**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      20-F**







[
                ]
            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,
                2006





[
                ]
            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 0-9266





**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 400


Vancouver,
      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, 2006 was
      11,962,075.





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











**TABLE
      OF CONTENTS**





Introduction
            3Currency
            3Forward-looking
                Statements
            3Cautionary
                Note to United States Investors Concerning Estimate of Measured andIndicated
                Mineral Resources
            3Glossary
                of Mining
                Terms
            4Part
                I
            6Item
                1.Identity
                of Directors, Senior Management and
                Advisors
            6Item
                2.Offer
                Statistics and Expected Timetable
            6Item
                3.Key
                Information
            6Item
                4.Information
                on the Company
            13Item
                5.Operating
                and Financial Review and
                Prospects
            21Item
                6.Directors,
                Senior Management and
                Employees
            26Item
                7.Major
                Shareholders and Related Party
                Transactions
            31Item
                8.Financial
                Information
            33Item
                9.The
                Offer and Listing
            33Item
                10.Additional
                Information
            34Item
                11.Quantitative
                and Qualitative Disclosures About Market
                Risk
            41Item
                12.Description
                of Securities Other than Equity
                Securities
            41Part
                II
            41Item
                13.Defaults,
                Dividend Arrearages and
                Delinquencies
            41Item
                14.Material
                Modifications to the Rights of Security Holders
                and Use of Proceeds
            41Item
                15.Controls
                and Procedures
            42Item
                16A.Audit
                Committee Financial Expert
            42Item
                16B.Code
                of Ethics
            42Item
                16C.Principal
                Accountant Fees and
                Services
            42Item
                16D.Exemptions
                from the Listing Standards for Audit
                Committees
            43Item
                16E.Purchases
                of Equity Securities by the Issuer and
                Affiliated Purchasers
            43Part
                III
            43Item
                17.Financial
                Statements
            43Item
                18.Financial
                Statements
            43Item
                19.Exhibits
            43





2
 Table
          of Contents


**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.





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 1995* concerning
      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
      Noteto 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
 Table
          of Contents


**GLOSSARY
      OF MINING TERMS**





***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.




***Cretaceous*****
            The
                geologic period extending from 135 million to 65 million years
                ago.




***cubic
                meters or m******3*****
            A
                metric measurement of volume, being a cube one meter in length on
                each
                side.




***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.





***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.




***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.





***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.




4
 Table
          of Contents




***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.





***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***
            Each
                means a comprehensive study of the viability of a mineral project
                that has


***preliminary
                feasibility***
            advanced
                to a stage where mining method, in the case of underground mining,
                or


***study***
            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.




***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.




***ton***
            Imperial
                measurement of weight equivalent to 2,000 pounds.




***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.









5
 Table
          of Contents


**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, 2006, 2005, 2004, 2003 and 2002, is derived
      from
      the audited financial statements of the Company. The audited financial
      statements and notes for each year in the three **** years
      ended January 31, 2006, 2005 and 2004 are included in this Annual Report. The
      selected historical financial information for each year ended January 31, 2003
      and 2002, 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 17 is a
      reconciliation between Canadian GAAP and United States generally accepted
      accounting principals, which is 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,****2006**
              
              **2005****(1)******
              
              **2004**
              
              **2003**
              
              **2002****Restated****Summary
                  of Operations:**Interest
                  and miscellaneous Income
              
              $
              46,073
              
              $
              41,999
              
              $
              8,299
              
              $
              197
              
              $
              1,195ExpensesGeneral
                  and administrative
              
              
              1,416,788
              
              
              506,010
              
              
              331,446
              
              
              147,091
              
              
              364,610Write-down
                  of mining Properties
              
              
              103,342
              
              
              -
              
              
              -
              
              
              -
              
              
              1,664,905Equity
                  in loss of Mexican Affiliate
              
              
              342,596
              
              
              -
              
              
              -
              
              
              -
              
              
              1,259,438Loss
                  in sale of Joint Venture
              
              
              -
              
              
              -
              
              
              -
              
              
              40,097
              
              
              -Write-down
                  of investment
              
              
              217,000
              
              
              -
              
              
              -
              
              
              -
              
              
              2,824Due
                  diligence review of Cia Minera Mexicana 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
              
              
              (2,369,724
              )
              
              (814,710
              )
              
              (445,591
              )
              
              (186,991
              )
              
              (3,290,582
              )Income
                (loss) per share
              
              
              (0.22
              )
              
              (0.08
              )
              
              (0.06
              )
              
              (0.03
              )
              
              (0.68
              )Weighted
                    Average Number of Shares Outstanding
              
              
              10,965,718
              
              
              10,410,379
              
              
              7,015,604
              
              
              5,625,498
              
              
              4,872,966




6
 Table
          of Contents




**As
                    at January
                    31,****2006**
                
                **2005****(1)******
                
                **2004**
                
                **2003**
                
                **2002****Restated****Balance
                    Sheet Data:**Total
                    assets
                
                
                3,957,892
                
                
                3,219,431
                
                
                3,522,548
                
                
                814,546
                
                
                2,239,468Cash
                    and cash equivalents
                
                
                3,067,011
                
                
                2,283,535
                
                
                2,832,457
                
                
                20,104
                
                
                1,317Note
                    ("Debenture") payable
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                1,629,171Total
                    liabilities
                
                
                586,714
                
                
                341,174
                
                
                305,170
                
                
                380,070
                
                
                2,032,601Shareholders'
                    equity
                
                
                3,371,178
                
                
                2,878,257
                
                
                3,216,838
                
                
                434,476
                
                
                206,867


_____________________________


(1)
      The accounts as at January 31, 2005 and have been restated to recognize an
      error
      in the accounting for the prospective application of the CICA Handbook Section
      3870 "Stock-Based Compensation" in fiscal 2005. The Company had not recognized
      stock-based compensation to employees related to the fiscal year of 2003 in
      its
      restatement to beginning deficit as at January 31, 2005 in the amount of
      $186,992. Accordingly, the statement of operations and deficit for the year
      ended January 31, 2005 was restated to reflect an increase of $(186,992) in
      the
      restatement of beginning deficit from $(297,621) to $(484,613). The
      shareholders' equity accounts as at January 31, 2005 were restated to reflect
      a
      $186,992 increase to contributed surplus from $502,973 to $689,965 and a
      $186,992 increase to deficit from $(14,552,931) to $(14,739,923).


**United
                  States GAAP:**
              
              **Year
                  Ended January 31,****2006**
              
              **2005****(1)******
              
              **2004**
              
              **2003**
              
              **2002****Restated****Summary
                  of Operations:**Net
                  Income (loss) per Canadian GAAP
              
              $
              (2,369,724
              )
              $
              (814,710
              )
              $
              (445,591
              )
              $
              (186,991
              )
              $
              (3,290,582
              )Adjustments
              
              
              35,147
              
              
              (132,600
              )
              
              (20,100
              )
              
              (204,000
              )
              
              732,290Net
                  Income (loss) per US GAAP
              
              
              2,404,871
              
              
              (947,310
              )
              
              (465,691
              )
              
              (390,991
              )
              
              (2,558,292
              )Income
                  (loss) per share per US GAAP
              
              
              (0.22
              )
              
              (0.09
              )
              
              (0.07
              )
              
              (0.07
              )
              
              (0.52
              )


**As
                  at January 31,****2006**
              
              **2005****(1)******
              
              **2004**
              
              **2003**
              
              **2002****Restated****Balance
                  Sheet Data:**Total
                  assets under Canadian GAAP
              
              
              3,957,892
              
              
              3,219,431
              
              
              3,522,548
              
              
              814,546
              
              
              2,239,468Adjustments
              
              
              (278,687
              )
              
              (60,088
              )
              
              624,675
              
              
              101,004
              
              
              (175,901
              )Total
                  assets under US GAAP
              
              
              3,679,205
              
              
              3,159,343
              
              
              4,147,223
              
              
              915,550
              
              
              2,063,567Total
                  equity under Canadian GAAP
              
              
              3,371,178
              
              
              2,878,257
              
              
              3,216,838
              
              
              434,476
              
              
              206,867Adjustments
              
              
              (278,687
              )
              
              (60,088
              )
              
              624,675
              
              
              101,004
              
              
              (175,901
              )Total
                  equity under US GAAP
              
              
              3,092,491
              
              
              2,818,169
              
              
              3,841,513
              
              
              535,480
              
              
              30,966
  (1)
      The accounts as at January 31, 2005 and have been restated to recognize an
      error
      in the accounting for the prospective application of the CICA Handbook Section
      3870 "Stock-Based Compensation" in fiscal 2005. The Company had not recognized
      stock-based compensation to employees related to the fiscal year of 2003 in
      its
      restatement to beginning deficit as at January 31, 2005 in the amount of
      $186,992. Accordingly, the statement of operations and deficit for the year
      ended January 31, 2005 was restated to reflect an increase of $(186,992) in
      the
      restatement of beginning deficit from $(297,621) to $(484,613). The
      shareholders' equity accounts as at January 31, 2005 were restated to reflect
      a
      $186,992 increase to contributed surplus from $502,973 to $689,965 and a
      $186,992 increase to deficit from $(14,552,931) to $(14,739,923).





7
 Table
          of Contents




**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
                Ended****January
                31,**
            **Average**
            **Period
                End**
            **High**
            **Low**2002
            1.5568
            1.5915
            1.6128
            1.49332003
            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
            1.1436





The
      following table sets forth the high and low exchange rate for the past six
      months. As of July 18, 2006, the exchange rate was CDN$1.1335 for each US$1.





**Month**
            **High**
            **Low**January
                2006
            1.1726
            1.1436February
                2006
            1.1577
            1.1379March
                2006
            1.1722
            1.1320April
                2006
            1.1718
            1.1203May
                2006
            1.1232
            1.0989June
                2006
            1.1241
            1.0991





**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,
      2006, we had a net loss of $2,369,724 and an accumulated deficit on January
      31,
      2006 of $17,109,647. 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.





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*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.





*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.





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*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.





*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.





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*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.





*Litigation.* Cia
      Minera Mexicana de Avino, S.A. de C.V., referred to as Cia Minera, a subsidiary
      of the Company, is subject to litigation with a lessor of mineral claims
      regarding past royalty payments. 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 6 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.





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*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.





*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 2006 fiscal year, the Company's common share price fluctuated between a
      low
      of $1.11 and a high of $2.29. Subsequent to the 2006 fiscal year, the Company's
      common share price has fluctuated between a low of $2.00 and a high of $4.48.
      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.





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**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.





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, $184,834 **** on
      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. The Company now owns 88.25% of Cia Minera. Consideration paid
      by
      the Company comprised an aggregate of 3,164,702 common shares of the Company
      at
      a deemed value of $1.00 per share. No individual vendor will receive more than
      1,133,304 common shares. There are no work commitments or other payments
      required of the Company under the terms of the agreement, although the Company
      will effectively assume responsibility for the payment of Cia Minera's existing
      liabilities which, as of December 31, 2005, amounted to in excess of $1,630,000.





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.





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**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 re-directed 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.





**Significant
      Acquisitions and Significant Dispositions**




We
      have
      no 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 2005,
      demand for silver exceeded supply and worldwide demand is expected to increase
      through 2006. 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.





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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 owns 88.25% of Cia Minera, a Mexican Corporation.





**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.





Graphic 1
            Graphic 2




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**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.




**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.




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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 $1,500 at January, 2006 (2005:$Nil), 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.





**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.





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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 $1,500 at January, 2006 (2005:$Nil), registered
      in the name of the Ministry of Finance of British Columbia, as security for
      estimated future reclamation costs.




*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 ten **** kilometers
      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.




*Proposed
      Work Program.* The
      Minto
      Property has reached the stage where diamond drilling is required to explore
      the
      depth extension of gold-bearing shear zones established on surface by
      geochemistry and trenching via the Ponderosa, Winter, Rainbow, View and Minto
      North Zones. Some additional trenching is needed to define drill targets,
      especially in the Minto North Zone. A budget of $80,000 to $90,000 has been
      proposed to carry out further work at this property and the Olympic-Kelvin
      property and our management is presently considering the proposal.


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**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.





*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.





*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 will be no change in the effective control of the Company as
      a result of this transaction. 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.





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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$8,640,000. 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.





*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.




*Cia
      Minera.* On
      July
      17, 2006, the Company completed the acquisition of an additional 39.25%
      equity interest in Cia Minera. The Company now owns 88.25% of the total issued
      shares of Cia Minera.  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 or 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.





The
      Company commenced an initial drill program in June 2006, consisting of nine
      NQ diameter
      diamond drill core holes totaling 3,200 meters. The holes will explore the
      down
      dip extension of silver, copper, gold are shoots in the Avino Vein system,
      which
      were mines by the Company between 1976 and 2001.





