547,500)
options having a life of five years and exercisable at a price of $3.99 per
share to directors, officers, and employees of the Company. In fiscal 2007 the
Company recognized $2,860,603 (2006 - $725,125) in stock-based compensation
representing the fair value of these stock options. In the fiscal 2005 year the
$81,540 in stock-based compensation expense was recorded for the vesting of
stock options granted in fiscal 2004. The fiscal 2007 weighted average fair
value of the options on the date of grant was $2.89 ((2006 - $1.33) (2005 -
$nil)). The fiscal 2007 fair value of these options were calculated using the
Black-Scholes model with following weighted average assumptions:

|                                          |  | 2007 |  |  | 2006 |  |  | 2005 | 
|----------------------------------------- |  | ---- |  |  | ---- |  |  | ---- | 
|Assumptions:                              |  |      |  |  |      |  |  |      | 
|Risk-free interest rate (%)               |  | 4.4  |  |  | 3.4  |  |  | 3.0  | 
|Expected dividend yield (%)               |  |     |  |  |     |  |  |     | 
|Expected option life (years)              |  | 5    |  |  | 3    |  |  | 5    | 
|Expected stock price
      volatility (%) |  | 91   |  |  | 180  |  |  | 52   | 

69

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 13 - INCOME TAXES

The components of future income tax provisions including, the
statutory tax rate, effective tax rate and the effect of the valuation allowance
are as follows:

|                                                            |   | 2007      |   |   | 2006     |   |   | 2005     |  
|----------------------------------------------------------- | - | --------- | - | - | -------- | - | - | -------- | -
|Statutory rate                                              |   | 34.12%    |   |   | 34.5%    |   |   | 36%      |  
|                                                            |   |           |   |   |          |   |   |          |  
|Income taxes recovered at the Canadian
      statutory rate | $ | 1,244,882 |   | $ | 817,555  |   | $ | 293,000  |  
|Less permanent differences:                                 |   |           |   |   |          |   |   |          |  
|Stock-based
      compensation                              |   | (976,038  | ) |   | (250,169 | ) |   | (29,400  | )
|Investor relations expense for stock
      options granted  |   | (66,739   | ) |   | (35,873  | ) |   |         |  
|Reduction for effect of
      lower Mexican tax rates       |   | (10,644   | ) |   |         |   |   |         |  
|Equity based accounting loss for
      interest in Cia      |   |           |   |   |          |   |   |          |  
|Minera Mexicana de Avino, S.A. de C.V.                      |   | (11,458   | ) |   | (118,200 | ) |   |         |  
|Other non-tax deductible expenses                           |   | (3,373    | ) |   |         |   |   |         |  
|Effect of temporary differences:                            |   |           |   |   |          |   |   |          |  
|Share issuance costs                                        |   | 71,239    |   |   |         |   |   |         |  
|Write-down of
      investment                              |   |          |   |   | (74,900  | ) |   |         |  
|Write-down of mineral property                              |   |          |   |   | (35,600  | ) |   |         |  
|Geological exploration
      expenditures                   |   |          |   |   | (45,000  | ) |   |         |  
|Benefit of tax losses not recognized in year  valuation    |   |           |   |   |          |   |   |          |  
|allowance                                                   |   | (247,869  | ) |   | (257,813 | ) |   | (263,600 | )
|Benefit of future income tax asset recognized on            |   |           |   |   |          |   |   |          |  
|renouncement Canadian
      exploration expenditures to     |   |           |   |   |          |   |   |          |  
|flow-through share investors                                |   |          |   |   | 19,750   |   |   | 41,200   |  
|Future income tax recovery recognized in the year           | $ |          |   | $ | 19,750   |   | $ | 41,200   |  

The approximate tax effects of each type of temporary
difference that gives rise to potential future tax assets are as follows:

|                                                                                      |   | 2007       |   |   | 2006       |  
|------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|Statutory rate                                                                        |   | 34.12%     |   |   | 34.5%      |  
|Non-capital tax losses carried forward                                                | $ | 1,392,852  |   | $ | 1,244,000  |  
|Capital tax losses carried forward                                                    |   | 251,159    |   |   | 254,000    |  
|Canadian exploration expenses, Canadian development
      expenses and foreign        |   |            |   |   |            |  
|exploration, and
      development expenses in excess of book value of Canadian       |   |            |   |   |            |  
|mineral properties                                                                    |   | 557,738    |   |   | 508,000    |  
|Share issuance costs                                                                  |   | 239,873    |   |   | 30,000     |  
|Tax basis of investments in related companies in excess of
      book value           |   | 37,020     |   |   | 37,433     |  
|Undeducted capital cost allowance in excess of book value
      of Canadian equipment |   | 70,862     |   |   | 69,700     |  
|Future tax assets                                                                     |   | 2,549,504  |   |   | 2,143,133  |  
|Less: valuation allowance                                                             |   | (2,549,504 | ) |   | (2,143,133 | )
|Net tax assets                                                                        | $ |           |   | $ |           |  

