---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

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

or

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

For the fiscal year ended December 31, 2008

or

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

For the transition period from _______________ to
_______________

or

[ ] 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 Registrant as specified in its charter)

British Columbia, Canada(Jurisdiction of Incorporation or Organization)

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

David Wolfin, 455 Granville Street, Suite 400 Vancouver,
British Columbia V6C 1T1, Canada,Tel:604-682-3701,
Email:dwolfin@oniva.ca(Name, telephone number, e-mail and/or facsimile number and address
of Company contact person)

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

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

Common Shares, without Par Value(Title of Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: NONE

The number of outstanding Common Shares as of December 31, 2008
was 20,584,727.

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

[   ] Yes    [X] No

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. [   ]
Yes    [X] No

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. [X] Yes  
 [   ] No

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*Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). [   ] 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 one):Large Accelerated File [  
]           Accelerated
Filer [ 
 ]          
Non-Accelerated Filer [X]

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

U.S. GAAP [   ]

International Financial Reporting Standards a issued by the International
  Accounting Standards Board [   ]

Other [X]

If Other has been checked in response to the previous
question, indicate by check mark which financial statement item the
registranthas 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 registrant 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

ii

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TABLE OF CONTENTS

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

1

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INTRODUCTION

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

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

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

CURRENCY

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

FORWARD-LOOKING STATEMENTS

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

CAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING
ESTIMATE OF MEASURED AND INDICATED MINERAL RESOURCES

We
advise United States investors that although the terms measured resources and
indicated resources are recognized and required by Canadian regulations, the
United States Securities and Exchange Commission, referred to as the SEC, does
not recognize them. United States investors are

2

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cautioned not to assume that all or any part of our mineral
resources in these categories will ever be converted into mineral reserves.

GLOSSARY OF MINING TERMS

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

3

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|lp induced polarization    | A method of ground geophysics
        surveying employing an electrical current to determine indications of
        mineralization, also referred to as IP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|laterite                   | A residual product of rock decay
        that is red in colour 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.
|                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NQ                         | Denotes a definition of drill
        size of approximately 2-1/2 inches.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|oxide                      | A compound of oxygen and some
        other element.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|ore                        | A natural aggregate of one or
        more minerals which may be mined and sold at a profit, or from which some
        part may be profitably separated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|outcrop                    | An exposure of rock at the earths
        surface.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

4

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|possible or inferred ore                                     | Term used to describe ore where the mineralization is
      believed to exist on the basis of some geological information, but the
      size, shape, grade, and tonnage are a matter of speculation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|prefeasibility study and
      preliminary feasibility study | Each means a comprehensive study of the viability of a
      mineral project that has advanced to a stage where mining method, in the
      case of underground mining, or the pit configuration, in the case of open
      pit mining, has been established, and which, if an effective method of
      mineral processing has been determined, includes a financial analysis
      based on reasonable assumptions of technical, engineering, operating and
      economic factors, and the evaluation of other relevant factors which are
      sufficient for a qualified person, acting reasonably, to determine if all
      or part of the mineral resource may be classified as a mineral reserve.
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|probable mineral reserve                                     | The economically mineable part of an indicated, and in
      some circumstances, a measured mineral resource demonstrated by at least a
      prefeasibility study. This study must include adequate information on
      mining, processing, metallurgical, economic, and other relevant factors
      that demonstrate, at the time of reporting, that economic extraction can
      be justified.                                                                                                                                                                                                                                                                                                      
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|proven mineral reserve                                       | The economically mineable part of a measured mineral
      resource demonstrated by at least a prefeasibility study. This study must
      include adequate information on mining, processing, metallurgical,
      economic, and other relevant factors that demonstrate, at the time of
      reporting, that economic extraction is justified. The term should be
      restricted to that part of the deposit where production planning is taking
      place and for which any variation in the estimate would not significantly
      affect potential economic viability.                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|quartz                                                       | Silica or SiO2, a common constituent of veins,
      especially those containing gold and silver mineralization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|tailings                                                     | Material rejected from a mill after most of the
      recoverable valuable minerals have been extracted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|ton                                                          | Imperial measurement of weight equivalent to 2,000
      pounds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|trench                                                       | A long, narrow excavation dug through overburden, or
      blasted out of rock, to expose a vein or ore structure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|tonne                                                        | Metric measurement of weight equivalent to 1,000
      kilograms (or 2,204.6 pounds).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|veins                                                        | The mineral deposits that are found filling openings in
      rocks created by faults or replacing rocks on either side of faults.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

5

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PART I

Item 1. Identity of Directors, Senior Management and
Advisors

Not
applicable.

Item 2. Offer Statistics and Expected Timetable

Not
applicable.

Item 3. Key Information

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

The
selected historical financial information presented in the table below for each
of the years ended December 31, 2008, December 31, 2007(1), January
31, 2007, 2006 and 2005, is derived from the audited financial statements of the
Company. The audited consolidated financial statements and notes for the year
ended December 31, 2008, the eleven month period ended December 31, 2007 and the
year ended January 31, 2007 are included in this Annual Report. The selected
historical financial information for each year ended January 31, 2006 and 2005,
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
consolidated 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
consolidated financial statements included in Item 17 in this Annual Report are
also prepared under Canadian GAAP. Included within these consolidated financial
statements in Note 23 is a reconciliation between Canadian GAAP and United
States generally accepted accounting principals, referred to as US GAAP, which
differ, among other things, in respect to the recording of the investments in
marketable securities, deferred exploration expenditures and recognition of
future income tax benefits on renouncement of Canadian exploration expenditures
to flow-through investors.













________________________________________________
(1)
In January 2008, the Company changed its financial year end from January 31 to
December 31. Consequently, the period ended December 31, 2007 is an 11 month
fiscal year (referred hereinafter as fiscal year end 2007-II).

6

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Canadian GAAP
      
      
      
      
      ElevenYear
      
      
      MonthsEnded
      
      
      EndedDecember
      
      
      December
      
      
      Year Ended January 31,31,
      
      
      31,2008
      
      
      2007
      
      
      2007
      
      
      2006
      
      
      2005Summary of Operations:Revenue
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -Interest Income
      
      146,386
      
      
      359,339
      
      
      430,231
      
      
      46,082
      
      
      41,999ExpensesOperating and Administrative
      
      1,575,913
      
      
      868,527
      
      
      4,014,734
      
      
      1,416,797
      
      
      506,039Write-down of mining Properties
      
      -
      
      
      -
      
      
      -
      
      
      103,342
      
      
      -Equity losses in Cia Minera Mexicanade Avino, S.A. de C.V.
      
      -
      
      
      -
      
      
      33,581
      
      
      342,596
      
      
      -Litigation settlement
      
      2,785
      
      
      (759,302
      )
      
      -
      
      
      -
      
      
      -Misappropriation loss
      
      -
      
      
      (86,155
      )Mineral property option revenue
      
      25,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -Write-down of investment
      
      -
      
      
      -
      
      
      -
      
      
      217,000
      
      
      -Due diligence review of Cia MineraMexicana
        de Avino, S.A. de C.V.
      