The
      Company is also currently mobilizing an IP geophysical team, who will run
      surveys over various showings and former producing mines in the mine
      area.





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*Other
      Properties.* Exploration
      during the past few years on our Canadian projects was limited to drill programs
      on the Olympic-Kelvin property.




**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.




**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, 2006, 2005 and 2004 should be read
      in conjunction with the financial statements and the related notes attached
      hereto (item 17).





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





The
      Company's principal business activities are the exploration and development
      of
      mineral properties. The Company is in the process of exploring and developing
      its mineral properties and has not yet determined whether its mineral properties
      contain ore reserves that are economically recoverable. The recoverability
      of
      amounts shown for mineral properties is dependent upon the discovery of
      economically recoverable ore reserves in its mineral properties, the ability
      of
      the Company to obtain the necessary financing to complete development,
      confirmation of the Company's interest in the underlying mineral claims and
      leases and future profitable production or sufficient proceeds from the
      disposition of its mineral properties. The Company is continually investigating
      new exploration opportunities, and mineral exploration is carried out on
      properties identified by management of the Company as having favorable
      exploration potential. Interests in such properties are acquired in various
      ways. In some cases, the Company, through its own efforts, stakes mineral claims
      or acquires exploration permits. In other cases the Company acquires an interest
      in mineral properties from third parties. An acquisition from a third party
      is
      typically made by way of an option agreement, which requires the Company to
      make
      specific option payments and to incur a specified amount of exploration costs
      on
      the property. Once the Company has incurred the specified exploration
      expenditures, the parties will enter into a joint venture requiring each party
      to contribute towards future exploration and development costs, based on its
      percentage interest in the property, or suffer dilution of its interest. The
      Company advances its projects to varying degrees by prospecting, mapping,
      geophysics and drilling. Once a property is determined to have limited
      exploration potential, the property is abandoned or sold. In cases where
      exploration work on the property reaches a stage where the expense and risk
      of
      further exploration and development are too high, the Company may seek a third
      party to earn an interest by furthering development. Optioning a property to
      a
      third party allows the Company to retain an interest in further exploration
      and
      development while limiting its obligation to commit a large amount of capital
      to
      any one project. The mineral exploration business is high risk and most
      exploration projects will not become mines.





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**Current
      Operations**





The
      Company holds mineral claims in the Yukon and in British Columbia, Canada.
      The
      Company also holds an 88.25% equity interest in Cia Minera, a Mexican
      corporation which owns the Avino Mine, located in Durango, Mexico. The Company's
      88.25% interest in Cia Minera consists of several mineral claims and leases
      and
      includes a silver mine. The mine operated from 1976 to 2001, producing about
      497
      tons of silver, three tons of gold, and 11,000 tons of copper. Depressed silver
      prices during the period 2000-2001 led to the suspension of mine operations
      at
      the end of 2001. Since 2001, the mine, plant and equipment have been on care
      and
      maintenance.





In
      the
      Yukon, the Company holds a 100% interest in 14 quartz leases known as the Eagle
      property located in the Mayo Mining Division. A quartz lease is for 21 years
      and
      the Company's leases expire on April 29, 2021.





In
      British Columbia, the Company has three separate mineral properties all of
      which
      are located in the Lillooet Mining Division and are wholly owned by the Company.
      They are as follows: (i) the Aumax property consisting of six unpatented mineral
      claims; (ii) the Olympic-Kelvin property consisting of 20 reverted Crown granted
      minerals claims, one located mineral claim and three fractions; and (iii) the
      Minto property consisting of eight Crown granted mineral claims, eight reverted
      Crown granted mineral claims and one located mineral claim.





**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 year ended January
      31, 2005. When stock-based compensation is removed from both periods, the
      increase in operating and administrative expenses for the year ended January
      31,
      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 and 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 FSE. Shareholder 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 the year ended January 31, 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 interest in Cia Minera, due
      diligence costs went from $391,899 in the year ended January 31, 2005 to
      $355,921 in the year ended January 31, 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 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 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.





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**Fiscal
      year ended January 31, 2005 compared to fiscal year ended January 31,
      2004**





Operating
      and administrative expenses totaled $506,010 for the fiscal year ended January
      31, 2005 compared with $331,446 for the fiscal year ended January 31, 2004,
      an
      increase of $174,564. The increase is primarily due to increases of $40,770
      in
      stock based compensation, $39,808 in salaries and benefits, $14,140 in
      professional fees, $22,500 in management fees, $15,904 in office and
      miscellaneous expenses, $24,849 in travel and entertainment and $31,198 in
      shareholder and investor relations expenses. These increases are all attributed
      to increased efforts in promoting the Company and providing the framework to
      support increased exploration and development activities, including the pursuit
      of acquiring the remaining interest in Cia Minera.





The
      loss
      for the twelve months ended January 31, 2005 was $814,710 compared with a loss
      of $445,591 for the twelve months ended January 31, 2004, an increase of
      $369,119. Higher administrative expenses as discussed above and an increase
      of
      $269,455 being charged against operations for the Cia Minera due diligence
      work
      are the primary reasons.





Interest
      income increased in the 2005 fiscal year by $33,700. This was a result of
      $2,000,000 being held in guaranteed investment certificates during the entire
      twelve month period.





**Government
      Regulation**





We
      are
      subject to various federal and provincial laws and regulations including
      environmental laws and regulations. Environmental regulations impose, among
      other things, restrictions, liabilities and obligations in connection with
      the
      generation, handling, use, storage, transportation, treatment and disposal
      of
      hazardous substances and waste and in connection with spills, releases and
      emissions of various substances to the environment. Environmental regulation
      also requires that facility sites and other properties associated with our
      operations be operated, maintained, abandoned and reclaimed to the satisfaction
      of applicable regulatory authorities. In addition, certain types of operations,
      including exploration and development projects and changes to certain existing
      projects, may require the submission and approval of environmental impact
      assessments or permit applications. Compliance with environmental regulation
      can
      require significant expenditures, including expenditures for clean up costs
      and
      damages arising out of contaminated properties and failure to comply with
      environmental regulations may result in the imposition of fines and penalties.
      We believe that we are in substantial compliance with such laws and regulations.
      However, such laws and regulations may change in the future in a manner which
      will increase the burden and cost of compliance.





Certain
      laws and governmental regulations may impose liability on us for personal
      injuries, clean-up costs, environmental damages and property damages, as well
      as
      administrative, civil and criminal penalties. We maintain limited insurance
      coverage for sudden and accidental environmental damages, but do not maintain
      insurance coverage for the full potential liability that could be caused by
      sudden and accidental environmental damage. Accordingly, we may be subject
      to
      liability or may be required to cease production from properties in the event
      of
      such damages.





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





At
      this
      time, the Company has no operating revenues and does not anticipate having
      any
      operating revenues until the Company is able to find, acquire, place in
      production and operate a resource property. Historically, the Company has raised
      funds through equity financing and the exercise of options and warrants to
      fund
      its operations. The market price of natural resources is highly speculative
      and
      volatile. Instability in prices may affect the interest in resource properties
      and the development of and production from such properties. This may adversely
      affect the Company's ability to raise capital to acquire and explore resource
      properties.





At
      January 31, 2006 the Company had cash of $3,067,011 and working capital of
      $2,967,178. The Company expended $235,640 in the year on geological, assay,
      and
      general services on its Olympic/Kelvin, Aumax, and Minto properties. New equity
      raised by the exercising of 1,190,800 share purchase warrants in the year was
      $1,544,384 and by the exercising of 249,500 stock options was
      $261,175.





A
      portion
      of the shares issued through the exercising of warrants were flow-through
      shares. The commitment that the Company has to incur additional qualifying
      Canadian exploration expenditures because of these flow-through shares is
      $120,401 as at January 31, 2006. Of this amount, $32,001 was to be incurred
      by
      March 2006 and the remaining $88,400 is to be incurred by August
      2007.





Subsequent
      to the January 31, 2006 year end, the Company successfully closed a private
      placement offering which raised gross proceeds of $10,000,000. Stock options
      and
      warrants have continued to be exercised as well subsequent to the year end
      which
      have generated additional cash.





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.





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 17 to the financial statements which sets out a reconciliation
      between Canadian and US GAAP.





**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.





24
 Table
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**F.** **Tabular
      disclosure of contractual obligations**





As
      at
      January 31, 2006, the Company had the following contractual
      obligations:




**Total**
            
            **<
                1 year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than 5 years**Lease
                obligation
            
            $
            6,040.80
            
            $
            6,040.80
            
            $
            -
            
            $
            -
            
            $
            -Investor
                Relations
            
            
            9,000.00
            
            
            9,000.00
            
            
            -
            
            
            -
            
            
            -Total
            
            
            15,040.80
            
            
            15,040.80
            
            
            -
            
            
            -
            
            
            -





**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.





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**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 12, 2006. The directors were re-elected by the Company's shareholders
      on July 14, 2006 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
                1990Gary
                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 of Coral Gold Resources Ltd.,
                Mill Bay
                Ventures Ltd., and Cresval Capital Corp., and President and Director
                of
                Gray Rock Resources Ltd.
            October
                1995Louis
                Wolfin(3)
              Director
            Director
                and Chief Executive Officer of Bralorne Gold Mine Ltd., and Director
                of
                Berkley Resources Inc., Coral Gold Resources Ltd., Levon Resources
                Ltd.,
                and Cresval Capital Corp.
            August
                1969Connie
                Lillico
              Secretary
            Secretary
                of Berkley Resources Inc., Bralorne Gold Mines Ltd., Coral Gold Resources
                Ltd., Gray Rock 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**





The
      directors of the Company have not been paid fees or other cash compensation
      in
      their capacity as directors. The Company has no arrangements, standard or
      otherwise, pursuant to which its current directors are compensated by the
      Company for their services in their capacity as directors, or for committee
      participation, or involvement in special assignments during the most recently
      completed financial year ended January 31, 2006, except that directors may
      be
      reimbursed for actual expenses reasonably incurred in connection with the
      performance of their duties as directors and certain directors may be
      compensated for services as consultants or experts. During the year ended
      January 31, 2006, the Company paid an aggregate of $60,000 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
      $2,000 to Frobisher Securities Ltd., a company controlled by Louis Wolfin,
      a
      director of the Company, referred to as "Frobisher", for management advisory
      services. The Company paid $30,000 to Wear Wolfin Design Ltd., a company
      controlled by Matt Wayrynen for management and advisory services. The Company
      paid an aggregate of $146,092 to ABC Drilling Services Inc., a private company
      whose common directors include Louis Wolfin, David Wolfin and William Kocken
      for
      drilling services, referred to as "ABC Drilling". The Company paid an aggregate
      of $20,433 to Bralorne, a related **** company
      whose common directors include Louis Wolfin and David Wolfin for exploration
      services. **** Incentive
      stock options, however, have been granted to non-executive directors and other
      insiders of the Company and are outstanding to purchase an aggregate of 934,800
      common shares of the Company as follows as at July 12, 2006:




26
 Table
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**Name
                of Optionee**
            **No.
                of Shares**
            **Exercise
                Price Per****Share**
            **Date
                of Grant**
            **Expiry
                Date**Louis
                Wolfin
            34,800
            $1.20
            October
                21, 2003
            October
                21, 2008Louis
                Wolfin
            100,000
            $1.35
            April
                5, 2005
            April
                5, 2010Louis
                Wolfin
            180,000
            $3.99
            April
                26, 2006
            April
                26, 2011Michael
                Baybak
            30,000
            $1.20
            October
                21, 2003
            October
                21, 2008Michael
                Baybak
            100,000
            $3.99
            April
                26, 2006
            April
                26, 2011Michael
                Baybak
            20,000
            $1.35
            April
                5, 2005
            April
                5, 2010David
                Wolfin
            40,000
            $1.35
            April
                5, 2005
            April
                5, 2010David
                Wolfin
            200,000
            $3.99
            April
                26, 2006
            April
                26, 2011Connie
                Lillico
            27,500
            $1.35
            April
                5, 2005
            April
                5, 2010Connie
                Lillico
            50,000
            $3.99
            April
                26, 2006
            April
                26, 2011Gary
                Robertson
            30,000
            $1.35
            September
                26, 2005
            September
                26, 2010Gary
                Robertson
            50,000
            $3.99
            April
                26, 2006
            April
                26, 2011Lloyd
                Andrews
            22,500
            $1.35
            September
                26, 2005
            September
                26, 2010Lloyd
                Andrews
            50,000
            $3.99
            April
                26, 2006
            April
                26, 2011





No
      pension plan or retirement benefit plans have been instituted by the Company
      and
      none are proposed at this time.





The
      following table sets forth details of the compensation paid during the Company's
      fiscal year ended January 31, 2006 to its Chief Executive Officer and to other
      executive officers of the Company who received a combined salary and bonuses
      in
      excess of $150,000 (the "Named Executive Officers" during the year ended January
      31, 2006).