70

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 13 - INCOME TAXES (continued)

The potential benefit of net operating tax loss carry-forwards
and other future income tax assets has not been recognized in the financial
statements since the Company cannot be assured that it is more likely than not
that such benefit will be utilized in future years.

The Company has capital losses of $1,472,210 carried forward
and $4,049,022 in non-capital tax losses carried forward available to reduce
future taxable income. The capital losses can be carried forward indefinitely
unless used. The non-capital tax losses if unused expire as follows:

2008
    $
    351,1142009
    
    253,3362010
    
    245,3812011
    
    904,2792012
    
    343,6902016
    
    568,4502027
    
    799,0442028
    
    583,728$
    4,049,022


In addition, the $2,335,999 future income tax liability
presented in these financial statements is due to the difference between the
carrying amount and tax basis upon acquisition of the mineral properties, mine
plant and equipment in the purchase of Cia Minera (see Note 3).

NOTE 14 - RELATED PARTY TRANSACTIONS AND BALANCES

The balances and transactions with related parties are as
follows:

|(a) | Advances to related parties:
|--- | ----------------------------

| |                                                                                  |   | 2007   |  |   | 2006   | 
| | -------------------------------------------------------------------------------- | - | ------ |  | - | ------ | 
| | ABC Drilling Services Inc.  a subsidiary
      of Oniva                         | $ | 64,933 |  | $ | 83,000 | 
| | Oniva International Services Corp.  a company controlled
      by a director of |   |        |  |   |        | 
| | Avino                                                                            |   | 837    |  |   |       | 
| | Advances to
      related parties                                                | $ | 65,770 |  | $ | 83,000 | 

The advance to ABC Drilling Services Inc. is intended as an
exploration advance for future drilling services.

|(b) | Amounts due to related
parties:
|--- | -------------------------------

| |                                                                                  |   | 2007    |  |   | 2006    | 
| | -------------------------------------------------------------------------------- | - | ------- |  | - | ------- | 
| | Directors                                                                        | $ | 7,500   |  | $ | -       | 
| | Frobisher Securities Ltd.  a company controlled by a
      director of Avino    |   | 105     |  |   | 16,710  | 
| | Bralorne Gold Mines Ltd.  a company with
      directors and management in      |   |         |  |   |         | 
| | common with Avino                                                                |   |        |  |   | 3,145   | 
| | Oniva International Services Corp.  a
      company controlled by a director of |   |         |  |   |         | 
| | Avino                                                                            |   | 133,919 |  |   | 161,563 | 
| |                                                                                  | $ | 141,524 |  | $ | 181,418 | 

The amounts due to related parties are non-interest bearing,
unsecured and due on demand.

71

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 14 - RELATED PARTY TRANSACTIONS AND BALANCES
(continued)

|(c) | The Company recorded the following amounts for
      administrative services and expenses provided by Oniva International
      Services Corp.:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

| |                                |   | 2007    |  |   | 2006    |  |   | 2005    | 
| | ------------------------------ | - | ------- |  | - | ------- |  | - | ------- | 
| | Salaries and benefits          | $ | 59,523  |  | $ | 73,529  |  | $ | 59,884  | 
| | Office and
      miscellaneous |   | 60,334  |  |   | 89,799  |  |   | 64,262  | 
| |                                | $ | 119,857 |  | $ | 163,328 |  | $ | 124,146 | 

|(d) | The Company recorded the following amounts for management
      and consulting services provided by the following
  companies:
|--- | ------------------------------------------------------------------------------------------------------------------------------