      -
      
      
      -
      
      
      -
      
      
      355,921
      
      
      391,899Future income tax benefit (expense)
      
      (98,653
      )
      
      501,083
      
      
      -
      
      
      19,750
      
      
      41,200Net Loss
      
      (1,538,876
      )
      
      (885,863
      )
      
      (3,648,539
      )
      
      (2,369,724
      )
      
      (814,710
      )Loss per share
      $
      (0.07
      )
      $
      (0.04
      )
      $
      (0.20
      )
      $
      (0.22
      )
      $
      (0.08
      )Weighted Average Number of SharesOutstanding
      
      20,584,727
      
      
      20,584,727
      
      
      18,385,007
      
      
      10,965,718
      
      
      10,410,379


As at December
        31,
      
      
      As at January 31,2008
      
      
      2007
      
      
      2007
      
      
      2006
      
      
      2005Balance Sheet Data:Total assets
      
      20,126,230
      
      
      21,190,940
      
      
      23,295,039
      
      
      3,901,160
      
      
      3,219,431Cash and cash equivalents
      
      3,575,241
      
      
      6,342,481
      
      
      11,045,106
      
      
      3,067,011
      
      
      2,283,535Total liabilities
      
      2,508,776
      
      
      2,532,414
      
      
      3,789,083
      
      
      586,714
      
      
      341,174Shareholders equity
      
      17,617,454
      
      
      18,658,526
      
      
      19,505,956
      
      
      3,314,446
      
      
      2,878,257


United States GAAP
      
      
      
      
      ElevenMonthsYear Ended
      
      
      EndedDecember
      
      
      December31,
      
      
      31,
      
      
      Year Ended January 31,2008
      
      
      2007
      
      
      2007
      
      
      2006
      
      
      2005Summary of Operations:Net Loss per Canadian GAAP
      $
      (1,538,876
      )
      $
      (885,863
      )
      $
      (3,684,539
      )
      $
      (2,369,724
      )
      $
      (814,710
      )Adjustments
      
      (1,666,066
      )
      
      (2,833,433
      )
      
      (10,277,556
      )
      
      (74,147
      )
      
      (132,600
      )Net Loss per US GAAP
      
      (3,204,942
      )
      
      (3,719,296
      )
      
      (13,962,095
      )
      
      (2,443,871
      )
      
      (947,310
      )Loss per share per US GAAP
      
      (0.16
      )
      
      (0.18
      )
      
      (0.76
      )
      
      (0.22
      )
      
      (0.09
      )


7

---

As at December 31,
      
      
      As at January 31,2008
      
      
      2007
      
      
      2007
      
      
      2006
      
      
      2005Balance Sheet Data:Total assets under CanadianGAAP
      
      20,126,230
      
      
      21,190,940
      
      
      23,295,039
      
      
      3,901,160
      
      
      3,219,431Adjustments
      
      (14,861,524
      )
      
      (13,096,805
      )
      
      (10,747,339
      )
      
      (260,955
      )
      
      (60,088
      )Total assets under US GAAP
      
      5,264,706
      
      
      8,094,135
      
      
      12,547,700
      
      
      3,640,205
      
      
      3,159,343Total equity under CanadianGAAP
      
      17,617,454
      
      
      18,658,526
      
      
      19,505,956
      
      
      3,314,446
      
      
      2,878,257Adjustments
      
      (12,927,955
      )
      
      (11,261,889
      )
      
      (10,747,339
      )
      
      (260,955
      )
      
      (60,088
      )Total equity under US GAAP
      
      4,689,499
      
      
      7,396,637
      
      
      8,758,617
      
      
      3,053,491
      
      
      2,818,169


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
    
    Average
    
    Period End
    
    High
    
    Low2005
    
    1.2961
    
    1.2396
    
    1.3970
    
    1.17752006
    
    1.2061
    
    1.1436
    
    1.2703
    
    1.14362007
    
    1.1357
    
    1.1792
    
    1.1824
    
    1.09892007 II
    
    1.0651
    
    0.9913
    
    1.1853
    
    0.91702008
    
    1.0660
    
    1.2246
    
    1.2969
    
    0.9719


The
following table sets forth the high and low exchange rate for the past six
months based on the noon buying rate. As of July 6, 2009, the exchange rate was
CDN$1.1612 for each US$1.

Month
    
    High
    
    LowJanuary 2009
    
    1.2741
    
    1.1823February 2009
    
    1.2890
    
    1.2192March 2009
    
    1.3000
    
    1.2245April 2009
    
    1.2643
    
    1.1940May 2009
    
    1.1872
    
    1.0872June 2009
    
    1.1625
    
    1.0827


**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.

8

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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. Our
ability to raise funds will depend on several factors, including, but not
limited to, current economic conditions, our properties, our prospects, metal
prices, businesses competing for financing and our financial condition. There
can be no assurance that we will be able to raise funds, or to raise funds on
commercially reasonable terms.

We
have incurred net losses since our inception and expect losses to continue.We have not been profitable since our inception. For the year ended December
31, 2008, we had a net loss of $1,538,876 and an accumulated deficit on December
31, 2008 of $23,182,925. The Company has not generated revenues from operations
since 2001and does not expect to generate revenues from operations until one or
more of its properties are placed in production. There is no assurance that any
of the Companys properties will be placed in production or that the Companys
operations will be profitable in the future.

The
mining industry is highly speculative and involves substantial risks.Even
when mining is conducted on properties known to contain significant quantities
of mineral 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 refining facilities, 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,

9

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the Company may be required to close an operation once it is
started until a particular problem is remedied or to undertake other remedial
actions.

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

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

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

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

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

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.

10

---

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

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

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

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

We
  may be adversely affected by fluctuations in foreign exchange rates. We
  maintain our bank accounts mainly in Canadian and U.S. Dollars. Any appreciation
  in the currency of Mexico or other countries where we may carry out 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.Although the Company is not currently subject to litigation, 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 favourably, it may have a material adverse
impact on the Companys financial performance, cash flow and results of
operations.

11

---

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 Companys ability to
raise capital to acquire and explore resource properties may be adversely
affected by the market prices for natural resources which are highly speculative
and volatile. 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 to disclose any personal interest which they may have in any
material transaction which is proposed to be entered into with the Company and
to abstain from voting as a director for the approval of any such transaction.

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

Uncertainty
of continuing as a going concern.The continuation of the Company depends
upon its ability to develop a self-supporting business and generate cash flow
from operations and/or to raise equity capital through the sale of its
securities. The Company will be required to raise new financing through the sale
of shares or issuance of debt to continue with the exploration and development
of its mineral properties. As a result, there is uncertainty about the Companys
ability to continue as a going concern. The Companys consolidated
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

12

---

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 2008 fiscal year, the Companys common share price fluctuated between a low
of $0.18 and a high of $1.78. Subsequent to the 2008 fiscal year and as of May
31, 2009, the Companys common share price has fluctuated between a low of $0.38
and a high of $0.83. Significant fluctuations in the Companys common share
price is likely to continue, and could potentially increase in the future.

Difficulty
for United States investors to effect services of process against the Company.The Company is incorporated under the laws of the Province of British
Columbia, Canada. Consequently, it will be difficult for United States investors
to affect service of process in the United States upon the directors or officers
of the Company, or to realize in the United States upon judgments of United
States courts predicated upon civil liabilities under the United States
Securities Exchange Act of 1934, as amended. The majority of the
Companys directors and officers are residents of Canada and all of the
Companys assets are located outside of the United States. A judgment of a
United States court predicated solely upon such civil liabilities would probably
be enforceable in Canada by a Canadian court if the United States court in which
the judgment was obtained had jurisdiction, as determined by the Canadian court,
in the matter. There is substantial doubt whether an original action could be
brought successfully in Canada against any of such persons or the Company
predicated solely upon such civil liabilities.

Item 4. Information on the Company

Cautionary Note to United States Investors

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

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

The
Company was incorporated by Memorandum of Association under the laws of the
Province of British Columbia on May 15, 1969, and on August 22, 1969, by virtue
of an amalgamation with Ace Mining Company Ltd., became a public company whose
common shares are registered under the United States Securities Exchange Act
of 1934, changing its name to Avino Mines & Resources Limited. On April
12, 1995, the Company changed its corporate name to International Avino Mines
Ltd. and affected a reverse stock split of one common share for every five
common shares outstanding. On August 29, 1997, the Company changed its corporate
name to Avino Silver & Gold Mines Ltd., its current name, to better reflect
the business of the Company of exploring for and mining silver and gold. In
January 2008, the Company announced the change of its financial year end from
January 31 to December 31. The change was completed in order to align the
Companys financial statement reporting requirements with its Mexico
subsidiaries which operate on a calendar fiscal year.

The
Company is a reporting issuer in British Columbia and Alberta, a foreign issuer
with the SEC and trades on the TSX-V under the symbol ASM, on the OTCBB under
the symbol ASGMF and on the Frankfurt Stock Exchange under the symbol GV6.
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.

The
Company is a natural resource company, primarily engaged in the acquisition,
exploration

13

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and development of natural resource properties. The Companys
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 the Company has capitalized
expenditures of $609,875 on the properties in Canada. These capitalized
expenditures consist of $187,854on the Aumax property, $163,467 on the
Olympic-Kelvin property, $256,801 on the Minto property, and $1,753 on the Eagle
property in Yukon.