**Name/
                Principal**
              **Position**
            **Year****(1)**
            **Annual
                Compensation**
            **Long-Term
                Compensation**
            **All
                Other Compensation**
              **$****Awards**
            **Payouts****Salary**
              **$****(2)**
            **Bonus**
              **$**
            **Other
                Annual Compensation**
              **$**
            **Securities
                Under Options/ SARs Granted (#)**
            **Restricted
                Shares/or Restricted Share Units $**
            **LTIP
                Payouts**
              **$**David
                Wolfin President (CEO)
            2006
            60,000
            Nil
            Nil
            100,000
            Nil
            Nil
            1,389




Notes:  (1)
      Year ended January 31.


(2) No member of the senior management team earned in excess of
      $100,000.





**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.





27
 Table
          of Contents




**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 12, 2006, the shareholders elected Messrs.
      Andrews, Baybak, Robertson, Wolfin and Wolfin as directors and reduced the
      number of directors from six to five.





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.





**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.





28
 Table
          of Contents




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.





*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.





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 Table
          of Contents




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 14, 2006.





**Name
                of Beneficial Owner**
            **Number
                of Shares**
            **Percent**Lloyd
                Andrews
            7,500
            *Michael
                Bayback
            2,700
            *Gary
                Robertson
            12,500
            *David
                Wolfin
            177,384
            1.02%Louis
                Wolfin
            4,345
            *Connie
                Lillico
            2,500
            *


_______________


*
      Less
      than one percent





*Options
      Granted to Directors and Officers During the Fiscal Year*





**Name
                of Director/Officer**
            
            **Securities****Under
                Option**
            
            **Exercise
                Price**
            
            **Purchase
                Price,**
              **if
                any**
            
            **Expiration
                Date**David
                Wolfin
            
            
            100,000
            
            $
            1.35
            
            
            N/A
            
            
            April
                5, 2010Louis
                Wolfin
            
            
            100,000
            
            $
            1.35
            
            
            N/A
            
            
            April
                5, 2010Michael
                Baybak
            
            
            20,000
            
            $
            1.35
            
            
            N/A
            
            
            April
                5, 2010Connie
                Lillico
            
            
            45,000
            
            $
            1.35
            
            
            N/A
            
            
            April
                5, 2010Gary
                Robertson
            
            
            30,000
            
            $
            1.35
            
            
            N/A
            
            
            September
                26, 2010Lloyd
                Andrews
            
            
            30,000
            
            $
            1.35
            
            
            N/A
            
            
            September
                26,2010





*Outstanding
      Options*





The
      following information, as of July 14, 2006, reflects outstanding options held
      by
      directors, officers, employees and consultants of the Company.





**No.
                  of Shares**
              
              **Date
                  of Grant**
              
              **Exercise
                  Price**
              
              **Expiration
                  Date**Louis
                  Wolfin
              
              
              34,800
              
              
              October
                  21, 2003
              
              $
              1.20
              
              
              October
                  23, 2008Michael
                  Baybak
              
              
              30,000
              
              
              October
                  21,2003
              
              $
              1.20
              
              
              October
                  23, 2008David
                  Wolfin
              
              
              40,000
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010Matt
                  Wayrynen
              
              
              27,500
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010Louis
                  Wolfin
              
              
              100,000
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010Michael
                  Baybak
              
              
              20,000
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010Connie
                  Lillico
              
              
              27,500
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010Vivienne
                  Ross
              
              
              15,000
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010
  30
 Table
            of Contents
  **No.
                  of Shares**
              
              
              **Date
                  of Grant**
              
              
              **Exercise
                  Price**
              
              
              **Expiration
                  Date**Bill
                  Smith
              
              
              10,000
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010John
                  Mullen
              
              
              15,000
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010Florian
                  Riedl-Riedenstein
              
              
              15,000
              
              
              April
                  5, 2005
              
              $
              1.35
              
              
              April
                  5,2010Gary
                  Robertson
              
              
              30,000
              
              
              September
                  26, 2005
              
              $
              1.35
              
              
              September
                  26, 2010Lloyd
                  Andrews
              
              
              22,500
              
              
              September
                  26, 2005
              
              $
              1.35
              
              
              September
                  26, 2010George
                  Duggan
              
              
              120,000
              
              
              March
                  15, 2006
              
              $
              2.72
              
              
              March
                  15, 2011David
                  Wolfin
              
              
              200,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Louis
                  Wolfin
              
              
              180,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Matt
                  Wayrynen
              
              
              150,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Michael
                  Baybak
              
              
              100,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Lloyd
                  Andrews
              
              
              50,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Bill
                  Kocken
              
              
              50,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Gary
                  Robertson
              
              
              50,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Connie
                  Lillico
              
              
              50,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Kevin
                  Bales
              
              
              35,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Jim
                  Baylis
              
              
              25,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Jevin
                  Werbes
              
              
              25,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Jasman
                  Yee
              
              
              15,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Gloria
                  Chan
              
              
              10,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Florian
                  Riedl-Riedenstein
              
              
              10,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011John
                  Mullen
              
              
              10,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Mercedes
                  Ling
              
              
              15,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Chris
                  Sampson
              
              
              15,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Stone’s
                  Throw Capital Corp.
              
              
              10,000
              
              
              April
                  26, 2006
              
              $
              3.99
              
              
              April
                  26, 2011Options
                  held by officers and directors as a group
              
              
              934,800





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 1,507,300 shares
      have
      been granted and remain outstanding under the Plan, leaving options for
      548,073 available for issuance.





**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 17, 2006, other than as stated below, 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.


**Name**
              **Number
                of Shares**
              **Percentage**Fernando
                Ysita Del Hoyo
              1,133,304
              5.5%


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





During
      the year ended January 31, 2006, the Company paid an aggregate of $60,000 to
      Intermark Capital Corp., a private company controlled by David Wolfin, president
      and directory of the Company for management advisory services. The Company
      paid
      an aggregate of $2,000 to Frobisher, a company controlled by Louis Wolfin,
      a
      director of the Company, for management advisory services. The Company paid
      $30,000 to Wear Wolfin Design Ltd., a company controlled by Matt Wayrynen for
      management and advisory services. **** The
      Company paid an aggregate of $146,092 to ABC Drilling, a private company whose
      common directors include Louis Wolfin, David Wolfin and William Kocken for
      drilling services, referred to as "ABC Drilling". The Company paid an aggregate
      of $20,433 to Bralorne, a related **** company
      whose common directors include Louis Wolfin, David Wolfin and William Kocken
      for
      exploration services. ****




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In
      2005,
      $60,000 and $12,500 were paid as consulting fees to private companies owned
      each
      by a director of the Company.




The
      Company entered into a cost sharing agreement dated October 1, 1997, amended
      November 1, 2003, to reimburse Oniva International Services Corporation,
      referred to as "Oniva", for a variable percentage (2005 fixed percentage -
      20%) 20% 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
      by
      either party giving to the other party one months notice. During the year,
      a
      total of $163,328 was charged to operations in relation to the cost sharing
      agreement referred to above. In 2005, the amount was $124,146. Included in
      amounts due to related parties is an amount of $161,563 due to Oniva for
      expenses paid on behalf of the Company. In 2005 the amount was
      $273,500.





Included
      in the accounts payable and accrued liabilities of the Company is a balance
      of
      $1,379 payable to a director of a related company for reimbursement of expenses
      (2005-$4,003).





Avino's
      investment in Bralorne, consists of 179,149 common shares with a quoted market
      value of $324,259 as at January 31, 2006 (2005 - $465,787) and a carrying value
      of $205,848 as at January 31, 2006 (2005-$422,848). Avino's investment in Levon
      Resources Ltd. consists of 141,200 common shares with a quoted market value
      of
      $7,766 as at January 31, 2006 (2005 - $12,708) and a carrying value of $4,236
      as
      at January 31, 2006 (2005-$4,236). These companies are related by way of common
      directors and common management.





A
      further
      amount due to related parties of $3,145 is due to Bralorne (2005 - $3,145).
      $16,710 (2005-Nil) is due to Frobisher Securities Ltd., a company controlled
      by
      Louis Wolfin.





All
      related party transactions are recorded at the value agreed upon by the Company
      and the related party. The amounts due to related parties are non-interest
      bearing, non-secured and due on demand.





None
      of
      the Company's directors, executive or senior officers, proposed nominees for
      election as directors, or associates or affiliates of any of them, is or has
      been indebted to the Company at any time since the Company's last completed
      financial year, with the exception of $83,000 (2005 -$135,000) due from ABC
      Drilling. The amount due is non-interest bearing, unsecured and has not stated
      terms of repayment. The Company has also paid an exploration advance of $39,000
      (2005- Nil) for future drilling services.





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





Not
      Applicable.





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**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, 2006 and 2005.


Statement
      of Operations and Deficit for the years ended January 31, 2006, 2005, and
      2004.


Statement
      of Cash flows for the years ended January 31, 2006, 2005, and 2004.


Notes
      to
      Financial Statements for the years ended January 31, 2006, 2005, and
      2004.





*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 14, 2006, there were 723 holders of record in the United States holding
      64.38% of the
      Company's outstanding common shares representing approximately 20.16 % 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**
            **Low**June
                2006
            3.19
            2.17May
                2006
            4.48
            2.65April
                2006
            4.35
            3.37March
                2006
            4.10
            2.50February
                2006
            2.80
            2.00January
                2006
            2.29
            1.65**2005-2006**
            **High**
            **Low**Fourth
                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
            1.18**2004-2005**
            **High**
            **Low**Fourth
                Quarter ended January 31, 2005
            1.60
            1.02Third
                Quarter ended October 31, 2004
            1.77
            1.23Second
                Quarter ended July 31, 2004
            1.42
            1.00First
                Quarter ended April 30, 2004
            2.50
            1.25**Last
                Five Fiscal Years**
            **High**
            **Low**2006
            2.29
            1.112005
            2.50
            1.002004
            3.00
            0.332003
            1.74
            0.322002
            0.75
            0.18





33
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**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.





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**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 Act*
      or 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.





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**Subsequent
      Events**





Subsequent
      to the year end, the Company closed a non-brokered private placement of
      5,000,000 units at a price of $2.00 per unit, referred to as the Offering,
      each unit consisting of one common share and one-half of a non-transferable
      share purchase warrant. Each whole warrant under the Offering entitles the
      investor to purchase one additional share at a price of $2.50 until March 20,
      2008. The
      hold
      period for all securities issued under this private placement expires on
      July 21, 2006. The Company paid a total of $778,795 cash as finder's
      fees.





Subsequent
      to the year end, the Company entered into an agreement with National Media
      Associates, referred to as "National Media", to provide financial
      relations, media relations and public market development services. The agreement
      provides that the Company pay National Media the sum of US$6,000 per month
      plus
      expenses for a term of one year and issue 120,000 incentive stock options to
      the
      principal of National Media for the purchase of 120,000 common shares at an
      exercise price of $2.72 per share, exercisable on or before March 15, 2011.
      The
      agreement may be terminated after September 15, 2006 upon 30 days' notice by
      the
      Company. One of the directors of the Company is related to National Media
      Associates.





Subsequent
      to the year end, the Company has had 386,200 stock options exercised for total
      proceeds of $501,750 and 1,250 share purchase warrants exercised for total
      proceeds of $3,125.





Subsequent
      to the year end, the Company completed the acquisition of a further 39.25%
      equity interest in Cia Minera, in consideration for the issuance of 3,164,702
      common shares of the Company. The Company now owns 88.25% of the total issued
      shares of Cia Minera.





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





The
      Company entered into a share exchange agreement dated for reference the
      9 th day of
      June, 2004 with Pedro Sanchez Mejorada, Fernando Ysita Del Hoyo, Francisco
      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
      Avino, S.A. de C.V. 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 interest.




Other
        than the foregoing, no other contracts have been entered into by the Company
        within the last two years outside the ordinary course of
        business.




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





There
      is
      no law, governmental decree or regulation in Canada that restricts the export
      or
      import of capital or affects the remittance of dividends, interest or other
      payments to a non-resident holder of common shares other than withholding tax
      requirements. Any such remittances to United States residents are subject to
      withholding tax. See "Taxation".





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 Act. The
      following discussion summarizes the principal features of the Investment Act
      for
      a non-resident who proposes to acquire the common shares.