| |                                                                         |   | 2007    |  |   | 2006   |  |   | 2005   | 
| | ----------------------------------------------------------------------- | - | ------- |  | - | ------ |  | - | ------ | 
| | Intermark Capital Corp.  a company
      controlled by a director of   |   |         |  |   |        |  |   |        | 
| | Avino                                                                   | $ | 87,000  |  | $ | 60,000 |  | $ | 60,000 | 
| | Frobisher Securities Ltd.                                               |   |        |  |   | 2,000  |  |   |       | 
| | Wear Wolfin Design Ltd.  a company controlled by a
      director of a |   |         |  |   |        |  |   |        | 
| | related company                                                         |   | 30,000  |  |   | 30,000 |  |   | 12,500 | 
| |                                                                         |   |         |  |   |        |  |   |        | 
| |                                                                         | $ | 117,000 |  | $ | 92,000 |  | $ | 72,500 | 

|(e) | The Company paid or accrued $53,837 (2006 - $146,092;
      2005 - $Nil) to ABC Drilling Services Inc. for drilling services and
      $6,854 (2006 - $20,433; 2005 - $Nil) to Bralorne Gold Mines Ltd. for
      exploration services.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                        
|(f) | The Company paid or accrued $84,279 (2006 - $Nil; 2005 -
      $Nil) for investor relations services to National Media Associates, a
      business significantly influenced by a director of the
  Company.                           

All related party transactions are recorded at the value agreed
upon by the Company and the related party, which management believes
approximates fair value.

NOTE 15 - SEGMENTED INFORMATION

The Companys operations are limited to one industry segment,
being the acquisition, exploration and development of mineral properties.
Regional geographic information pertaining to the Companys mineral properties
is disclosed in Note 5.

NOTE 16 - SUPPLEMENTARY CASH FLOW INFORMATION

|                                               |   | 2007    |   |   | 2006    |   |   | 2005    |  
|---------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
|Changes in non-cash working capital items:     |   |         |   |   |         |   |   |         |  
|Interest receivable                            | $ | (38,179 | ) | $ |        |   | $ |        |  
|Taxes recoverable                              |   | (61,665 | ) |   | (1,871  | ) |   | (13,432 | )
|Prepaid expenses                               |   | (40,497 | ) |   | 8,804   |   |   | (10,066 | )
|Advances to related companies                  |   | 17,230  |   |   |        |   |   | 2,884   |  
|Accounts payable and
      accrued liabilities |   | 224,755 |   |   | (3,235  | ) |   | 19,047  |  
|Due to related parties                         |   | (39,894 | ) |   | (95,227 | ) |   | 16,416  |  
|Net change in non-cash working capital         | $ | 61,750  |   | $ | (91,529 | ) | $ | 14,849  |  

72

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 17 - COMPARATIVE FIGURES

Certain fiscal 2005 and 2006 comparative figures have been
reclassified to conform to the financial statement presentation adopted for
2007. These reclassifications do not affect the net loss or closing deficit of
the comparative figures.

NOTE 18 - CONTINGENT LIABILITY

The Companys subsidiary Cia Minera leases four core mineral
claims in consideration for royalties. The lessor is currently contesting the
underlying royalty agreement, and has filed a legal action claiming royalties
are owing from prior years in the approximate amount $3,487,223 (denominated in
Mexican pesos $32,651,905) plus interest. The Company has accrued $738,302
(denominated in Mexican pesos $6,912,940) on account of the royalties owing. Cia
Minera has held the position that it has fully provided for the royalty
liability in its accounts and continues to contest the action in court, however,
negotiations are being held as both parties are working towards an amicable
settlement.

NOTE 19 - COMMITMENTS

The Company entered into a 12 month Investor Relations
Agreement with Investor Relations Group Inc., formerly called Investors
Relations Services Group John Mullen & Partners (IRS), to provide investor
relations services in Europe. In consideration for the services rendered, the
Company has agreed to pay IRS fees of $2,000 per month plus expenses. The
agreement with IRS expires on October 5, 2007, and the Companys commitment
under the agreement as at January 31, 2007 totals $16,000.

The Company entered into a 12 month agreement with National
Media Associates ("National Media") to provide financial relations, media
relations and public market development services. The Company has agreed to pay
National Media US$6,000 per month, and the contract can be terminated after
September 15, 2006 upon 30 days' notice by the Company. The agreement with
National Media expires on March 15, 2007, and the Companys commitment under the
agreement as at January 31, 2007 totals $10,613 (US$9,000).