Significant Acquisitions and Significant Dispositions

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

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

The
Company acquired a further 1.1% interest in Cia Minera through the acquisition
from an estate subject to approval and transfer of the shares to the Company by
the trustee for the estate. On December 21, 2007 approval was received and the
Company obtained the 1.1% interest from the estate for no additional
consideration. As at December 31, 2008 the Companys interest in Cia Minera is
89.35% .

On
February 16, 2009, the Companys subsidiary, Cia Minera, held a Shareholders
Meeting to increase the capital through capitalization of loans advanced to Cia
Minera by the Company. As a result, the Companys ownership interest in Cia
Minera increased to 99.28% .

The
  Company has no other significant acquisitions or dispositions of property, except
  as disclosed in this Annual Report.

**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 Silver Mine, located in the state of
Durango, Mexico (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 and closing of smelter.
Beginning in 2002, the Company redirected its corporate strategy to focus almost
entirely on silver and began acquiring silver properties in North America. The
Companys most recent acquisitions, consisting of the Eagle property in Canadas
Yukon Territory, and the Eagle claims are under option to Mega Silver Inc. The
Aumax silver and gold property in British Columbia, have produced positive
assays for silver through drilling and sampling. The Avino Mine in Mexico 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.

14

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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.

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 2008,
demand for silver exceeded supply and worldwide demand is expected to increase
through 2009. 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.

Mineral
exploration and mining in Mexico is covered under the Mining Law as first
published in June 1992, and amended in April 2005. Mining operations in Mexico
are administered by the Ministry of Economy. Environmental regulations are
covered under Ley General del Equilibrio Ecológio y la Protección al Ambiente
(General Law of Ecological Balance and Environmental Protection) and its
regulations. Certain other environmental laws, including Ley de Aguas
Nacionales (Law of National Waters) and Ley Forestal (Forestry Law) and their
associated regulations may also cover certain operations. The kind of permits or
authorizations required to conduct mining or mineral exploration

15

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operations in Mexico depend upon the type of operation. Common
exploration activities do not require prior environmental authorization or
licenses, but it is advisable to request a confirmation from the National Water
Commission that planned operations will not affect the water table. It is also
necessary to confirm that any planned operations will not be conducted in
protected natural areas.

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

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

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

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

The
Companys Mexican subsidiaries are the majority owned subsidiary of Oniva Silver
and Gold Mines S.A. de C.V., referred to as Oniva, Promotora, in which the
Company has direct ownership of 79.09%, and Cia Minera in which the Company has
a 50% direct ownership and an additional 49.28% of Cia Minera is held through
Promotora. The Companys total ownership interest in Cia Minera is 99.28% .

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

**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 99.28% 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. Cia
Minera is not involved with any exploration activities in Canada. The Company
owns and manages these properties. Mega Silver Inc. has an option to acquire a
100% title and interest in the Eagle Property located in the Yukon Territory.
Exploration in Canada has in recent years, been limited to prospecting,
trenching and drill programs on our Olympic-Kelvin Property, Minto, Aumax.

16

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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.

On
November 12, 2008, the Company entered into an option agreement with Mega Silver
Inc. (Mega Silver), whereby Mega Silver can earn the exclusive right and
option to acquire a 100% title and interest in the Eagle Property located in the
Yukon Territory.

To
earn a 75% interest in the Eagle Property, Mega Silver must:

- Incur exploration costs totalling $7.1 million over five years;
- Make total cash payments of $400,000 over five years to the Company; and
- Issue 500,000 common shares of Mega Silver in years 4 and 5 to the Company.

After
earning a 75% interest, Mega Silver may either elect to form a Joint Venture
with the Company, or earn an additional 25% interest, whereby Mega Silver must
commence commercial production and upon Mega Silver commencing commercial
production it will have been deemed to have acquired 25% interest free and clear
of all encumbrances with no further action required by it.

If
the Production Decision (defined below) is made by Mega Silver at any time from
the fifth anniversary of November 17, 2008, the Exchange Approval Date until the
date that is six months following the fifth anniversary of November 17, 2008,
Mega Silver may decide to proceed to commercial production (the Production
Decision), Mega Silver shall:

| | (a) | pay CDN$200,000 to the Company within five days of the
      Production Decision; and                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                  
| | (b) | pay CDN$200,000 to the Company on or before each yearly
      anniversary of the Production Decision until the later of (i) the fifth
      anniversary of the Production Decision, and (ii) the date that commercial
      production commences.

17

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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 nonexistent 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.

The
Eagle Property includes historic surface trenches that expose a section of the
Eagle vein, a strong transverse vein-fault hosted in Keno Hill Quartzite. The
Eagle vein varies from 0.6 to 4.9 metres wide with mineralized lenses of galena,
tetrahedrite and sphalerite. Yukon Government files report that a total of 33
holes totalling 3,075.5 metres have been drilled along 300 metres of vein strike
on the property in two programs (1964 and 1978/79). The best intercepts are
reported in the following table.

EAGLE VEIN  HISTORIC REPORTED DRILLING (YTG MinFile 105M
021)

Year
    Operator
    Reported Structure
    Reported
      Intercept (m)
    Silver g/t
    Lead %
    Zinc %1964
    Jersey Yukon Mines Ltd.
    Branch
      Vein
    2.1
    1,885.7
    12.8
    4.2Main Vein (parallel intercepts)
    0.15
    7,624.9
    1.20.4
    682.3
    11.61978/79
    Teck
      Corporation
    Main
      Vein (DDH JB3)
    1.5
    366.6
    5.4
    6.8


Soil
sampling conducted in 1971 by United Keno Hill Mines Ltd. outlined a strong 300
metre long Pb-Ag anomaly across the southern boundary of Mega Silvers adjoining
Man claim that apparently represents the untested northeast extension of the
Eagle vein. The core of the soil anomaly measures roughly 200 by 100 metres and
contains peak values of 2,280 ppm lead and 10.8 ppm silver (UKHM 1973.
Assessment Report #060116).

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.

18

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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.

19

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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 reclamation bond of $1,500 at December 31, 2008 (December
31, 2007:$1,500), registered in the name of the Ministry of Finance of British
Columbia, as security for estimated future reclamation costs.

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

Olympic-Kelvin Property

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

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

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

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

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

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

The
Enigma Zone is a colour anomaly on the south shore of Carpenter Lake on Lot
6280, approximately 700 metres east, north-east of the Margarita Zone. Trenching
revealed a quartz stock work

20

---

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.

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 reclamation bond of $1,500 at December 31, 2008 (December
31, 2007: $1,500), registered in the name of the Ministry of Finance of British
Columbia, as security for estimated future reclamation costs.

No
drilling on the Olympic Property was completed in 2008.

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

Minto Property

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

Property
Description and Location.The Minto Property is situated about tenkilometers east of Goldbridge in the Bridge River gold district of British
Columbia and adjoins the Olympic-Kelvin Property. The property covers
approximately 204 hectares. The claims occupy the lake bed and north side 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.

21

---

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

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

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

The
Company has placed a reclamation bond of $2,500 at December 31, 2008 (December
31, 2007: $2,500), 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 program has been proposed.

Avino Mine



Ownership. The Company has
a 99.28% ownership interest in Cia Minera, a company incorporated under the laws
of Mexico. Cia Minera owns the Avino property. The Company acquired its 49%
interest in Cia Minera in 1968, an additional interest of 39.25% in July 2006,
1.1% interest in December 2007 and most recently 9.93% in February 2009.

Cia
Minera leases four core mineral claims in consideration for royalties. The
lessor had contested the underlying royalty agreement, and had filed a legal
action claiming royalties were owed from years prior to the Companys
acquisition of control of Cia Minera. An amicable settlement was negotiated
during the period ended December 31, 2007 whereby the Company settled the
dispute at a cost of $1,497,604 (settlement denominated in USD$1,500,000). The
$1,497,604 amount, less a prior year accrual of $738,302 is recorded in
litigation settlement expense during the period ended December 31,

22

---

2007. The Company paid a $1,398,457 (USD$1,400,000) portion of
the settlement during the period ended December 31, 2007 and the balance owing
of $102,785 (USD$100,000) during the year ended December 31, 2008. A difference
in foreign exchange on the settlement date in 2008 resulted in $2,785 recovery.

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 property 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 in November 2001.

History.
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. Over the last two years, the Company has been
refurbishing the plant.