The
      Investment Act generally prohibits implementation of a reviewable investment
      by
      an individual, government or agency thereof, corporation, partnership, trust
      or
      joint venture (each an "entity") that is not a "Canadian" as defined in the
      Investment Act (a "non-Canadian"), unless after review, the Director of
      Investments appointed by the minister responsible for the Investment Act is
      satisfied that the investment is likely to be of net benefit to Canada. An
      investment in the common shares by a non-Canadian other than a "WTO Investor"
      (as that term is defined by the Investment Act, and which term includes entities
      which are nationals of or are controlled by nationals of member states of the
      World Trade Organization) when the Company was not controlled by a WTO Investor,
      would be reviewable under the Investment Act if it was an investment to acquire
      control of the Company and the value of the assets of the Company, as determined
      in accordance with the regulations promulgated under the Investment Act, equals
      or exceeds $5 million for direct acquisitions and over $50 million for indirect
      acquisitions, or if an order for review was made by the federal cabinet on
      the
      grounds that the investment related to Canada's cultural heritage or national
      identity, regardless of the value of the assets of the Company. An investment
      in
      the common shares by a WTO Investor, or by a non-Canadian when the Company
      was
      controlled by a WTO Investor, would be reviewable under the Investment Act
      if it
      was an investment to acquire control of the Company and the value of the assets
      of the Company, as determined in accordance with the regulations promulgated
      under the Investment Act, was not less than a specified amount, which for 2004
      is any amount in excess of $137 million. A non-Canadian would acquire control
      of
      the Company for the purposes of the Investment Act if the non-Canadian acquired
      a majority of the common shares. The acquisition of one third or more, but
      less
      than a majority of the common shares, would be presumed to be an acquisition
      of
      control of the Company unless it could be established that, on the acquisition,
      the Company was not controlled in fact by the acquirer through the ownership
      of
      the common shares.





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Certain
      transactions relating to the common shares would be exempt from the Investment
      Act, including: (i) an acquisition of the common shares by a person in the
      ordinary course of that person's business as a trader or dealer in securities;
      (ii) an acquisition of control of the Company in connection with the realization
      of security granted for a loan or other financial assistance and not for a
      purpose related to the provisions of the Investment Act; and (iii) an
      acquisition of control of the Company by reason of an amalgamation, merger,
      consolidation or corporate reorganization following which the ultimate direct
      or
      indirect control in fact of the Company, through the ownership of the common
      shares, remained unchanged.





**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.





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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.





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.




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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.





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.





39
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          of Contents




*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.





*Personal
      Holding 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 PHC tax of 15% on its undistributed personal holding
      company income (generally limited, in the case of a foreign corporation, to
      United States source income) in addition to United States federal income
      tax.




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





40
 Table
          of Contents




*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 28% for
      2006 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.





**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**





As
      the
      Company is a small business issuer, this section is inapplicable.





**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.





41
 Table
          of Contents




**Item
      15. Controls and Procedures**




Not
      Applicable.




**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 Assocation 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 three fiscal years was Vellmer & Chang,
      Chartered Accountants (formerly Hoogendoorn Vellmer, Chartered
      Accountants).





**Audit
      Fees**





The
      aggregate fees billed by Vellmer & Chang for professional services rendered
      for the audit of the Company's annual financial statements for the fiscal year
      ended January 31, 2006 was $33,000 and January 31, 2005 was
      $14,000.





**Audit-Related
      Fees**





The
      estimated aggregate fees to be billed for assurance and related services by
      the
      auditor that were reasonably related to the performance of the audit or review
      of the Company's financial statements for the year ended January 31, 2006 is
      $3,000. This amount is an estimate of travel expenses related to the Cia Minera
      audit. For the financial year ending January 31, 2005, the audit-related fees,
      consisting of travel expenses relating to the Cia Minera audit, was $2,042.





**Tax
      Fees**





There
      were no aggregate fees billed for tax compliance, tax advice and tax planning
      by
      the Company's independent auditors for the 2006 fiscal year. The aggregate
      fees
      billed for tax compliance, tax advice and tax planning rendered by our
      independent auditors for the fiscal year ended January 31, 2005 was $1,200.
      The
      services comprising these fees include the preparation of corporate tax
      returns.





**All
      Other Fees**





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. There were no aggregate fees billed for
      any
      other professional services rendered by the Company's independent auditors
      for
      the fiscal year ended January 31, 2005.





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.





42
 Table
          of Contents




**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
            45Balance
                Sheets
            46Statements
                of Operations and Deficit
            47Statements
                of Cash Flows
            48Notes
                to Financial Statements
            49 thru
              70




**Item
      18. Financial Statements**





See
      Item
      17.





**Item
      19. Exhibits**







Exhibit Number
            Name1.1
            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 Subsidiaries12.1
            Certification of the Principal
              Executive Officer12.2
            Certification of the Principal
              Financial Officer13.1
            Certificate under the Sarbanes-Oxley
              Act13.2
            Consent of Expert15.1
            Form 43 -101F1 Technical Report:
              Tailings Retreatment - Process Options*


___________________________


*
      Previously filed.








43
 Table
          of Contents


























**AVINO
      SILVER & GOLD MINES LTD.**







**Financial
      Statements**









**January
      31, 2006, 2005 and 2004**







































44
 Table
            of Contents





***Vellmer
      & Chang***


***Chartered
      Accountants ****





*505
      -
      815 Hornby Street*


*Vancouver,
      B.C, V6Z 2E6*


*Tel:
      604-687-3776, Fax: 604-687-3778*


**
      denotes a firm of incorporated professionals*




**AUDITORS’
      REPORT**







***To
      the Shareholders of***


**Avino
      Silver & Gold Mines Ltd.**








We
      have
      audited the balance sheets of Avino Silver & Gold Mines Ltd. **** as
      at
      January 31, 2006 and 2005 and the statements of operations and deficit and
      cash
      flows for the years ended January 31, 2006, 2005 and 2004. 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 2005 and the
      results of its operations and its cash flows for the years then ended in
      accordance with Canadian generally accepted accounting principles.




**Vancouver,
      Canada**       **“Vellmer & Chang”**


**May
      31, 2006**        **Chartered
      Accountants**








**COMMENTS
      BY AUDITORS ON**


**CANADA
      - 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.





As
      discussed in Note 2 to the financial statements, the accounts as at January
      31,
      2005 have been restated to recognize an error in the accounting for the
      prospective application of the CICA Handbook Section 3870 “Stock-Based
      Compensation” in fiscal 2005. The Company had not recognized stock-based
      compensation to employees related to the fiscal year of 2003 in its restatement
      to beginning deficit as at January 31, 2005, resulting in an understatement
      of
      the beginning deficit of $186,992 and an understatement of contributed surplus
      as at January 31, 2005 of $186,992.








**Vancouver,
      Canada                                                                          
V** **ellmer
      & Chang”**


**July
      26, 2006**        **Chartered Accountants**















45
 Table
            of Contents




**AVINO
      SILVER & GOLD MINES LTD.**


Balance
      Sheets


As
      at
      January 31, 2006  and
      2005


(In
      Canadian Dollars)







**2006**
            
            **2005****ASSETS**
            
            
            
            (Restated)**Current**Cash
                and cash equivalents
            
            $
            3,067,011
            
            $
            2,283,535Share
                subscriptions receivable (Note 8 (g))
            
            
            56,732
            
            
            -Taxes
                recoverable
            
            
            35,009
            
            
            33,138Prepaid
                expenses
            
            
            13,544
            
            
            22,348Exploration
                advance (Note 10 (a))
            
            
            39,000
            
            
            -3,211,296
            
            
            2,339,021**Office
                Furniture and Equipment**(Note 4)
            
            
            2,611
            
            
            2,823**Reclamation
                Bonds**(Note
                5 (b), (d))
            
            
            3,000
            
            
            -**Mineral
                Properties Interests**(Note 5)
            
            
            447,899
            
            
            315,501**Due
                from a Related Company**(Note 10 (a))
            
            
            83,000
            
            
            135,000**Investment
                in Cia Minera Mexicana de Avino, S.A. de C.V.**(Note 6)
            
            
            1
            
            
            1**Investments
                in Related Companies**(Note 7)
            
            
            210,085
            
            
            427,085$
            3,957,892
            
            $
            3,219,431**LIABILITIES****Current**Accounts
                payable and accrued liabilities (Note 10 (c))
            
            $
            62,700
            
            $
            64,529Due
                to related parties (Note 10 (b))
            
            
            181,418
            
            
            276,645244,118
            
            
            341,174**Commitment
                toward equity interest in Cia Minera Mexicana de Avino, S.A. de C.V.
                (Note
                6)**
            
            
            342,596
            
            
            -586,714
            
            
            341,174**SHAREHOLDERS'
                EQUITY****Share
                Subscriptions Received in Advance**
            
            
            247,730
            
            
            -**Share
                Capital**(Note 8 (a))
            
            
            19,264,265
            
            
            17,030,084**Contributed
                Surplus**(Note 8 (b))
            
            
            1,070,699
            
            
            689,965**Treasury
                Shares (14,180 Shares, at cost)**
            
            
            (101,869
            )
            
            (101,869
            )**Deficit**
            
            
            (17,109,647
            )
            
            (14,739,923
            )3,371,178
            
            
            2,878,257$
            3,957,892
            
            $
            3,219,431




**NOTE
      1 - NATURE OF OPERATIONS**




Approved
      by the Board of Directors:





“ *Louis
      Wolfin* ” Director     *“David
      Wolfin”* Director











46
 Table
            of Contents





**AVINO
      SILVER & GOLD MINES LTD.**


Statements
      of Operations and Deficit


Years
      Ended January 31, 2006, 2005 and 2004


(In
      Canadian Dollars)








**2006**
            
            **2005**
            
            **2004**(Restated)**Operating
                and Administrative Expenses**Amortization
            
            $
            980
            
            $
            1,210
            
            $
            711Interest
            
            
            -
            
            
            65
            
            
            7,798Foreign
                exchange loss
            
            
            (9
            )
            
            (29
            )
            
            3,786Management
                fees
            
            
            60,000
            
            
            60,000
            
            
            37,500Office
                and miscellaneous
            
            
            119,864
            
            
            96,409
            
            
            80,505Professional
                fees
            
            
            141,005
            
            
            34,993
            
            
            20,853Regulatory
                and compliance fees
            
            
            21,690
            
            
            39,463
            
            
            43,019Salaries
                and benefits
            
            
            73,529
            
            
            69,310
            
            
            29,502Shareholder
                and investor relations
            
            
            93,349
            
            
            59,044
            
            
            27,846Stock-based
                compensation
            
            
            829,106
            
            
            81,540
            
            
            40,770Travel
                and entertainment
            
            
            77,274
            
            
            64,005
            
            
            39,156**Loss
                from operations**
            
            
            (1,416,788
            )
            
            (506,010
            )
            
            (331,446
            )**Other
                income and expenses**Interest
                income
            
            
            46,073
            
            
            41,999
            
            
            8,299Write
                down of investment in related company
            
            
            (217,000
            )
            
            -
            
            
            -Write
                down of mineral properties interest
            
            
            (103,242
            )
            
            -
            
            
            -Due
                diligence review of Cia Minera Mexicana de Avino, S.A. de C.V (Note
                6)
            
            
            (355,921
            )
            
            (391,899
            )
            
            (122,444
            )Equity
                in losses of Cia Minera Mexicana de Avino, S.A. de C.V. (Note
                6)
            
            
            (342,596
            )
            
            -
            
            
            -**Loss
                before income taxes**
            
            
            (2,389,474
            )
            
            (855,910
            )
            
            (445,591
            )Future
                income tax benefit recognized on the renouncement of Canadian exploration
                expenditures (Note 9)
            
            
            19,750
            
            
            41,200
            
            
            -**LOSS
                FOR THE YEAR**
            
            
            (2,369,724
            )
            
            (814,710
            )
            
            (445,591
            )**DEFICIT**,
                beginning of year:
            
            
            (14,739,923
            )
            
            (13,440,600
            )
            
            (12,995,009
            )Adjustment
                for change in accounting for stock-based compensation (Notes 2 and
                8(d))
            
            
            -
            
            
            (484,613
            )
            
            -**RESTATED
                DEFICIT**,
                beginning of year
            
            
            (14,739,923
            )
            
            (13,925,213
            )
            
            (12,995,009
            )**DEFICIT**,
                end of year
            
            $
            (17,109,647
            )
            $
            (14,739,923
            )
            $
            (13,440,600
            )**BASIC
                AND DILUTED LOSS PER SHARE**
            
            $
            (0.22
            )
            $
            (0.08
            )
            $
            (0.06
            )**WEIGHTED
                AVERAGE NUMBER OF SHARES OUTSTANDING**
            
            
            10,965,718
            
            
            10,410,379
            
            
            7,015,604













47
 Table
            of Contents





**AVINO
      SILVER & GOLD MINES LTD.**


Statements
      of Cash Flows


Years
      Ended January 31, 2006, 2005 and 2004


(In
      Canadian Dollars)








**2006**
            
            **2005**
            
            **2004**(Restated)**CASH
                PROVIDED BY (USED IN):****OPERATING
                ACTIVITIES**Loss
                for the year
            
            $
            (2,369,724
            )
            $
            (814,710
            )
            $
            (445,591
            )Items
                not requiring cash in the period:-
                Amortization
            
            
            980
            
            
            1,210
            
            
            711-
                Stock-based compensation
            
            
            829,106
            
            
            81,540
            
            
            40,770-
                Write-down of investment in related company
            
            
            217,000
            
            
            -
            
            
            --
                Write-down of mineral property interest
            
            
            103,242
            
            
            -
            
            
            --
                Equity loss in Cia Minera Mexicana de Avino, S.A. de C.V.
            