The Company entered into a cost sharing agreement dated October
1, 1997, and amended November 1, 2003 to reimburse Oniva for a variable
percentage of its overhead expenses, to reimburse 100% of its out-of-pocket
expenses incurred on behalf of the company, and to pay a percentage fee based on
the total overhead and corporate expenses. The agreement may be terminated with
one-month notice by either party. Transactions and balances with Oniva, which is
a related company, are disclosed in Note 14.

The Company has a contractual minimum drilling commitment for
the exploration of its mineral properties in Durango, Mexico. As at January 31,
2007 the Company is committed to drilling services at an estimated cost of
$416,022, which is denominated in U.S. dollars (US$352,800). Management has
determined that the Companys exploration in fiscal 2008 will likely exceed the
minimum commitment, thus an amount in excess of the minimum drilling cost will
likely be paid in fiscal 2008.

73

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 20 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

These consolidated financial statements of the Company have
been prepared in accordance with Canadian generally accepted accounting
principles (Canadian GAAP), which differ in certain material respects from
accounting principles generally accepted in the United States of America (U.S.
GAAP). The material differences between Canadian and U.S. GAAP and their effect
on the Companys financial statements are summarized as follows:

|                                        |   | 2007        |   |   | 2006      |  
|--------------------------------------- | - | ----------- | - | - | --------- | -
|Balance sheets                          |   |             |   |   |           |  
|Total assets under Canadian GAAP        | $ | 23,295,039  |   | $ | 3,901,160 |  
|                                        |   |             |   |   |           |  
|Deferred exploration expenditures (iii) |   | (10,764,455 | ) |   | (382,896  | )
|Investments (i)                         |   | 17,116      |   |   | 121,941   |  
|Total assets under US GAAP              |   | 12,547,700  |   |   | 3,640,205 |  
|                                        |   |             |   |   |           |  
|Total equity under Canadian GAAP        |   | 19,505,956  |   |   | 3,314,446 |  
|                                        |   |             |   |   |           |  
|Deferred exploration expenditures (iii) |   | (10,764,455 | ) |   | (382,896  | )
|Investments (i)                         |   | 17,116      |   |   | 121,941   |  
|Total equity under US GAAP              | $ | 8,758,617   |   | $ | 3,053,491 |  

|                                                       |   | 2007        |   |   | 2006       |   |   | 2005       |  
|------------------------------------------------------ | - | ----------- | - | - | ---------- | - | - | ---------- | -
|Consolidated statements of operations                  |   |             |   |   |            |   |   |            |  
|Loss for year under Canadian GAAP                      | $ | (3,684,539  | ) | $ | (2,369,724 | ) | $ | (814,710   | )
|Future income tax benefit on renouncement of qualified |   |             |   |   |            |   |   |            |  
|Canadian exploration
      expenditures (ii)           |   |            |   |   | (19,750    | ) |   | (41,200    | )
|Exploration expenses (iii)                             |   | (10,277,556 | ) |   | (271,397   | ) |   | (91,400    | )
|Write-down of investment (i)                           |   |            |   |   | 217,000    |   |   |           |  
|                                                       |   |             |   |   |            |   |   |            |  
|Net loss for the year under U.S. GAAP (iv)             |   | (13,962,095 | ) |   | (2,443,871 | ) |   | (947,310   | )
|Comprehensive income (loss) items:                     |   |             |   |   |            |   |   |            |  
|Unrealized gain (loss) on investments (i)              |   | 17,116      |   |   | (146,470   | ) |   | (797,365   | )
|Net comprehensive
      income (loss) items            | $ | (13,944,979 | ) | $ | (2,590,341 | ) | $ | (1,744,675 | )
|Income (loss) per share under U.S. GAAP (iv)           | $ | (0.76       | ) | $ | (0.22      | ) | $ | (0.09      | )