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 has been supplied by
the government-owned Federal Electricity Commission, referred to as the
FEC.

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.

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

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

23

---

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.

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.

The
Company operated the mine from 1976 to 2001 when closure was caused by low
silver, gold and copper prices and the local smelter closing for toll
processing. The 2006 drill program was designed to test for continuity down dip
below the existing workings of the three principal areas of mineralization (San
Luis, Elena-Tolosa, and Chirumbo). The Avino vein system strikes principally
east west over 1.2 km and dips south at 60 - 70°. Drilling of the Avino vein in
2006 was disappointing and continuity was not found.

During
2006 to 2007, the Company had drilled 82 holes totaling approximately 18,000
metres on different targets across the Avino property.

|                                                                         | Total  |                                  |        |              |       |        |      |       |     
|------------------------------------------------------------------------ | ------ | -------------------------------- | ------ | ------------ | ----- | ------ | ---- | ----- | ----
|Vein or                                                                  | Depth  | From                             | To     | Intersection | Au    | Ag     | Cu   | Pb    | Zn  
|Structure                                                                | (m)    | (m)                              | (m)    | (m)          | g/t   | g/t    | ppm  | ppm   | ppm 
|LA ESTELA VEIN                                                           |        |                                  |        |              |       |        |      |      
|LE-06-01                                                                 | 200.00 | Did not intersect vein structure |        |              |       |        |     
|LE-06-02                                                                 | 238.25 | 215.05                           | 219.1  | 4.05         | 0.73  | 239    |      |       |     
|Includes:                                                                |        |                                  |        |              |       |        |      |       |     
|Footwall La                                                              |        |                                  |        |              |       |        |      |       |     
|Estela Vein                                                              |        | 215.05                           | 216.0  | 0.95         | 0.869 | 52.5   |      |       |     
|                                                                         |        | 216.05                           | 217.10 | 1.05         | 0.025 | 9.0    |      |       |     
|                                                                         |        | 217.10                           | 218.10 | 1.00         | 0.015 | 14.8   |      |       |     
|                                                                         |        | 218.10                           | 218.60 | 0.50         | 0.052 | 18.0   |      |       |     
|Hangingwall                                                              |        |                                  |        |              |       |        |      |       |     
|La Estela                                                                |        | 218.60                           | 219.10 | 0.50         | 3.95  | 1744.1 | 9460 | 24600 | 5500
|LE-06-03                                                                 | 251.85 | 221.85                           | 223.70 | 1.85         | 0.85  | 80     |      |       |     
|Includes                                                                 |        | 221.85                           | 222.85 | 1.00         | 1.37  | 132.1  |      |       |     
|                                                                         |        | 222.85                           | 223.70 | 0.85         | 0.24  | 18.4   |      |       |     
|                                                                         |        |                                  |        |              |       |        |      |       |     
|CERRO SAN JOSEThe two drill holes did not
      intersect the structure. |        |                                  |        |             
|SJ-06-01                                                                 | 320.55 |                                  |        |              |       |        |      |       |     
|SJ-06-02                                                                 | 373.70 |                                  |        |              |       |        |      |       |     

24

---

|                                                                 | Total  |        |        |              |        |       |      |        |       
|---------------------------------------------------------------- | ------ | ------ | ------ | ------------ | ------ | ----- | ---- | ------ | ------
|Vein or                                                          | Depth  | From   | To     | Intersection | Au     | Ag    | Cu   | Pb     | Zn    
|Structure                                                        | (m)    | (m)    | (m)    | (m)          | g/t    | g/t   | ppm  | ppm    | ppm   
|LOS ANGELES                                                      |        |        |        |              |        |       |      |        |       
|LA-07-01                                                         | 358.90 | 327.25 | 329.65 | 2.40         | 0.39   | 119   |      |        |       
|Includes                                                         |        | 327.25 | 327.25 | 0.30         | 13.645 | 711.9 | 5602 | 8259   | 4220  
|                                                                 |        | 327.55 | 328.35 | 0.80         | 0.368  | 5.5   | 141  | 1192   | 1490  
|                                                                 |        | 328.35 | 329.25 | 0.90         | 0.044  | 1.1   | 29   | 317    | 1217  
|                                                                 |        | 329.25 | 329.65 | 0.40         | 0.649  | 168.7 | 3346 | 61700  | 59000 
|                                                                 |        |        |        |              |        |       |      |        |       
|LA-07-02                                                         | 358.90 | 100.35 | 101.35 | 1.00         | 0.052  | 15.5  | 9    | 76     | 356   
|                                                                 |        | 101.35 | 102.35 | 1.00         | 0.015  | 3.3   | 9    | 301    | 644   
|                                                                 |        | 102.35 | 103.35 | 1.00         | 0.085  | 7.2   | 35   | 259    | 849   
|                                                                 |        | 103.35 | 104.35 | 1.00         | 0.480  | 45.5  | 49   | 229    | 487   
|                                                                 |        |        |        |              |        |       |      |        |       
|LA-07-03                                                         | 185.30 | 123.30 | 124.30 | 1.00         | 0.130  | 59.7  | 135  | 1994   | 15800 
|                                                                 |        | 127.10 | 127.75 | 0.65         | 0.040  | 43.1  | 602  | 2952   | 26000 
|                                                                 |        | 130.35 | 131.30 | 0.95         | 0.319  | 59.1  | 1143 | 1330   | 3580  
|                                                                 |        | 132.15 | 132.30 | 0.15         | 1.783  | 71.2  | 445  | 64200  | 60000 
|                                                                 |        |        |        |              |        |       |      |        |       
|LA-07-04                                                         | 140.40 | 100.70 | 107.4  | 6.7          |        |       |      |        |       
|                                                                 |        | 100.70 | 101.70 | 1.00         | 0.404  | 48.8  | 48   | 402    | 2189  
|                                                                 |        | 101.70 | 102.80 | 1.10         | 0.630  | >200  | 555  | 1277   | 3660  
|                                                                 |        | 102.80 | 103.80 | 1.00         | 0.373  | 45.3  | 35   | 470    | 589   
|                                                                 |        | 103.80 | 104.75 | 0.95         | 0.149  | 20.9  | 36   | 258    | 403   
|                                                                 |        | 104.75 | 105.80 | 1.05         | 3.444  | 67.9  | 42   | 285    | 589   
|                                                                 |        | 105.80 | 106.80 | 1.00         | 0.830  | >200  | 210  | 2519   | 7532  
|                                                                 |        | 106.80 | 107.40 | 0.60         | 0.329  | 168.5 | 78   | 1103   | 2762  
|                                                                 |        |        |        |              |        |       |      |        |       
|LA-07-05                                                         | 115.25 | 95.80  | 96.60  | 0.80         | 0.093  | 54.4  | 1836 | 806    | 1300  
|                                                                 |        | 99.80  | 100.15 | 0.35         | 0.992  | 87    | 103  | 248    | 337   
|                                                                 |        | 100.55 | 101.25 | 0.70         | 0.418  | 174.2 | 304  | 2563   | 13500 
|                                                                 |        |        |        |              |        |       |      |        |       
|SANTIAGO STRUCTURE                                               |        |        |        |              |        |       |     
|ST-07-01                                                         | 309.05 | 51.00  | 51.25  | 0.25         | 7.260  | 37    | 108  | >10000 | >10000
|                                                                 |        | 55.45  | 56.45  | 1.00         | 0.040  | 55.9  | 9940 | 1038   | 402   
|                                                                 |        |        |        |              |        |       |      |        |       
|ST-07-02                                                         | 200.05 | 120.80 | 121.10 | 0.30         | 0.09   | 59.1  | 2652 | 14100  | 37800 
|                                                                 |        |        |        |              |        |       |      |        |       
|SANTA ANA, SAN PEDRO & SAN
      PAUL: No significant intercepts |        |        |        |             
|STA-07-01                                                        | 315.30 |        |        |              |        |       |      |        |       
|SP&P-07-01                                                       | 181.25 |        |        |              |        |       |      |        |       