            
            342,596
            
            
            -
            
            
            --
                Future income tax benefit recognized on the renouncement of Canadian
                exploration expenditures
            
            
            (19,750
            )
            
            (41,200
            )
            
            -(896,550
            )
            
            (773,160
            )
            
            (404,110
            )Net
                change in non-cash working capital items (Note 12)
            
            
            (130,529
            )
            
            14,849
            
            
            64,124(1,027,079
            )
            
            (758,311
            )
            
            (339,986
            )**FINANCING
                ACTIVITIES**Shares
                subscriptions received in advance
            
            
            247,730
            
            
            -
            
            
            -Shares
                issued for cash
            
            
            1,748,827
            
            
            435,789
            
            
            3,187,1831,996,557
            
            
            435,789
            
            
            3,187,183**INVESTING
                ACTIVITIES**Advances
                to a related company
            
            
            52,000
            
            
            (135,000
            )
            
            -Purchase
                of office equipment
            
            
            (768
            )
            
            -
            
            
            (4,744
            )Investment
                in reclamation bonds
            
            
            (3,000
            )
            
            -
            
            
            (10,000
            )Mineral
                property exploration expenditures
            
            
            (234,234
            )
            
            (91,400
            )
            
            (20,100
            )(186,002
            )
            
            (226,400
            )
            
            (34,844
            )**Increase
                (decrease) in cash and cash equivalents**
            
            
            783,476
            
            
            (548,922
            )
            
            2,812,353**CASH
                AND CASH EQUIVALENTS,**beginning
                of year
            
            
            2,283,535
            
            
            2,832,457
            
            
            20,104**CASH
                AND CASH EQUIVALENTS,**end
                of year
            
            $
            3,067,011
            
            $
            2,283,535
            
            $
            2,832,457





**2006**
            
            **2005**
            
            **2004****SUPPLEMENTARY
                DISCLOSURE OF NON-CASH****FINANCING
                AND INVESTING ACTIVITIES**Share
                issuance costs paid by issuance of shares
            
            $
            -
            
            $
            -
            
            $
            220,225Stock-based
                compensation
            
            
            829,106
            
            
            81,540
            
            
            40,770Future
                income tax benefit recognized on the renouncement of Canadian exploration
                expenditures
            
            
            19,750
            
            
            41,200
            
            
            -**SUPPLEMENTARY
                DISCLOSURE OF****STATEMENTS
                OF CASH FLOWS INFORMATION**Interest
                expense
            
            $
            -
            
            $
            65
            
            $
            7,798Income
                taxes
            
            
            -
            
            
            -
            
            
            -











48
 Table
            of Contents





**AVINO
      SILVER & GOLD MINES LTD.**


Notes
      to
      Financial Statements


January
      31, 2006, 2005 and 2004


(In
      Canadian Dollars)








**NOTE
      1 - NATURE OF OPERATIONS**





Avino
      Silver & Gold Mines Ltd. (“Avino”) was incorporated under the laws of the
      Province of British Columbia. Its principal business activities include the
      exploration for and development of mineral properties. The Company owns
      interests in mineral properties in British Columbia and Yukon,
      Canada.





Avino
      is
      in the exploration stage of its mineral properties interests in Canada and
      has
      not yet determined whether these properties contain ore reserves which are
      economically recoverable.





Avino
      owns 49% of the issued common shares of Cia Minera Mexicana de Avino, S.A.
      de
      C.V. (“Cia Minera”) a company incorporated in Mexico. Cia Minera’s operations
      involve the mining of commercial ores and resource exploration and development,
      including the operation of a silver mine in Mexico. The silver mine has been
      shut down since November 2001, when operations became uneconomical (Note
      6).





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





These
      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 property interests. 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 financial statements
      do not include any adjustments that might result from the outcome of this
      uncertainty.





**NOTE
      2 - RESTATEMENT OF FINANCIAL STATEMENTS**





The
      accounts as at January 31, 2005 and have been restated to recognize an error
      in
      the accounting for the prospective application of the CICA Handbook Section
      3870
“Stock-Based Compensation” in fiscal 2005. The Company had not recognized
      stock-based compensation to employees related to the fiscal year of 2003 in
      its
      restatement to beginning deficit as at January 31, 2005 in the amount of
      $186,992. Accordingly, the statement of operations and deficit for the year
      ended January 31, 2005 was restated to reflect an increase of $(186,992) in
      the
      restatement of beginning deficit from $(297,621) to $(484,613). The
      shareholders’ equity accounts as at January 31, 2005 were restated to reflect a
      $186,992 increase to contributed surplus from $502,973 to $689,965 and a
      $186,992 increase to deficit from $(14,552,931) to $(14,739,923).








49
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)







**NOTE
      3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**(i)** **Cash
      and cash equivalents**





The
      Company considers all highly liquid instruments with maturity of three months
      or
      less at the time of issuance to be cash equivalents. As at January 31, 2006,
      the
      Company has cash and cash equivalents in the amount of $2,967,011 (2005 -
      $2,223,535), which are over the federally insured limit of $100,000 (2005 -
      $60,000). As at January 31, 2006 $542,728 (2005 - $283,535) was held as cash
      and
      $2,524,283 (2005 - $2,000,000; ) was held in short term guaranteed
      certificates.





**(ii)**
            **Office
                furniture and equipment**





Office
      furniture and equipment are recorded at cost on acquisition and amortized over
      their estimated useful lives at a rate of 30% declining balance per
      annum.





Office
      furniture and equipment are written down to their net realizable value if it
      is
      determined that their carrying values exceed estimated future benefits to the
      Company.





**(iii)**
            **Mineral
                properties interests**





Avino
      capitalizes all acquisition costs and related exploration and development
      expenditures until such time as the property to which they relate is brought
      into production, abandoned, or deemed not to contain economic reserves. The
      costs will be amortized on a unit-of-production basis following commencement
      of
      production or written off to operations if the property is sold, abandoned
      or
      deemed to not contain economic reserves. Proceeds received from option payments
      are netted against capital costs and related exploration and development
      expenditures of the optioned property. The amounts shown for mineral properties
      interests and deferred exploration and development costs represent net costs
      incurred to date and do not necessarily reflect present or future values.





**(iv)**
            **Investments**





Investments
      in the shares of companies over which Avino has the ability to exercise
      significant influence, but not control, are accounted for by the equity method.
      Accordingly, the Company includes its share of the investee’s net income or loss
      for the year in operations. In those instances where the Company’s share in the
      investee’s net losses exceeds the carrying amount of the Company’s investment,
      the Company records its share of the investee’s losses only if it has determined
      that it has obligations or commitments towards the investee.





Investments
      in the shares of companies over which Avino does not have control or exercises
      significant influence are accounted for at cost. They are written down when
      there is a decline in value that is considered other than
      temporary.











50
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





**(v)**
            **Foreign
                currency translation**





The
      Company’s functional currency is Canadian dollars. Foreign currency balances of
      the Company are translated into Canadian dollars using the temporal method
      as
      follows:





Monetary
      assets and liabilities are translated at the year-end exchange
      rate.





Non-monetary
      assets are translated at the rate of exchange in effect at their acquisition,
      unless such assets are carried at market or nominal value, in which case they
      are translated at the year-end exchange rate.





Revenue
      and expense items are translated at the average exchange rate for the
      year.





Foreign
      exchange gains and losses are included in operations.





In
      fiscal
      2006, the Company assessed its Mexican affiliate Cia Minera to have become
      an
      integrated foreign operation, due to its continuing dependence on support from
      Avino. The Company commenced to use the temporal method to translate the
      operations of Cia Minera into Canadian dollars, as detailed above. This change
      in accounting policy from the current rate method is applied prospectively
      as at
      January 31, 2005. The translated amounts for non-monetary items as at December
      31, 2004 became the historical cost basis for those items in the year ended
      January 31, 2006 and subsequently.





**(vi)**
            **Financial
                instruments**





The
      Company’s financial instruments include cash and cash equivalents, share
      subscriptions receivable, taxes recoverable, exploration advance, amounts due
      from a related company, accounts payable and accrued liabilities, and amounts
      due to related parties. The carrying values of these financial instruments
      approximate their fair values.





The
      Company is not exposed to significant interest or credit risk. It is subject
      to
      currency risk to the extent that the operations of its Mexican affiliate Cia
      Minera are conducted in Mexican currency.





**(vii)**
            **Use
                of estimates**





The
      preparation of financial statements in conformity with Canadian generally
      accepted accounting principles requires management to make estimates and
      assumptions which affect the reported amounts of assets and liabilities and
      the
      disclosure of contingent assets and liabilities at the date of the financial
      statements and revenues and expenses for the periods reported. These estimates
      are reviewed periodically, and as adjustments become necessary, they are
      reported in operations in the period in which they become known.





**(viii)**
            **Income
                taxes**





Future
      income tax assets and liabilities are recorded where the accounting net book
      values of assets and liabilities differ from their corresponding tax bases.
      The
      benefit of future income tax assets is only recognized when their realization
      is
      considered more likely than not.





The
      Company has adopted the CICA Emerging Issues Committee Abstract 146 (“EIC-146”) *Flow-Through
      Shares* and
      accordingly recognizes a future income tax liability on the renouncement of
      Canadian exploration expenditures to its flow-through share investors on the
      date the renouncement is filed with Canadian taxation authorities. The Company
      further recognizes in operations the benefit of previously unrecorded future
      income tax assets on the renouncement of Canadian exploration expenditures
      to
      its flow-through share investors.





51
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





**(ix)**
            **Stock-based
                compensation**





Effective
      February 1, 2004 the Company adopted new CICA Handbook Section 3870 *Stock
      Based Compensation and Other Stock-Based Payments* (“S3870”).
      Accordingly the Company recognizes stock-based compensation expense for the
      estimated fair value of equity-based instruments granted to both employees
      and
      non-employees. Compensation costs attributable to stock options or similar
      equity instruments granted to employees are measured at the fair value at the
      grant date, and 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.





Prior
      to
      adopting S3870, the Company had adopted the disclosure-only method for reporting
      the estimated fair value of stock options granted to employees. The cumulative
      effect of the non-recognized fair value of stock options granted to employees
      in
      the periods from February 1, 2002 to January 31, 2003 and February 1, 2003
      to
      January 31, 2004, in the amounts of $186,992 and $297,621 respectively, have
      been charged to opening deficit in the 2005 fiscal year without restatement
      of
      prior periods (see Notes 2 and 8(d)).





**(x)** **Loss
      per share**





Basic
      loss per share is calculated using the weighted average number of common shares
      outstanding during the year. Diluted income (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. 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.





**(xi)** **Site
      restoration liability**





The
      Company recognizes the fair value of its liability for asset retirement
      obligations, which in the mining industry are categorized as “site restoration
      costs”, in the year in which such liability is incurred and can be estimated.
      Upon recognition of an asset retirement obligation, the capitalized cost of
      the
      mineral properties interest is increased by the same amount as the liability.
      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 evaluated
      its site restoration costs to be $nil as at January 31, 2006 (2005 -
      $nil).





**(xii)** **Long-lived
      assets impairment**





Long-lived
      assets of the Company are reviewed when changes in circumstances suggest their
      carrying value has become impaired. Management considers assets to be impaired
      if the carrying value exceeds the estimated undiscounted future projected cash
      flows to result from the use of the asset and its eventual disposition. If
      impairment is deemed to exist, the assets will be written down to fair value.
      Fair value is generally determined using a discounted cash flow
      analysis.