74

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 20 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

|                                                              |   | 2007       |   |   | 2006       |   |   | 2005     |  
|------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | -------- | -
|Statements of cash flows                                      |   |            |   |   |            |   |   |          |  
|Cash flows used in operating activities under Canadian        |   |            |   |   |            |   |   |          |  
|GAAP                                                          | $ | (494,328   | ) | $ | (988,079   | ) | $ | (758,311 | )
|                                                              |   |            |   |   |            |   |   |          |  
|Mineral properties expenditures (iii)                         |   | (751,981   | ) |   | (273,234   | ) |   | (91,400  | )
|                                                              |   |            |   |   |            |   |   |          |  
|Cash flows used in operating activities under US GAAP         |   | (1,246,309 | ) |   | (1,261,313 | ) |   | (849,711 | )
|Cash flows (used in) from investing activities                |   | (1,095,902 | ) |   | (225,002   | ) |   | (226,400 | )
|Under Canadian GAAP                                           |   |            |   |   |            |   |   |          |  
|                                                              |   |            |   |   |            |   |   |          |  
|Mineral properties expenditures (iii)                         |   | 751,981    |   |   | 273,234    |   |   | 91,400   |  
|                                                              |   |            |   |   |            |   |   |          |  
|Cash flows (used in) from investing
      activities under US |   |            |   |   |            |   |   |          |  
|GAAP                                                          | $ | (343,921   | ) | $ | 48,232     |   | $ | (135,000 | )

|i)  | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | U.S. GAAP requires investments held for sale to be
      recorded at market. The periodic fluctuation in value is recorded as part
      of comprehensive income (loss); under U.S. GAAP such fluctuations are not
      recognized into operations until the shares are sold. Canadian GAAP
      requires such investments to be recorded at the lower of cost and market;
      long-term investments in marketable securities are written down to market
      when impairment is considered other than temporary, in which case the
      written-down value becomes the new cost base, and the impairment is
      charged to operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|ii) | Flow-through shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Under Canadian income tax legislation a company is
      allowed to issue flow-through shares pursuant to which the Company
      renounces Canadian exploration expenditures to the flow-through share
      investors for an amount equal to the share issuance price.                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Under Canadian GAAP, the Company recognizes a future
      income tax benefit upon the renouncement of these exploration expenditures
      for the amount of the future tax value of the expenditures renounced.
      Under U.S. GAAP, the recognition of this future income tax benefit is
      limited to the extent that the issue price of the flow- through shares
      exceeds the fair value of the Companys shares on the date that the
      flow-through shares are sold.                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Under Canadian GAAP, unexpended flow-through funds are
      not classified as restricted. Under US GAAP, however, unexpended
      flow-through funds are considered restricted and not part of cash and cash
      equivalents. As at January 31, 2007 and 2006 the Company had $120,401 of
      restricted, unexpended flow-through funds (2005 -
  $258,378).                                                                                                                                                                                                                                                                             

75

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 20 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

|iii) | Mineral properties interests                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | Canadian GAAP allows for the deferral of the costs of
      acquisition of mineral property interests and exploration expenditures
      subject to periodic assessment for impairment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | U.S. GAAP requires that exploration expenditures be
      charged to operations in the period in which they are incurred. Effective
      April 30, 2004, U.S. GAAP, in accordance with Emerging Issues Task Force
      (EITF) 04-2, further requires that acquisition costs of mineral property
      interests be recognized as tangible assets. Prior to the issuance of EITF
      04-2, acquisition costs of mineral properties interests were charged to
      operations in the period in which they were incurred. The adoption of EITF
      04-2 is to be applied retroactively with a restatement of prior periods.
      The Company adopted EITF 04-2 as at February 1, 2005, and, accordingly,
      restated its mineral properties interest balance under U.S. GAAP from $nil
      to $204,002 as at January 31, 2005, resulting in an increase of $204,002
      to total assets and total equity.                                                                                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|iv)  | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | The weighted average number of common shares used to
      calculate the loss per share under Canadian GAAP is equal to the weighted
      average number of common shares under U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|v)   | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | In September 2006, the Financial Accounting Standards
      Board (FASB) issued SFAS No. 158, Employers Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB
      Statements No. 87, 88, 106, and 132(R). This statement requires employers
      to recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes
      in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net
      assets of a not-for-profit organization. This statement also requires an
      employer to measure the funded status of a plan as of the date of its
      year-end statement of financial position, with limited exceptions. The
      provisions of SFAS No. 158 are effective for employers with publicly
      traded equity securities as of the end of the fiscal year ending after
      December 15, 2006. The adoption of this statement is not expected to have
      a material effect on the Company's future reported financial position or
      results of operations.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | In September 2006, the FASB issued SFAS No. 157, Fair
      Value Measurements. The objective of SFAS No. 157 is to increase
      consistency and comparability in fair value measurements and to expand
      disclosures about fair value measurements. SFAS No. 157 defines fair
      value, establishes a framework for measuring fair value in generally
      accepted accounting principles, and expands disclosures about fair value
      measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any
      new fair value measurements. The provisions of SFAS No. 157 are effective
      for fair value measurements made in fiscal years beginning after November
      15, 2007. The adoption of this statement is not expected to have a
      material effect on the Company's future reported financial position or
      results of operations.                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | In June 2006, the FASB issued FASB Interpretation No. 48,
      Accounting for Uncertainty in Income Taxes, an interpretation of FASB
      Statements No. 109 (FIN 48). FIN 48 clarifies the accounting for
      uncertainty in income taxes by prescribing a two-step method of first
      evaluating whether a tax position has met a more likely than not
      recognition threshold and second, measuring that tax position to determine
      the amount of benefit to be recognized in the financial statements. FIN 48
      provides guidance on the presentation of such positions within a
      classified statement of financial position as well as on derecognition,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. FIN 48 is effective for fiscal years beginning after December
      15, 2006. The adoption of this statement is not expected to have a
      material effect on the Company's future reported financial position or
      results of operations.                                                                                                                                                                                                                                                   