25

---

|                                                                                                   | Total  |        |         |              |       |       |       |        |       
|-------------------------------------------------------------------------------------------------- | ------ | ------ | ------- | ------------ | ----- | ----- | ----- | ------ | ------
|Vein or                                                                                            | Depth  | From   | To      | Intersection | Au    | Ag    | Cu    | Pb     | Zn    
|Structure                                                                                          | (m)    | (m)    | (m)     | (m)          | g/t   | g/t   | ppm   | ppm    | ppm   
|NUESTRA SENORA                                                                                     |        |        |         |              |       |       |       |       
|NS-07-01                                                                                           | 167.10 | 99.40  | 99.85   | 0.45         | 0.045 | 258.2 | 7184  | 65500  | 77800 
|                                                                                                   |        | 159.90 | 161.05  | 1.15         | 3.291 | 53.6  | 14700 | 157    | 661   
|                                                                                                   |        | 161.05 | 161.95  | 0.90         | 1.195 | 33.8  | 8469  | 133    | 359   
|                                                                                                   |        |        |         |              |       |       |       |        |       
|NS-07-02                                                                                           | 134.05 |        |         |              |       |       |       |        |       
|NS-07-03                                                                                           | 121.35 |        |         |              |       |       |       |        |       
|HOLES NS-07-02, AND 03 did not intersect the
      Nuestra Senora Vein (probably due to faulting). |        |       
|NS-07-04                                                                                           | 101.60 | 68.90  | 69.55   | 0.65         | 0.115 | 38.8  | 1669  | 2968   | 1429  
|                                                                                                   |        | 90.55  | 91.25   | 0.70         | 0.02  | 53.9  | 225   | 518    | 1213  
|                                                                                                   |        | 91.25  | 91.90   | 0.65         | 0.01  | 22    | 50    | 763    | 1335  
|                                                                                                   |        | 91.90  | 94.15   | 2.25         | 0.04  | 143   |       |        |       
|Includes:                                                                                          |        | 91.90  | 92.90   | 1.00         | 0.03  | 146   | 233   | 829    | 2262  
|                                                                                                   |        | 92.90  | 93.40   | 0.50         | 0.015 | 196.5 | 578   | 1728   | 3321  
|                                                                                                   |        | 93.40  | 94.15   | 0.75         | 0.065 | 103.4 | 875   | >10000 | >10000
|                                                                                                   |        |        |         |              |       |       |       |        |       
|NS-07-05                                                                                           | 124.85 | 61.05  | 61.45   | 0.40         | 0.195 | 27.4  | 126   | 1115   | 245   
|                                                                                                   |        | 61.45  | 62.45   | 1.00         | 0.115 | 19.6  | 49    | 1485   | 600   
|                                                                                                   |        | 62.45  | 63.15   | 0.70         | 0.150 | 58.9  | 314   | 1189   | 337   
|                                                                                                   |        |        |         |              |       |       |       |        |       
|GEOPHYSICAL  IP TARGET                                                                            |        |        |         |              |       |       |      
|                                                                                                   | Depth  | From   | To      | Intersection | Au    | Ag    | Cu    | Pb     | Zn    
|                                                                                                   | (m)    | (m)    | (m)     | (m)          | g/t   | g/t   | ppm   | ppm    | ppm   
|GFA-07-01                                                                                          | 360.75 | 260.30 | 262.355 | 2.05         |       |       |       |        |       
|                                                                                                   |        | 260.30 | 261.20  | 0.90         | 0.055 | 10.6  | 33    | 421    | 1908  
|                                                                                                   |        | 261.20 | 261.95  | 0.75         | 0.030 | 4.7   | 14    | 286    | 1668  
|                                                                                                   |        | 261.95 | 262.35  | 0.40         | 0.790 | 209.2 | 554   | 751    | 3657  

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

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

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

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

26

---

|Vein or Structure          | From   | To     | Down Hole Lengths | Au    | Ag    | Pb    | Zn   
|-------------------------- | ------ | ------ | ----------------- | ----- | ----- | ----- | -----
|                           | (m)    | (m)    | (m)               | (g/t) | (g/t) | (%)   | (%)  
|Hole SG-07-01              |        |        |                   |       |       |       |      
|Santiago Vein              | 147.0  | 149.7  | 2.70              | 1.19  | 227   | > 1%  | > 1% 
|San Gonzalo Vein Hanging   | 357.3  | 362.15 | 4.85              | 0.64  | 343.2 | 0.36% | 0.63%
|Wall Zone                  |        |        |                   |       |       |       |      
|San Gonzalo Vein Foot Wall | 372.65 | 375.05 | 2.4               | 2.41  | 712.4 | 0.5%  | 0.13%
|Zone                       |        |        |                   |       |       |       |      
|Hole SG-07-02              |        |        |                   |       |       |       |      
|San Gonzalo Vein Hanging   | 214.65 | 219.10 | 4.45              | 6.11  | 583.8 | 1.4   | 2.54 
|Wall Zone                  |        |        |                   |       |       |       |      
|San Gonzalo Vein Foot Wall | 252.65 | 256.00 | 3.35              | 6.91  | 21.1  | 1.55  | 2.33 
|Zone                       |        |        |                   |       |       |       |      
|Hole SG-07-03              |        |        |                   |       |       |       |      
|San Gonzalo Vein           | 187.45 | 188.70 | 1.25              | 3.57  | 341   | 0.6   | 0.87 
|Hole SG-07-04              |        |        |                   |       |       |       |      
|Santiago Vein              | 18.55  | 25.00  | 6.45              | 0.21  | 364   | NS    | NS   
|(includes)                 | 20.85  | 21.9   | 1.05              | 0.29  | 990   | 0.21  | NS   
|                           | 21.90  | 22.8   | 0.90              | 0.49  | 433   | 0.16  | NS   
|Cross Vein                 | 31.00  | 34.05  | 3.05              | 0.18  | 86    | 0.17  | NS   
|San Gonzalo HW             | 248.15 | 249.25 | 1.10              | 0.43  | 58    | 0.25  | 0.26 
|FW                         | 258.75 | 259.00 | 0.25              | 2.66  | 114   | 4.8   | 4.22 
|Hole SG-07-05              |        |        |                   |       |       |       |      
|Santiago Vein              | 28.70  | 31.80  | 3.10              | 0.49  | 201   | NS    | NS   
|Includes                   | 31.10  | 31.80  | 0.70              | 1.54  | 272   | NS    | NS   
|Hole SG-07-06              |        |        |                   |       |       |       |      
|Santiago Vein              | 24.80  | 28.30  | 3.50              | 0.40  | 226   | NS    | NS   
|Cross Vein                 | 280.65 | 280.90 | 0.25              | 0.50  | 2,120 | 7.82  | NS   
|San Gonzalo Vein           | 367.35 | 371.5  | 3.85              | 0.10  | 11    | NS    | NS   
|Hole SG-07-07              |        |        |                   |       |       |       |      
|San Gonzalo Vein           | 247.75 | 250.35 | 2.60              | 2.85  | 351   | 1.04  | 0.66 

Hole
SG-07-08 missed the ore shoot and encountered only low gold and silver values.
For holes SG-07-09, 10 and 11 only gold results have been received to date.

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

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

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

|Includes: |        |        |        |         |        |        |       
|--------- | ------ | ------ | ------ | ------- | ------ | ------ | ------
|From      | To     | Metres | Au g/t | Ag g/t  | Cu ppm | Pb ppm | Zn ppm
|165.65    | 166.40 | 0.75   | 22.902 | 1,609.6 | 840    | 2,106  | 3,692 
|166.40    | 167.05 | 0.65   | 8.366  | 898.0   | 262    | 974    | 2,266 
|167.05    | 167.75 | 0.70   | 13.508 | 427.6   | 261    | 1,188  | 1,282 
|167.75    | 168.55 | 0.80   | 1.890  | 283.6   | 1,169  | 9,356  | 4,652 
|168.55    | 169.45 | 0.90   | 2.792  | 194.4   | 293    | 427    | 723   

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

Down
Hole Intersection Lengths 147.45 -- 153.00 m (5.55m)

27

---

1.12
  g/t gold, 189 g/t silver, 0.28% lead, 0.43% zinc.