52
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)


**NOTE
      4 - OFFICE FURNITURE AND EQUIPMENT**





2006
            
            2005Cost
            
            Accumulated
                Depreciation
            
            Net
                Book Value
            
            Cost
            
            Accumulated
                Depreciation
            
            Net
                Book ValueOffice
                furniture and equipment
            
            $
            5,512
            
            $
            (2,901
            )
            $
            2,611
            
            $
            4,744
            
            $
            (1,921
            )
            $
            2,823





**NOTE
      5 - MINERAL PROPERTIES INTERESTS**





Mineral
      properties interests’ costs are comprised of the following:





**2006**
            
            **2005****Eagle
                property**(Note 5 (a)):Acquisition
                cost, beginning of year
            
            $
            100,000
            
            $
            100,000Additions
            
            
            -
            
            
            -Acquisition
                cost, end of year
            
            
            100,000
            
            
            100,000Exploration
                and development, beginning of year
            
            
            3,243
            
            
            51Assays
            
            
            -
            
            
            961Travel
            
            
            -
            
            
            2,231Exploration
                and development, end of year
            
            
            3,243
            
            
            3,243103,243
            
            
            103,243Less
                accumulated write-down
            
            
            (103,242
            )
            
            -Total
            
            $
            1
            
            $
            103,243Balance
                carried forward
            
            $
            1
            
            $
            103,243








53
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      5 - MINERAL PROPERTIES INTERESTS** (Continued)





**2006**
            
            **2005**Balance
                brought forward
            
            $
            1
            
            $
            103,243**Aumax
                property**(Note 5 (b)):Acquisition
                cost, beginning of year
            
            $
            104,000
            
            $
            104,000Additions
            
            
            -
            
            
            -Acquisition
                cost, end of year
            
            
            104,000
            
            
            104,000Exploration
                and development, beginning of year
            
            
            16,815
            
            
            1,467Assays
            
            
            488
            
            
            2,910Assessment
                / taxes
            
            
            2,965
            
            
            780Drilling
            
            
            40,782
            
            
            -Field
                supplies and services
            
            
            11,721
            
            
            -Geological
            
            
            8,063
            
            
            11,658Exploration
                and development, end of year
            
            
            80,834
            
            
            16,815Total
            
            
            184,834
            
            
            120,815**Minto
                property**(Note 5 (c)):Acquisition
                cost, beginning of year
            
            
            129,400
            
            
            129,400Additions
            
            
            -
            
            
            -Acquisition
                cost, end of year
            
            
            129,400
            
            
            129,400Exploration
                and development, beginning of year
            
            
            238,043
            
            
            238,043Assays
            
            
            8,833
            
            
            -Drilling
            
            
            65,394
            
            
            -Field
                supplies and services
            
            
            14,114
            
            
            -Geological
            
            
            15,147
            
            
            -Exploration
                and development, end of year
            
            
            341,531
            
            
            238,043470,931
            
            
            367,443Less
                accumulated write-down
            
            
            (367,442
            )
            
            (367,442
            )Total
            
            
            103,489
            
            
            1**Olympic-Kelvin
                property**(Note
                5 (d)):Acquisition
                cost, beginning of year
            
            
            93,500
            
            
            93,500Additions
            
            
            -
            
            
            -Acquisition
                cost, end of year
            
            
            93,500
            
            
            93,500Exploration
                and development, beginning of year
            
            
            359,012
            
            
            286,152Assay
            
            
            1,837
            
            
            -Drilling
            
            
            48,220
            
            
            45,903Field
                supply and services
            
            
            -
            
            
            1,025Geological
            
            
            12,349
            
            
            25,932Surface
                work
            
            
            5,727
            
            
            -Exploration
                and development, end of year
            
            
            427,145
            
            
            359,012520,645
            
            
            452,512Less
                accumulated write-down
            
            
            (361,070
            )
            
            (361,070
            )Total
            
            
            159,575
            
            
            91,442**Total
                mineral properties interests**
            
            $
            447,899
            
            $
            315,501




54
 Table
          of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)







**NOTE
      5 - MINERAL PROPERTIES INTERESTS** (Continued)





**(a)**
            **Eagle
                property**





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.





**(b)**
            **Aumax
                property**





In
      2003
      the Company acquired a 100% interest in 6 Crown granted mineral claims, located
      in the Lillooet Mining Division of British Columbia, Canada 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. The Company has placed a deposit in the amount of
      $1,500 at January 31, 2006 (2005: $Nil),
      registered in the name of the Ministry of Finance of British Columbia, as
      security for estimated future reclamation
      costs.





**(c)** **Minto
      property**





The
      Company has a 100% interest in 8 Crown granted mineral claims, 8 reverted Crown
      granted mineral claims and one located mineral claim, located in the Lillooet
      Mining Division of British Columbia. The property was written down to a nominal
      value of $1 in fiscal 2002. Avino recommenced exploration of the property in
      fiscal 2006 and costs incurred since then have been deferred.





**(d)** **Olympic-Kelvin
      property**





The
      Company has a 100% interest in 20 reverted Crown granted mineral claims, one
      located mineral claim and three fractions located in the Lillooet Mining
      Division of British Columbia. The property was written down entirely in fiscal
      2002. The Company has placed a deposit in the amount of $1,500 at January 31,
      2006 (2005: $Nil),
      registered in the name of the Ministry of Finance of British Columbia, as
      security for estimated future reclamation costs .





Avino
      recommenced exploration of the property in fiscal 2004 and costs incurred since
      then have been deferred.





**NOTE
      6 - INVESTMENT IN CIA MINERA MEXICANA DE AVINO, S.A. DE
      C.V.**





2006
            
            2005Cia
                Minera Mexicana de Avino, S.A. de C.V. (”Cia Minera”)
            
            $
            1
            
            $
            1





Avino
      owns 49% of the issued common shares of Cia Minera, a private company
      incorporated in Mexico. Cia Minera was involved in the mining of commercial
      ores
      and resource exploration and development, including the operation of a silver
      mine in the Province of Durango, Mexico. Cia Minera ceased operations in fiscal
      2002 when the operations of its silver mine became uneconomical.





During
      the year ended January 31, 2005 Avino signed an agreement to purchase the
      remaining 51% of the issued common shares of Cia Minera by issuing 4,000,000
      of
      its common shares, subject to the conditions of completing a due diligence
      review and obtaining approval of the TSX Venture Exchange (“TSX”) for the
      transaction. The share purchase agreement was accepted for filing by the TSX
      in
      October of 2005. The Company has not yet completed the transaction and its
      equity interest in Cia Minera continues to be 49% of the issued shares.








55
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      6 - INVESTMENT IN CIA MINERA MEXICANA DE AVINO, S.A. DE C.V.** (Continued)





During
      the years ended January 31, 2006 and 2005, Avino has incurred due diligence
      costs on its intended purchase of Cia Minera as follows:





2006
            
            2005
            
            2004Geological
                assessment
            
            $
            133,915
            
            $
            128,419
            
            $
            16,261Professional
                fees
            
            
            26,054
            
            
            22,964
            
            
            26,835Advances
                to Cia Minera for its operations
            
            
            195,952
            
            
            240,516
            
            
            79,348$
            355,921
            
            $
            391,899
            
            $
            122,444





The
      Company continues to account for its 49% investment in Cia Minera using the
      equity method. Prior to fiscal 2006, the Company had determined that it did
      not
      have a commitment or obligation towards Cia Minera and accordingly did not
      recorded its equity interest in the losses of Cia Minera. During fiscal 2006
      the
      Company determined that it has an intended commitment towards Cia Minera.
      Accordingly, it has commenced to recognize in operations its equity interest
      in
      the previously unrecorded losses of Cia Minera, with the equity interest in
      the
      losses first being applied towards prior period advances and investments in
      Cia
      Minera which were previously charged to operations. In fiscal 2006, Avino has
      recognized into operations its interest in previously unrecorded equity losses
      of Cia Minera in the amount $342,596.





On
      December 16, 2005, Cia Minera sold its two subsidiaries Minera San Miguel de
      Coneto, S.A. de C.V. and Inmobiliaria MMA, S.A. de C.V. (“the Subsidiaries”) to
      an officer and director of Cia Minera in exchange for the settlement of debt
      due
      to him and companies owned by him. The financial statements of Cia Minera
      reflect the financial position and results of operations of only Cia Minera
      as
      at December 31, 2005. The sale of the Subsidiaries was recorded as a
      discontinuance of operations in the below disclosed financial statements, where
      the Subsidiaries’ assets and liabilities have been shown segregated as assets
      and liabilities of discontinued operations as at December 31, 2004; the
      Subsidiaries’ income and expenses have been segregated as discontinued
      operations in the statement of operations during the years ended December 31,
      2005 and 2004.





56
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      6 - INVESTMENT IN CIA MINERA MEXICANA DE AVINO, S.A. DE
      C.V.** (Continued)





The
      summarized balance sheet and income statement of Cia Minera applying Canadian
      generally accepted accounting principles as at December 31, 2005 and 2004 are
      as
      follows:





**2005**
            
            **2004****ASSETS****Current
                Assets**Cash
            
            $
            29,983
            
            $
            400Accounts
                receivable
            
            
            1
            
            
            1Taxes
                recoverable
            
            
            3,887
            
            
            3,398Prepaid
                expenses
            
            
            6,554
            
            
            6,544Assets
                of discontinued operations
            
            
            -
            
            
            202,60540,425
            
            
            212,948**Long
                Term Investment in Securities**
            
            
            2
            
            
            2**Mineral
                Properties Interests**
            
            
            1
            
            
            1**Property,
                Plant and Equipment**
            
            
            72,881
            
            
            204,165**Incorporation
                costs**
            
            
            -
            
            
            1,707$
            113,309
            
            $
            418,823**LIABILITIES****Current
                Liabilities**Accounts
                payable and accrued liabilities
            
            $
            924,528
            
            $
            1,007,824Taxes
                payable
            
            
            244,371
            
            
            244,002Liabilities
                of discontinued operations
            
            
            -
            
            
            558,5631,168,899
            
            
            1,810,389**Due
                to Avino**
            
            
            461,596
            
            
            264,1831,630,495
            
            
            2,074,572**SHAREHOLDERS’
                DEFICIENCY****Share
                Capital**
            
            
            680,400
            
            
            680,400**Contributed
                Surplus**
            
            
            169,242
            
            
            169,242**Deficit**
            
            
            (2,366,828
            )
            
            (2,505,391
            )(1,517,186
            )
            
            (1,655,749
            )$
            113,309
            
            $
            418,823














57
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      6 - INVESTMENT IN CIA MINERA MEXICANA DE AVINO, S.A. DE C.V.** (Continued)





**2005**
            
            **2004**
            
            **2003****Operating
                Expenses**General
                office and administrative
            
            $
            59,930
            
            $
            55,788
            
            $
            487,792Bank
                charges and interest
            
            
            699
            
            
            825
            
            
            25,053(60,629
            )
            
            (56,613
            )
            
            (512,845
            )**Other
                Income and Expenses**Other
                income
            
            
            19,175
            
            
            -
            
            
            2,092Foreign
                exchange gain (loss)
            
            
            (506,799
            )
            
            133,237
            
            
            (17,976
            )Write-down
                of incorporation costs
            
            
            (1,755
            )
            
            -
            
            
            -Write-down
                of long term investment in marketable securities
            
            
            -
            
            
            -
            
            
            (285,514
            )Write-down
                of taxes recoverable
            
            
            -
            
            
            (35,076
            )
            
            (233,838
            )Write-down
                of mineral property interests
            
            
            -
            
            
            -
            
            
            (4,687
            )Write-down
                of fixed assets
            
            
            (74,921
            )
            
            (104,189
            )
            
            (908,609
            )Loss
                Before Discontinued Operations
            
            
            (624,929
            )
            
            (62,641
            )
            
            (1,448,532
            )**Discontinued
                Operations**
            
            
            763,492
            
            
            (290,703
            )
            
            (308,353
            )**GAIN
                (LOSS) FOR THE YEAR**
            
            
            138,563
            
            
            (353,344
            )
            
            (1,756,885
            )**DEFICIT,
                beginning of the year**
            
            
            (2,505,391
            )
            
            (2,152,047
            )
            
            (395,162
            )**DEFICIT,
                end of the year**
            
            $
            (2,366,828
            )
            $
            (2,505,391
            )
            $
            (2,152,047
            )





There
      were no material transactions for the one month period of January 2006 requiring
      disclosure in these financial statements.





Cia
      Minera has been shut down since 2002. It does not have self-sustaining
      operations and is dependent upon the financial support of its shareholders
      to
      re-commence its operations, to re-commence exploration for economically
      recoverable mineral reserves and to re-develop its mining and processing
      operations. It is not determinable whether Cia Minera’s shareholders will be
      able to provide the financial support to continue the financing of Cia Minera’s
      operating losses until it has reached self-sustaining operations.





As
      at
      December 31, 2005 Cia Minera is subject to the following
      contingency:





Cia
      Minera leases 4 core mineral claims in consideration for royalties. The lessor
      is currently contesting the underlying royalty agreement, and has filed a legal
      action claiming royalties owing in the amount of approximately $Mexican pesos
      32,651,905 ($Cdn 3,531,731). Cia Minera has accrued $Cdn 755,140 on account
      of
      the royalties owing. It holds the position that it has fully provided for the
      royalty liability in its accounts, and contesting the action vigorously in
      court. The likely outcome of the claim is not determinable at this
      time.