76

---

|AVINO SILVER & GOLD MINES LTD.             
|-------------------------------------------
|Consolidated Statements of Cash Flows      
|Years Ended January 31, 2007, 2006 and 2005
|(Expressed in Canadian
      Dollars)      

NOTE 20 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

|v) | Recent Accounting Pronouncements
  (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In March 2006, the FASB issued SFAS No. 156, "Accounting
      for Servicing of Financial Assets, an amendment of FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities". This statement requires all separately
      recognized servicing assets and servicing liabilities be initially
      measured at fair value, if practicable, and permits for subsequent
      measurement using either fair value measurement with changes in fair value
      reflected in earnings or the amortization and impairment requirements of
      Statement No. 140. The subsequent measurement of separately recognized
      servicing assets and servicing liabilities at fair value eliminates the
      necessity for entities that manage the risks inherent in servicing assets
      and servicing liabilities with derivatives to qualify for hedge accounting
      treatment and eliminates the characterization of declines in fair value as
      impairments or direct write-downs. SFAS No. 156 is effective for an
      entity's first fiscal year beginning after September 15, 2006. The
      adoption of this statement is not expected to have a material effect on
      the Company's future reported financial position or results of
      operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In February 2006, the FASB issued SFAS No. 155,
      "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB
      Statements No. 133 and 140", to simplify and make more consistent the
      accounting for certain financial instruments. SFAS No. 155 amends SFAS No.
      133, "Accounting for Derivative Instruments and Hedging Activities", to
      permit fair value re-measurement for any hybrid financial instrument with
      an embedded derivative that otherwise would require bifurcation, provided
      that the whole instrument is accounted for on a fair value basis. SFAS No.
      155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of
      Long-Lived Assets", to allow a qualifying special-purpose entity to hold a
      derivative financial instrument that pertains to a beneficial interest
      other than another derivative financial instrument. SFAS No. 155 applies
      to all financial instruments acquired or issued after the beginning of an
      entity's first fiscal year that begins after September 15, 2006, with
      earlier application allowed. The adoption of this statement is not
      expected to have a material effect on the Company's future reported
      financial position or results of operations.                            

77

---

SIGNATURE

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.

|Dated: August
      20, 2008 | AVINO SILVER & GOLD MINES LTD.
|---------------------------- | ------------------------------
|                             |                               
|                             | By:                           
|                             |                               
|                             |                               



---



|Exhibit Number | Name                                                                                   
|-------------- | ---------------------------------------------------------------------------------------
|               |                                                                                        
|1.1            | Memorandum of Avino Silver &
      Gold Mines Ltd.*                                    
|1.2.           | Articles of Avino Silver & Gold Mines Ltd.*                                            
|4.1            | Share Purchase Agreement dated
      March 22, 2004*                                   
|8.1            | List of Subsidiaries                                                                   
|12.1           | Certification
      of the Principal Executive Officer                                 
|12.2           | Certification of the
      Principal Financial Officer                                 
|13.1           | Certificate
      under the Sarbanes-Oxley Act of
      the Principal Executive Officer
|13.2           | Certificate
      under the Sarbanes-Oxley Act of the Principal Financial Officer      
|15.1           | Form 43 -101F1 Technical Report: Tailings Retreatment
       Process Options*         

____________________________* Previously filed.

---