Or

149.05
  -- 153.00 m (3.59m) 1.39 g/t gold, 230 g/t silver

544
  ppm copper, 3,211 ppm lead and 4368 zinc

|Includes: |        |        |        |        |        |        |       
|--------- | ------ | ------ | ------ | ------ | ------ | ------ | ------
|From      | To     | Metres | Au g/t | Ag g/t | Cu ppm | Pb ppm | Zn ppm
|147.45    | 148.45 | 1.00   | 0.550  | 91.5   | 3,199  | 2,205  | 2,436 
|148.45    | 149.05 | 0.60   | 0.155  | 77.9   | 326    | 724    | 7,039 
|149.05    | 149.70 | 0.65   | 1.209  | 150.8  | 192    | 1,284  | 1,670 
|149.70    | 150.70 | 1.00   | 0.778  | 500.6  | 264    | 1.779  | 3,037 
|150.70    | 151.50 | 0.80   | 3.153  | 238.9  | 1,910  | 11,000 | 10,700
|151.50    | 152.20 | 0.70   | 0.822  | 121.3  | 241    | 922    | 4,552 
|152.20    | 153.00 | 0.80   | 1.057  | 44.5   | 91     | 783    | 1,730 

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

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

At
the time of shutdown in 2001 with low commodity prices and closure of smelter,
the mill was operating at an average rate of 1,130 TPD. The concentration ratio
(weight) ranged from 2.5 to 3.5% i.e. producing 25-30 TPD of concentrate at a
20-25 g/t Au, 2-4 Kg/t Ag and 22-24% Cu. Prior to shut down the average cost per
ton milled was approximately US $16/ton and about US $7/ton for freight
treatment and refining charges from the smelter. A new mining value cut off
grade was determined to be around US $30/ton. This followed a review of the
historical production and financial figures.

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

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

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

28

---

In
December 2006, the Company contracted Peter E. Walcott & Associates to carry
out an 80 km line deep penetrating IP Survey at its Avino property in Mexico. IP
Geophysics will help identify drill targets for the upcoming years. The IP
Survey was completed in 2007. Once a final report has been received from Peter
E. Walcott & Associates, Avino is planning to conduct follow-up soil
geochemical, satellite imagery and other surveys to better define targets in the
covered areas.

During
January 2008, Avino released results of holes SG-07-32 through SG-07-40 at San
Gonzalo and ET-07-01 through ET-07-10 on the ET zone of the main Avino Vein.

Further
drill results at San Gonzalo SG-08-01, SG-08-02, SG-08-03 through SG-08-06 were
released in September and November 2008. A further eight holes ET-08-01 through
ET-08-08 on the ET zone were also released in November 2008.

In
addition, in 2008 Avino drilled seven holes on the Avino Mexicana structure, two
at La Blanca, six holes at San Jose, and four at Santa Ana, of which two holes
at Aquila Mexicana intersected significant mineralization.

Details
of the drilling results for the year ended December 31, 2008, are as follow:

SG-07-32          
(Bearing 215 - Dip 70 - Length 390.2m)

Intersection 392.50  397.75m (5.25m), 0.49 g/t gold 54 g/t
silver (0.01oz/t gold, 1.57oz/t silver).

Detailed intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm392.50
    393.20
    0.70
    Hanging wall vein
    2.1490
    0.06
    192.8
    5.62
    710
    1484
    1153393.20
    394.60
    1.40
    Strong silicif and quartz veining. San Gonzalo
      System
    0.1230
    0.004
    24.1
    0.70
    176
    393
    1081394.60
    396.20
    1.60
    
    0.1400
    0.004
    7.7
    0.22
    59
    148
    522396.20
    397.75
    1.55
    San
      Gonzalo Vein System
    0.4190
    0.01
    65.9
    0.92
    116
    528
    919


SG-07-33           (Bearing
209 - Dip 45 - Length 130.60m)

Intersection 116.15  123.60m (7.45m), 0.69 g/t gold, 127.6 g/t
silver (0.02 oz/t gold, 3.722 oz/t silver).

Detailed intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm116.15
    117.15
    1.00
    San
      Gonzalo vein
    0.283
    0.01
    264.3
    7.71
    361
    8295
    25100117.15
    118.40
    1.25
    San
      Gonzalo vein
    0.337
    0.01
    205.5
    5.99
    659
    7934
    32900118.40
    119.55
    1.15
    San
      Gonzalo vein
    0.934
    0.03
    90.4
    2.64
    475
    10000
    39300119.55
    120.50
    0.95
    San
      Gonzalo vein
    0.168
    0.005
    76.1
    2.22
    193
    2418
    7965120.50
    121.85
    1.35
    San
      Gonzalo vein
    1.996
    0.06
    126.8
    3.70
    878
    31400
    17400121.85
    122.70
    0.85
    San
      Gonzalo vein
    0.378
    0.01
    60.8
    1.77
    954
    17700
    61800122.70
    123.60
    0.90
    San
      Gonzalo vein
    0.115
    0.003
    33.8
    0.99
    192
    1495
    1573


Holes SG-07-34, 35 and 36 were drilled on the south west side
of the San Gonzalo ore zone. They define the edge of the ore zone. They
intersected only narrow low grade gold silver mineralization as follows:

29

---

SG-07-34           (Bearing
215 - Dip 45 - Length 100m)

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm161.50
    162.60
    1.10
    San
      Gonzalo vein
    0.258
    0.008
    28.0
    0.82
    60
    129
    231162.60
    163.95
    1.35
    Silicif tuff
    0.072
    0.002
    6.8
    0.20
    9
    42
    285163.95
    165.02
    1.10
    Quartz
      veining
    0.050
    0.001
    7.0
    0.20
    26
    43
    220165.05
    166.20
    1.15
    Quartz
      veining
    0.066
    0.002
    5.1
    0.15
    22
    43
    355166.20
    167.30
    1.10
    San
      Gonzalo vein
    0.058
    0.002
    19.7
    0.57
    24
    58
    822


SG-07-35          
  (Bearing 209 - Dip 45 - Length 272.15m)

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm195.40
    196.05
    0.65
    San
      Gonzalo vein
    2.254
    
    >200
    
    194
    947
    1397


SG-07-36          
(Bearing 215 - Dip 45 - Length 102.15m)

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm65.30
    65.65
    0.35
    San
      Gonzalo vein
    <0.005
    0.000
    6.0
    0.17
    13
    60
    52078.05
    78.80
    0.75
    Los
      Angeles vein
    0.030
    0.001
    12.1
    0.35
    13
    29
    42878.80
    80.45
    1.65
    Silicif tuff
    0.010
    0.000
    3.8
    0.11
    103
    95
    45680.45
    81.95
    1.50
    Los
      Angeles vein
    0.105
    0.003
    19.5
    0.57
    73
    144
    281


SG-07-37          
(Bearing 219 - Dip 53 - Length 154.35m)

Intersection 145.45  147.55 (2.10mts), 0.16 g/t gold, 146 g/t
silver (0.005 oz/t gold, 4.26 oz/t silver).

Detailed intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm145.45
    146.55
    1.10
    San
      Gonzalo vein
    0.210
    0.006
    220.7
    6.44
    104
    698
    2554146.55
    147.55
    1.00
    San
      Gonzalo vein
    0.108
    0.003
    63.6
    1.85
    68
    670
    1257


SG-07-38          
  (Bearing 221 - Dip 66.5 - Length 214.15m)

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm168.65
    170.00
    1.35
    S Gonzalo Vein. Ox-milky wh
    0.716
    0.021
    88.2
    2.57
    231
    1278
    2217qtz
      vein


SG-07-39          
(Bearing 220 - Dip 73 - Length 128.05m)

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm76.50
    77.00
    0.50
    San
      Gonzalo vein
    0.286
    0.008
    25.5
    0.74
    61
    943
    91877.00
    77.80
    0.80
    San
      Gonzalo vein
    0.192
    0.006
    66.5
    1.94
    118
    324
    35777.80
    78.60
    0.80
    San
      Gonzalo vein
    0.082
    0.002
    58.5
    1.71
    142
    1001
    1032


30

---

SG-07-40          
(Bearing 230  Dip 74  Length 516.05m)

Detailed intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm
    Pb ppm
    Zn ppm33.20
    33.70
    0.50
    Santiago vein
    5.966
    0.174
    2851.9
    83.18
    576
    748
    1558255.65
    256.75
    1.10
    Qtz veining w/chalcopyrite
    0.030
    0.001
    212.6
    6.20
    6115
    1386
    2887275.90
    276.45
    0.55
    Quartz veinlet w/sulfides
    0.059
    0.002
    390.0
    11.37
    978
    17000
    364382.90
    383.25
    0.35
    Quartz veinlet w/sulfides. Along
      core axe
    1.926
    0.056
    208.7
    6.09
    331
    270
    307500.25
    501.65
    1.40
    San Gonzalo vein
    0.075
    0.002
    14.1
    0.41
    71
    263
    833501.65
    502.45
    0.80
    San Gonzalo vein
    0.015
    0.000
    3.1
    0.09
    25
    49
    81


ET-07-01          
(Bearing 001 - Dip 69 - Length 298.6m)

Total Avino vein intersection: 216.35  293.65m (77.3m)

Significant intersection: 284.90  290.0m (5.1m), 0.055 g/t
gold, 114 g/t silver (0.002oz/t gold, 3.32oz/ton silver), 8385 ppm copper.