58
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      7 - INVESTMENTS IN RELATED COMPANIES**





2006
            
            2005**Investments
                carried at cost:**Bralorne
                Gold Mines Ltd.
            
            $
            205,848
            
            $
            422,848Levon
                Resources Ltd.
            
            
            4,236
            
            
            4,236Oniva
                International Services Corporation
            
            
            1
            
            
            1$
            210,085
            
            $
            427,085





**Bralorne
      Gold Mines Ltd. (“Bralorne”)**





Avino’s
      investment in Bralorne consists of 179,149 common shares with a quoted market
      value of $324,259 as at January 31, 2006 (2005 - $465,787). Bralorne is a public
      company with common directors. The investment in Bralorne was written down
      by
      $217,000 due to a decline in value that is estimated to be other than
      temporary.





**Levon
      Resources Ltd. (“Levon”)**





Avino’s
      investment in Levon consists of 141,200 common shares with a quoted market
      value
      of $7,766 as at January 31, 2006 (2005 - $12,708). Levon is a public company
      with common directors.





**Oniva
      International Services Corporation (“Oniva”)**





The
      Company owns a 16.67% 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 15 for disclosure on the Company’s a
      commitment to Oniva.








59
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      8 - SHARE CAPITAL**





**(a)** **Authorized** :  Unlimited
      common shares without par value





**Issued** :


2006
            
            2005Shares
            
            Amount
            
            Shares
            
            AmountBalance,
                beginning of year
            
            
            10,521,775
            
            $
            17,030,084
            
            
            9,869,775
            
            $
            16,574,340Shares
                issued for cash:-
                Stock options:-
                consideration received
            
            
            -
            
            
            -
            
            
            -
            
            
            10,549-
                exercise of stock options
            
            
            249,500
            
            
            261,175
            
            
            145,000
            
            
            161,600-
                Warrants:-
                exercise of warrants
            
            
            1,190,800
            
            
            1,544,384
            
            
            507,000
            
            
            263,640Stock-based
                compensation on the exercise of stock options (Note 8(b))
            
            
            -
            
            
            448,372
            
            
            -
            
            
            61,155Future
                income tax liability on renouncement of Canadian exploration expenditure
                to flow-through share investors (Note 9)
            
            
            -
            
            
            (19,750
            )
            
            -
            
            
            (41,200
            )1,440,300
            
            
            2,234,181
            
            
            652,000
            
            
            455,744Balance,
                end of year
            
            
            11,962,075
            
            $
            19,264,265
            
            
            10,521,775
            
            $
            17,030,084





**(b)** **Contributed
      surplus**





2006
            
            2005(restated)Balance,
                beginning of year
            
            $
            689,965
            
            $
            184,967Stock-based
                compensation on stock options granted during the year
            
            
            829,106
            
            
            81,540Adjustment
                for change in accounting for stock-based compensation (Note
                8(d))
            
            
            -
            
            
            484,613Stock-based
                compensation on stock options exercised during the year (Note
                8(a))
            
            
            (448,372
            )
            
            (61,155
            )Balance,
                end of year
            
            $
            1,070,699
            
            $
            689,965








60
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      8 - SHARE CAPITAL** (Continued)





**(c)** **Warrants**





Underlying
                Shares
            
            Weighted
                Average Exercise PriceWarrants
                outstanding, January 31, 2004
            
            
            2,940,250
            
            $
            1.28Exercised
            
            
            (507,000
            )
            $
            0.52Warrants
                outstanding, January 31, 2005
            
            
            2,433,250
            
            $
            1.44Exercised
            
            
            (1,190,800
            )
            $
            1.30Expired
            
            
            (1,242,450
            )
            $
            1.58Warrants
                outstanding, January 31, 2006
            
            
            -
            
            
            -





The
      following share purchase warrants were outstanding as at January 31 st :





Expiry
                Date
            Exercise
                Price
            Warrants
                Outstanding
              2006
            Warrants
                Outstanding
              2005August
                14, 2005
            $0.52
            -
            318,000December
                19, 2005
            $1.58
            -
            2,115,250





**(d)** **Stock
      options:**





Underlying
                Shares
            
            Weighted
                Average Exercised PriceStock
                options outstanding, January 31, 2004
            
            
            615,000
            
            $
            1.01Exercised
            
            
            (145,000
            )
            $
            1.11Expired
            
            
            (20,000
            )
            $
            1.20Stock
                options outstanding, January 31, 2005
            
            
            450,000
            
            $
            1.09Granted
            
            
            642,500
            
            $
            1.35Exercised
            
            
            (249,500
            )
            $
            1.05Expired
                or cancelled
            
            
            (30,000
            )
            $
            1.20Stock
                options outstanding, January 31, 2006
            
            
            813,000
            
            $
            1.31





The
      following stock options were outstanding as at January 31 st :





Expiry
                Date
            Exercise
                Price
            Stock
                Options Outstanding 2006
            Stock
                Options Outstanding 2005October
                23, 2007
            $0.58
            -
            80,000October
                21, 2008
            $1.20
            233,000
            370,000April
                5, 2010
            $1.35
            510,000
            -September
                26, 2010
            $1.35
            70,000
            -





As
      at
      January 31, 2006 there were 798,000 exercisable stock options and as of January
      31, 2005 there were 450,000 exercisable stock options.





61
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      8 - SHARE CAPITAL** (Continued)





**(d)** **Stock
      options** (continued):





The
      Company established a stock option plan in fiscal 2005, under which it may
      grant
      stock options totaling in aggregate 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 are fully vestable on the date of grant, except 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 expiry date can not
      exceed five years after the grant date.





Effective
      February 1, 2004 the Company adopted the new CICA Handbook Section 3870 *Stock
      Based Compensation and Other Stock-Based Payments* (“S3870”).
      Accordingly, the Company ** recognizes
      stock-based compensation expense for the estimated fair value of stock options
      granted to both employees and non-employees. Compensation costs are measured
      at
      the fair value at the grant date, and expensed over the expected vesting period.





Prior
      to
      adopting S3870, the Company had adopted the disclosure-only method for reporting
      the estimated fair value of stock options granted to employees. The cumulative
      effect of the non-recognized fair value of stock options granted to employees
      in
      the periods from February 1, 2002 to January 31, 2003 and February 1, 2003
      to
      January 31, 2004, in the amounts of $186,992 and $297,621 respectively, have
      been charged to opening deficit in the 2005 fiscal year without restatement
      of
      prior periods (see Notes 2 and 8(b)).





In
      the
      third quarter of fiscal 2004, the Company granted 150,000 stock options to
      non-employee consultants, having a remaining life of 5 years to employees,
      exercisable at a price of $1.20 per share. Accordingly, the Company recorded
      in
      fiscal 2004 consulting expenses totaling $40,770 relating to fair value of
      these
      stock options which vested in 2004. The Company recorded in fiscal 2005
      consulting expenses totaling $81,540 relating to the fair value of the
      corresponding stock options which vested in 2005. In the third quarter of fiscal
      2004, the Company further granted 365,000 stock options to employees, having
      a
      remaining life of 5 years and exercisable at a price of $1.20 per
      share.





The
      Company did not grant any stock options in fiscal 2005.





In
      the
      first quarter of fiscal 2006, the Company granted 572,500 shares to directors,
      officers, employees and consultants of the Company, having a remaining life
      of 5
      years and exercisable at a price of $1.35 per share, and recognized stock-based
      compensation totaling $739,056 relating to the fair value of the stock options
      which vested in 2006. In the third quarter of 2006, the Company granted 70,000
      shares to directors and employees of the Company, having a remaining life of
      5
      years and exercisable at a price of $1.35 per share. The Company recognized
      stock-based compensation totaling $90,050 relating to the fair value of these
      stock options in 2006.





The
      fair
      value of the options granted to both employees and non-employees in fiscal
      2004
      was estimated at the date of granting using the Black-Scholes option pricing
      model with the following assumptions: risk free interest rate of 3.0%, dividend
      yield of 0%, volatility factor of 52%, and a weighted average life of 5 years.
      The weighted average grant date fair value of the stock options granted in
      fiscal 2004 was $0.82.





The
      fair
      value of the options granted in 2006 was estimated at the date of granting
      using
      the Black-Scholes option pricing model with the following assumptions: risk
      free
      interest rate of 3.3% - 3.5%, dividend yield of 0%, weighted average volatility
      factor of 159% - 201%, and an expected average life of 3 years. The weighted
      average grant date fair value of the stock options granted in fiscal 2006 was
      $1.33.





62
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      8 - SHARE CAPITAL** (Continued)





**(d)** **Stock
      options** (continued):





The
      Black-Scholes valuation model was developed for use in estimating the fair
      value
      of traded options which are fully transferable and freely traded. In addition,
      option valuation models require the input of highly subjective assumptions
      including the expected stock price volatility. Because the Company’s stock
      options have characteristics significantly different from those of traded
      options, and because changes in the subjective input assumptions can materially
      affect the fair value estimate, in management’s opinion, the existing models do
      not necessarily provide a reliable single measure of the fair value of its
      employee stock options.





**(e)** **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
      are claimable only by the investors of the flow-through common shares.





As
      at
      January 31, 2006, the Company has a commitment to incur a further $120,401
      of
      qualifying Canadian exploration expenditures (“CEE”), as defined in the Canadian
      Income Tax Act, pursuant to the terms of the exercise of flow-through share
      purchase warrants. $32,001 of the CEE is to be incurred by March 2006 and the
      remaining CEE of $88,400 is to be incurred from April 2007 to August
      2007.





**(f)**
            **Flow-through
                warrants**





Included
      in the warrants detailed in note 8 (c) are flow-through warrants as
      follows:





Underlying
                Shares
            
            Weighted
                Average Exercise PriceFlow-through
                warrants outstanding, January 31, 2004
            
            
            390,000
            
            $
            0.52Exercised
            
            
            (220,000
            )
            $
            0.52Flow-through
                warrants outstanding, January 31, 2005
            
            
            170,000
            
            $
            0.52Exercised
            
            
            (170,000
            )
            $
            0.52Flow-through
                warrants outstanding, January 31, 2006
            
            
            -
            
            
            -





The
      following flow-through warrants were outstanding as at January 31 st :





Expiry
                Date
            Exercise
                Price
            Flow-through
                Warrants
              Outstanding
                2006
            Flow-through
                Warrants
              Outstanding
                2005August
                14, 2005
            $0.52
            -
            170,000





**(g)** After
      January 31, 2006, the Company received $56,732 on account of 43,500 stock
      options  having
      been exercised before January 31, 2006.





63
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      9 - INCOME TAXES**





The
      potential benefit of net operating loss carry forwards 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
      components of the net future tax asset, the statutory tax rate, the effective
      tax rate and the elected amount of the valuation allowance are as
      follows:





**2006**
            
            **2005**
            
            **2004**Statutory
                rate
            
            
            34.5
            %
            
            36
            %
            
            39
            %Income
                taxes recovered at the Canadian statutory rate
            
            $
            817,555
            
            $
            293,000
            
            $
            170,000Less
                permanent differences:Stock-based
                compensation
            
            
            (286,042
            )
            
            (29,400
            )
            
            -Equity
                interest in net loss of Cia Minera Mexicana de Avino, S.A. de
                C.V.
            
            
            (118,200
            )Less
                temporary differences: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
            
            
            (257,813
            )
            
            (263,600
            )
            
            (170,000
            )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 (expense) recognized in the year
            
            $
            19,750
            
            $
            41,200
            
            $
            -





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





**2006**
            
            **2005**Operating
                loss carry forwards, expiring 2007 - 2016
            
            $
            1,244,000
            
            $
            1,145,000Canadian
                exploration expenses, Canadian development expenses and foreign
                exploration, and development expenses in excess of book value of
                mineral
                properties
            
            
            508,000
            
            
            604,000Undeducted
                capital cost allowance
            
            
            69,700
            
            
            73,500Future
                tax assets
            
            
            1,821,700
            
            
            1,822,500Less:
                valuation allowance
            
            
            (1,821,700
            )
            
            (1,822,500
            )Net
                tax assets
            
            $
            -
            
            $
            -




64
 Table
          of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)







**NOTE
      10 - RELATED PARTY BALANCES AND TRANSACTIONS**





Balances
      and transactions with related parties not disclosed elsewhere in these financial
      statements are as follows:








(a)
            The
                balance due from a related company of $83,000 (2005 - $135,000) is
                due
                from ABC Drilling Services Inc. (“ABC Drilling”), a private drilling
                company that is a 100% owned subsidiary of Oniva. The amount due
                is
                non-interest bearing, unsecured and has no stated terms of repayment.
                The
                Company has also paid an exploration advance of $39,000 (2005 - $Nil)
                for
                future drilling services.





(b)
            Due
                to related parties comprises the following accounts
                payable:





**2006**
            
            **2005**Bralorne
            
            $
            3,145
            
            $
            3,145Frobisher
                Securities Ltd. - company controlled by a director
            
            
            16,710
            
            
            -Oniva
            
            
            161,563
            
            
            273,500$
            181,418
            
            $
            276,645





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





(c)
            Included
                in accounts payable and accrued liabilities is a balance of $1,379
                payable
                to a Director of a related company for reimbursement of expenses
                (2005 -
                $4,003).





(d)
            Oniva
                provides the Company with certain office and administrative services.
                Oniva is a private company controlled by a Director of the Company.





The
      Company paid or accrued the following amounts for administrative services and
      expenses to Oniva:




**2006**
            
            **2005**
            
            **2004**Salaries
                and benefits
            
            $
            73,529
            
            $
            59,884
            
            $
            29,298Office
                and miscellaneous
            
            
            89,799
            
            
            64,262
            
            
            56,861$
            163,328
            
            $
            124,146
            
            $
            86,159





(e) The
        Company paid or accrued the following amounts for management and consulting
        to
        related companies, as follows:


**2006**
            
            **2005**
            
            **2004**Intermark
                Capital Corp. - company controlledby
                a director of the Company
            
            $
            60,000
            
            $
            60,000
            
            $
            30,000Dawn
                Pacific Management Ltd. - companycontrolled
                by an officer
            
            
            -
            
            
            -
            
            
            9,000Frobisher
                Securities Ltd.
            
            
            2,000
            
            
            -
            
            
            7,500Wear
                Wolfin Design Ltd. - company controlled by a director of a related
                company
            
            
            30,000
            
            
            12,500
            
            
            -$
            92,000
            
            $
            72,500
            
            $
            46,500








65
 Table
            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      10 - RELATED PARTY BALANCES AND TRANSACTIONS** (Continued)





(f)
            The
                Company paid or accrued $146,092 (2005 - $Nil) to ABC Drilling for
                drilling services and $20,433 (2005 - $Nil; 2004 - $Nil) to Bralorne
                for
                exploration services.





All
      related party transactions are recorded at the value agreed upon by the Company
      and the related party.





**NOTE
      11 - SEGMENTED INFORMATION**





Substantially
      all of the Company’s operations are in one industry, the exploration of precious
      metals. All mineral property interests held directly by the Company are located
      in Canada.





**NOTE
      12 - NET CHANGE IN NON-CASH CURRENT ASSETS AND LIABILITIES**





**2006**
            
            **2005**
            
            **2004**(restated)Net
                change in non-cash working capital balances:Taxes
                recoverable
            
            $
            (1,871
            )
            $
            (13,432
            )
            $
            (18,892
            )Prepaid
                expenses
            
            
            8,804
            
            
            (10,066
            )
            
            (10,056
            )Due
                from related parties
            
            
            -
            
            
            2,884
            
            
            157,432Exploration
                advance
            
            
            (39,000
            )
            
            -
            
            
            -Accounts
                payable and accrued liabilities
            
            
            (3,235
            )
            
            19,047
            
            
            29,555Due
                to related parties
            
            
            (95,227
            )
            
            16,416
            
            
            (93,915
            )$
            (130,529
            )
            $
            14,849
            
            $
            64,124





**NOTE
      13 - COMPARATIVE FIGURES**





Certain
      fiscal 2004 and 2005 comparative figures have been reclassified to conform
      to
      the financial statement presentation adopted for 2006.





**NOTE
      14 - SUBSEQUENT EVENTS**





Subsequent
      to January 31, 2006, the following events occurred:





(i)
            The
                Company closed a non-brokered private placement of 5,000,000 units
                at a
                price of $2.00 per unit (the “Offering”), each unit consisting of one
                common share and one-half of a non-transferable share purchase warrant.
                Each whole warrant under the Offering entitles the investor to purchase
                one additional share at a price of $2.50 until March 20, 2008.The
                hold period for all securities issued under this private placement
                expires
                on July 21, 2006. The Company paid a total of $778,795 cash as
                finder’s fees.





(ii)
            The
                Company entered into an agreement with National Media Associates
                ("National Media") to provide financial relations, media relations
                and
                public market development services. The agreement provides that the
                Company pay National Media the sum of US$6,000 per month plus expenses
                for
                a term of one year and issue 120,000 incentive stock options to the
                principal of National Media for the purchase of 120,000 common shares
                at
                an exercise price of $2.72 per share, exercisable on or before March
                15,
                2011. The agreement may be terminated after September 15, 2006 upon
                30
                days' notice by the Company. One of the directors of the Company
                is
                related to National Media
                Associates.





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            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      14 - SUBSEQUENT EVENTS** (Continued)





(iii)
            The
                Company has had 386,200 stock options exercised for total proceeds
                of
                $501,750 and 1,250 share purchase warrants exercised for total proceeds
                of
                $3,125.





**NOTE
      15 - EVENT SUBSEQUENT TO DATE OF AUDITOR’S REPORT**





On
      July
      17, 2006, the Company acquired of a further 39.25% equity interest in Cia Minera
      in consideration for the issuance of 3,164,702 common shares of the Company.
      The
      Company’s equity interest in Cia Minera is 88.25% upon completion of the
      acquisition.





**NOTE
      16 - COMMITMENTS**





The
      Company entered into a 12 month Investor Relations Agreement on July 1, 2005
      with 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 totaling $18,000 plus expenses
      (2005 - $nil)





The
      Company entered into a cost sharing agreement dated October 1, 1997, and amended
      November 1, 2003 to reimburse Oniva for a variable percentage (2005 fixed
      percentage - 20%) 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 (Note 10
      (d)).
      The agreement may be terminated with one-month notice by either
      party.





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





The
      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
      consolidated financial statements are summarized as follows:





**2006**
            
            **2005****Consolidated
                balance sheets**
            
            
            
            
            
            (restated
            )Total
                assets under Canadian GAAP
            
            $
            3,957,892
            
            $
            3,219,431Share
                subscriptions receivable (i)
            
            
            (56,732
            )
            
            -Deferred
                exploration expenditures (iv)
            
            
            (343,896
            )
            
            (111,499
            )Investments
                (ii)
            
            
            121,941
            
            
            51,411Total
                assets under US GAAP
            
            
            3,679,205
            
            
            3,159,343Total
                equity under Canadian GAAP
            
            
            3,371,178
            
            
            2,878,257Share
                subscriptions receivable (i)
            
            
            (56,732
            )
            
            -Deferred
                exploration expenditures (iv)
            
            
            (343,896
            )
            
            (111,499
            )Investments
                (ii)
            
            
            121,941
            
            
            51,411Total
                equity under US GAAP
            
            $
            3,092,491
            
            $
            2,818,169








67
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          of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)




**NOTE
      17 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED** **ACCOUNTING
      PRINCIPLES** (Continued)




**2006**
            
            **2005**
            
            **2004****Consolidated
                statements of operations**Loss
                for year under Canadian GAAP
            
            $
            (2,369,724
            )
            $
            (814,710
            )
            $
            (445,591
            )Future
                income tax benefit on renouncement of qualified Canadian exploration
                expenditures (iii)
            
            
            (19,750
            )
            
            (41,200
            )
            
            -Exploration
                expenses (iv)
            
            
            (232,397
            )
            
            (91,400
            )
            
            (20,100
            )Write-down
                of investment (ii)
            
            
            217,000
            
            
            -
            
            
            -Net
                loss for the year under U.S. GAAP (v)
            
            
            (2,404,871
            )
            
            (947,310
            )
            
            (465,691
            )Comprehensive
                income (loss) items:Unrealized
                gain (loss) on investments (ii)
            
            
            (146,470
            )
            
            (797,365
            )
            
            543,771Net
                comprehensive income (loss) items
            
            $
            (2,551,341
            )
            $
            (1,744,675
            )
            $
            78,080Income
                (loss) per share under U.S. GAAP (v)
            
            $
            (0.22
            )
            $
            (0.09
            )
            $
            (0.07
            )





**2006**
            
            **2005**
            
            **2004****Statements
                of cash flows**Cash
                flows used in operating activities underCanadian
                GAAP
            
            $
            (1,027,079
            )
            $
            (758,311
            )
            $
            (339,986
            )Mineral
                properties expenditures (iv)
            
            
            (234,234
            )
            
            (91,400
            )
            
            (20,100
            )Cash
                flows used in operating activitiesunder
                US GAAP
            
            
            (1,261,313
            )
            
            (849,711
            )
            
            (360,086
            )Cash
                flows (used in) from investing activities Under
                Canadian GAAP
            
            
            (186,002
            )
            
            (226,400
            )
            
            (34,844
            )Mineral
                properties expenditures (iv)
            
            
            234,234
            
            
            91,400
            
            
            20,100Cash
                flows (used in) from investing activitiesunder
                US GAAP
            
            $
            48,232
            
            $
            (135,000
            )
            $
            (14,744
            )





**(i)**
            **Share
                subscription receivable**





U.S.
      GAAP
      requires that accounts receivable arising from sale of stock be presented as
      deductions from stockholders’ equity and not as assets.








68
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            of Contents


**AVINO
        SILVER & GOLD MINES LTD.**
 Notes
        to
        Financial Statements
 January
        31, 2006, 2005 and 2004
 (In
        Canadian Dollars)







**NOTE
      17 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED** **ACCOUNTING
      PRINCIPLES** (Continued)





**(ii)**
            **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 it is not recognized into operations under 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.





**(iii)**
            **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 at the amount that the carrying
      value of the flow-through shares exceeds their tax basis. Under U.S. GAAP,
      the
      recognition of this future income tax benefit is limited to the extent that
      the
      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, 2006 the Company
      had $120,401 of restricted, unexpended flow-through funds (2005 -
      $258,378).





**(iv)**
            **Mineral
                properties interests**





Canadian
      GAAP allows for the deferral mineral property interests acquisition 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 February 1, 2005 the Company changed its
      accounting policy to capitalize acquisition costs as tangible assets subject
      to
      period evaluation of impairments.  Prior to this change, acquisition
      costs of mineral properties interests were charged to operations in the period
      in which they were incurred. The change in accounting policy is applied
      retroactively with a restatement of prior periods. Accordingly, the
      Company 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.





**(v)**
            **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.





**(vi)**
            **Recent
                Accounting Pronouncements**





The
      FASB
      has recently issued SFAS No. 155 “Accounting for Certain Hybrid Financial
      Instruments - an amendment of SFAS No. 133 and 140” and SFAS No.156 “Accounting
      for Servicing of Financial Assets - an amendment of SFAS No. 140”, but these
      pronouncements will not have any relationship to the operations of the Company.
      Therefore, a description and its impact on the Company's operations and
      financial position for each have not been disclosed.





69
 Table
          of Contents





**AVINO
      SILVER & GOLD MINES LTD.**


Notes
      to
      Financial Statements


January
      31, 2006, 2005 and 2004


(In
      Canadian Dollars)







**NOTE
      17 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED** **ACCOUNTING
      PRINCIPLES** (Continued)





**(vii)**
            **Related
                party transactions**





U.S.
      GAAP
      requires that financial statements disclose related party transactions on the
      face of the balance sheet, income statement or statement of cash flows. Had
      the
      financial statements been prepared in accordance with U.S. GAAP, the following
      items would have been disclosed:





On
      the
      balance sheet, as at January 31, 2006, the exploration advance of $39,000 would
      be disclosed as an exploration advance to a related party of $39,000 (2005
      -
      $nil); shareholders’ equity would separately disclose share subscriptions
      receivable from related parties for an amount of $(25,500) (2005 - $nil) and
      separately disclose share subscriptions received in advance from related parties
      for an amount of $25,000 (2005 - $nil).





On
      the
      statement of operations and deficit the following operating and administrative
      expense items would be disclosed separately:





**2006**
            
            **2005**
            
            **2004**Management
                services provided by related party
            
            $
            60,000
            
            $
            60,000
            
            $
            37,500Administrative
                services provided by related parties
            
            
            46,357
            
            
            23,772
            
            
            14,976Mineral
                property exploration services provided by related parties
            
            
            154,712
            
            
            -
            
            
            -
















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**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.




**AVINO
              SILVER & GOLD MINES LTD.**Dated: 
July
              28, 2006
            By:
            /s/ David
              WolfinDavid
              Wolfin, President(Principal
              Executive Officer)











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Exhibit Number
              Name1.1
              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 Subsidiaries12.1
              Certification of the Principal
                Executive Officer12.2
              Certification of the Principal
                Financial Officer13.1
              Certificate under the Sarbanes-Oxley
                Act13.2
              Consent of Expert15.1
              Form 43 -101F1 Technical Report:
                Tailings Retreatment - Process Options*
 ___________________________
 *
        Previously filed.