Detailed intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm284.90
    285.85
    0.95
    Avino vein. Silicified quartz with diss cpy-
      py-specularite
    0.068
    0.002
    201.7
    5.88
    3149285.85
    286.80
    0.95
    Avino vein. Silicified quartz with diss cpy-
      py-specularite
    0.025
    0.001
    35.4
    1.03
    969286.80
    287.00
    0.20
    Avino vein. Silicified quartz with diss cpy-
      py-specularite
    0.226
    0.007
    808.8
    23.59
    100200287.00
    288.50
    1.50
    Avino vein. Silicified quartz with diss cpy-
      py-specularite
    0.045
    0.001
    27.3
    0.80
    2540288.50
    290.00
    1.50
    Avino vein. Silicified quartz with diss cpy-
      py-specularite
    0.052
    0.002
    101.6
    2.96
    10000


ET-07-02          
(Bearing 358 - Dip 75 - Length 311.9m)

Intersected Avino vein: 243.45  300.7m (57.25m)

No significant assays.

ET-07-03           (Bearing
336  Dip 71  Length 349.5m)

Intersected Avino vein: 280.75  331.75m (51.0m)

Significant intersections:

From
      To
      Metres
      Description
      Au g/t
      Au oz/t
      Ag g/t
      Ag oz/t
      Cu ppm280.75
      282.25
      1.50
      Avino vein. Oxidized
        material
      7.680
      0.224
      121.9
      3.56
      6048282.25
      283.75
      1.50
      Avino vein. Oxidized
        material
      6.034
      0.176
      196.3
      5.73
      5034283.75
      285.25
      1.50
      Avino vein. Oxidized
        material
      1.692
      0.049
      69.9
      2.04
      10400285.25
      286.75
      1.50
      Avino vein. Oxidized
        material
      13.988
      0.408
      295.3
      8.61
      19600


31

---

286.75
      288.25
      1.50
      Avino vein. Oxidized material
      4.731
      0.138
      104.7
      3.05
      16100288.25
      289.75
      1.50
      Avino vein. Oxidized material
      2.158
      0.063
      103.7
      3.02
      3948289.75
      291.25
      1.50
      Avino vein. Oxidized material
      0.158
      0.005
      31.5
      0.92
      3789291.25
      292.75
      1.50
      Avino vein. Oxidized material
      2.411
      0.070
      60.0
      1.75
      2683292.75
      294.25
      1.50
      Avino vein. Oxidized material
      2.733
      0.080
      27.5
      0.80
      2793294.25
      295.75
      1.50
      Avino vein. Oxidized material
      0.548
      0.016
      89.6
      2.61
      7268295.75
      297.25
      1.50
      Avino vein. Silicified quartz with diss cpy-py- specularite.
      3.086
      0.090
      161.8
      4.72
      5934297.25
      298.75
      1.50
      Avino vein. Silicified quartz with diss cpy-py- specularite.
      7.954
      0.232
      75.7
      2.21
      1476298.75
      300.25
      1.50
      Avino vein. Silicified quartz with diss cpy-py- specularite.
      2.265
      0.066
      97.0
      2.83
      10500300.25
      301.75
      1.50
      Avino vein. Silicified quartz with diss cpy-py- specularite.
      1.057
      0.031
      60.4
      1.76
      1486301.75
      303.25
      1.50
      Avino vein. Silicified quartz with diss cpy-py- specularite.
      1.911
      0.056
      42.0
      1.22
      3258


ET-07-04           (Bearing
331  Dip 56  Length 318.7m)

Intersected Avino vein: 271.45  304.45m (33.0m)

Significant intersections:

From
      To
      Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm271.45
      272.95
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.155
    0.005
    44.1
    1.29
    3618272.95
      274.45
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.397
    0.012
    106.1
    3.09
    2842274.45
      275.95
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    1.080
    0.031
    76.1
    2.22
    3862275.95
      277.45
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    1.314
    0.038
    126.9
    3.70
    4010277.45
      278.95
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.874
    0.025
    53.0
    1.55
    381278.95
      280.45
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.534
    0.016
    61.4
    1.79
    675280.45
      281.95
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.436
    0.013
    97.3
    2.84
    2649287.95
      289.45
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.250
    0.007
    63.5
    1.85
    7555289.45
      290.95
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.101
    0.003
    31.4
    0.92
    5156290.95
      292.45
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    1.115
    0.033
    138.6
    4.04
    3558292.45
      293.95
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.151
    0.004
    86.3
    2.52
    4162293.95
      295.45
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.161
    0.005
    34.9
    1.02
    3521295.45
      296.95
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.568
    0.017
    41.6
    1.21
    5047296.95
      298.45
      1.50
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.115
    0.003
    29.1
    0.85
    10000298.45
      300.10
      1.65
    Avino vein. Wh qtz veining w/
      fine grain diss cpy-py
    0.080
    0.002
    29.8
    0.87
    8408


ET-07-05           (Bearing
333  Dip 66  Length 351.5m)

Intersected Avino vein: 292.75  342.45m (49.7m)

32

---

Significant intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm301.95
    303.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    1.152
    0.034
    83.0
    2.42
    1971303.45
    304.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    1.483
    0.043
    26.7
    0.78
    683304.95
    306.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    2.119
    0.062
    36.9
    1.08
    2030312.45
    312.95
    0.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    1.752
    0.051
    10.7
    0.31
    533312.95
    315.45
    2.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    1.015
    0.030
    119.7
    3.49
    1268315.45
    316.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.195
    0.006
    204.2
    5.96
    8565316.95
    318.45
    1.50
    Avino vein. Wh qtz stkwk-veining
      w/diss f.g. cpy+py+spec
    0.075
    0.002
    123.6
    3.60
    2212319.95
    321.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.155
    0.005
    86.2
    2.51
    20300321.45
    322.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.120
    0.003
    30.4
    0.89
    13000322.95
    324.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.115
    0.003
    45.2
    1.32
    15400324.45
    325.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.075
    0.002
    40.2
    1.17
    18400325.95
    327.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.070
    0.002
    27.5
    0.80
    10200327.45
    328.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.050
    0.001
    48.1
    1.40
    17500328.95
    330.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.053
    0.002
    38.2
    1.11
    16700330.45
    331.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.095
    0.003
    61.9
    1.81
    20200331.95
    333.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.144
    0.004
    75.2
    2.19
    18900333.45
    334.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.130
    0.004
    45.7
    1.33
    15800337.95
    339.45
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.328
    0.010
    69.0
    2.01
    12200339.45
    340.95
    1.50
    Avino vein. Wh qtz stkwk-veining w/diss f.g.
      cpy+py+spec
    0.236
    0.007
    41.0
    1.20
    12200


ET-07-06          
(Bearing 336  Dip 55  Length 320.05m)

Intersected Avino vein: 289.00  309.6m (19.6m)

Significant intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm289.00
    290.50
    1.50
    Avino vein. Wh qtz stockwork
      veining textures wdiss py-cpy
    0.950
    0.028
    228.9
    6.68
    23200298.00
    299.50
    1.50
    Avino vein. Wh qtz stockwork
      veining textures wdiss py-cpy
    0.165
    0.005
    72.3
    2.11
    14800299.50
    301.00
    1.50
    Avino vein. Wh qtz stockwork
      veining textures wdiss py-cpy
    0.485
    0.014
    54.6
    1.59
    8401301.00
    302.50
    1.50
    Avino vein. Wh qtz stockwork
      veining textures wdiss py-cpy
    0.090
    0.003
    40.8
    1.19
    11500302.50
    304.00
    1.50
    Avino vein. Wh qtz stockwork veining textures
    0.147
    0.004
    55.6
    1.62
    14400


33

---

wdiss py-cpy304.00
      305.50
      1.50
    Avino vein. Wh qtz stockwork
      veining textures wdiss py-cpy
      0.093
      0.003
      55.8
      1.63
      8321305.50
      307.00
      1.50
    Avino vein. Wh qtz stockwork
      veining textures wdiss py-cpy
      1.590
      0.046
      90.4
      2.64
      15100307.00
      308.60
      1.60
    Avino vein. Wh qtz stockwork
      veining textures wdiss py-cpy
      0.150
      0.004
      73.8
      2.15
      8729308.60
      310.10
      1.50
    Intrusive rock. Wh qtz veining w/cpy
      0.040
      0.001
      54.6
      1.59
      5962310.10
      311.60
      1.50
    Intrusive rock. Wh qtz veining w/cpy
      0.075
      0.002
      98.0
      2.86
      6217311.60
      313.10
      1.50
    Intrusive rock. Wh qtz veining w/cpy
      0.075
      0.002
      81.9
      2.39
      10800313.10
      314.60
      1.50
    Intrusive rock. Wh qtz veining w/cpy
      0.040
      0.001
      97.9
      2.86
      7765


ET-07-07           (Bearing
330  Dip 59  Length 304.85m)

Intersected Avino vein: 272.30  295.15m (22.85m), 0.11 g/t
gold, 115 g/t silver (0.003 oz/t gold 3.35 oz/t silver), 13810 ppm copper

Significant intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm272.30
    273.80
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.615
    0.018
    80.6
    2.35
    2199273.80
    275.30
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.148
    0.004
    160.9
    4.69
    20500275.30
    276.80
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.118
    0.003
    203.5
    5.94
    19700276.80
    278.30
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.280
    0.008
    172.8
    5.04
    17800278.30
    279.80
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.368
    0.011
    441.4
    12.87
    24600279.80
    281.30
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.220
    0.006
    327.0
    9.54
    12600281.30
    282.80
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.081
    0.002
    110.8
    3.23
    3002282.80
    284.30
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.065
    0.002
    184.6
    5.38
    3317284.30
    285.80
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.070
    0.002
    89.2
    2.60
    8786285.80
    287.30
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.070
    0.002
    209.3
    6.10
    54400287.30
    288.80
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.035
    0.001
    32.8
    0.96
    13200288.80
    290.30
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.047
    0.001
    76.1
    2.22
    29300290.30
    291.80
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.126
    0.004
    339.7
    9.91
    44300291.80
    293.30
    1.50
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.060
    0.002
    20.8
    0.61
    6361293.30
    295.15
    1.85
    Avino vein. Wh qtz veining
      w/moderate diss cpy and strong py.
    0.202
    0.006
    166.9
    4.87
    55500


ET-07-08          
(Bearing 346  Dip 69  Length 399.7m)

Intersected Avino vein: 346.65  366.7m (20.05m)

Significant intersections:

From
      To
      Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm


34

---

355.85
      357.35
      1.50
      Avino vein. Moderate diss cpy-py
      0.111
      0.003
      257.5
      7.51
      6959357.35
      359.15
      1.80
      Avino vein. Moderate diss cpy-py
      0.125
      0.004
      170.0
      4.96
      9341


ET-07-09           (Bearing
336  Dip 62  Length 328.6m)

Intersected Avino vein: 272.80  319.10m (46.3m)

Significant intersections:

From
    To
    Metres
    Description
    Au g/t
    Au oz/t
    Ag g/t
    Ag oz/t
    Cu ppm290.80
    292.30
    1.50
    Avino vein with massive chalcopyrite
    0.040
    0.001
    101.9
    2.97
    12100292.30
    293.80
    1.50
    Avino vein with massive chalcopyrite
    0.160
    0.005
    23.7
    0.69
    11500295.30
    296.80
    1.50
    Avino vein with massive chalcopyrite
    0.146
    0.004
    32.3
    0.94
    11200299.80
    301.30
    1.50
    Avino vein with massive chalcopyrite
    0.070
    0.002
    51.2
    1.49
    6327301.30
    302.80
    1.50
    Avino vein with massive chalcopyrite
    0.360
    0.010
    40.4
    1.18
    14600302.80
    304.30
    1.50
    Avino vein with massive chalcopyrite
    0.015
    0.000
    18.1
    0.53
    8029304.30
    305.80
    1.50
    Avino vein with massive chalcopyrite
    0.020
    0.001
    28.2
    0.82
    8475


ET-07-10           (Bearing
336  Dip 63  Length 308.7m)

Intersected Avino vein: 243.80  299.10m (55.3m)

Significant intersections:

From
    To
    Metres
    Description
    Au g/t
    **Au** oz/t
    Ag g/t
    **Ag** oz/t
    Cu ppm257.30
    258.80
    1.50
    Avino quartz vein with sulphides
    0.160
    0.005
    85.3
    2.49
    15700258.80
    260.30
    1.50
    Avino quartz vein with sulphides
    0.080
    0.002
    86.6
    2.53
    23400260.30
    261.80
    1.50
    Avino quartz vein with sulphides
    0.125
    0.004
    27.7
    0.81
    14100261.80
    263.30
    1.50
    Avino quartz vein with sulphides
    0.101
    0.003
    21.8
    0.64
    15400263.30
    264.80
    1.50
    Avino quartz vein with sulphides
    0.098
    0.003
    20.3
    0.59
    13500266.30
    267.80
    1.50
    Avino quartz vein with sulphides
    0.574
    0.017
    43.4
    1.27
    6613267.80
    269.30
    1.50
    Avino quartz vein with sulphides
    0.457
    0.013
    39.8
    1.16
    4211269.30
    270.80
    1.50
    Avino quartz vein with sulphides
    0.089
    0.003
    19.3
    0.56
    15200282.80
    284.30
    1.50
    Avino quartz vein with sulphides
    0.020
    0.001
    9.3
    0.27
    16000284.30
    285.80
    1.50
    Avino quartz vein with sulphides
    0.010
    0.000
    10.2
    0.30
    19300285.80
    287.30
    1.50
    Avino quartz vein with sulphides
    0.035
    0.001
    27.0
    0.79
    31600287.30
    288.80
    1.50
    Avino quartz vein with sulphides
    0.070
    0.002
    37.4
    1.09
    21500288.80
    290.30
    1.50
    Avino quartz vein with sulphides
    0.049
    0.001
    27.1
    0.79
    34200290.30
    291.80
    1.50
    Avino quartz vein with sulphides
    0.065
    0.002
    51.3
    1.50
    72600291.80
    293.30
    1.50
    Avino quartz vein with sulphides
    0.020
    0.001
    14.8
    0.43
    33300293.30
    294.80
    1.50
    Avino quartz vein with sulphides
    0.335
    0.010
    28.8
    0.84
    15000294.80
    295.80
    1.00
    Avino quartz vein with sulphides
    0.035
    0.001
    23.2
    0.68
    17200295.80
    297.30
    1.50
    Avino quartz vein with sulphides
    1.310
    0.038
    37.9
    1.11
    16100297.30
    299.10
    1.80
    Avino quartz vein with sulphides
    0.510
    0.015
    51.5
    1.50
    7570


Hole SG-08-01 on the San Gonzalo vein intersected a 2.75 -metre
zone 1.13 g/t gold and 155 g/t silver of gold and silver mineralization with the
following values:

SG-08-01

From (m)
    To (m)
    Length (m)
    Au (g/t)
    Ag (g/t)
    Cu (ppm)
    Pb (ppm)
    Zn (ppm)143.05
    144.40
    1.35
    1.330
    168.6
    309
    530
    3598144.40
    145.80
    1.40
    0.930
    142.1
    131
    560
    1540


35

---

Hole SG-08-02 intersected two zones of mineralization. The
first zone, located above the San Gonzalo vein in the hanging wall, measured
1.60 metres grading 1.72 g/t gold and 704 g/t silver. The second zone, located
within the vein, measured 3.0 metres grading 10.28 g/t gold and 545 g/t silver.
Intersection and grade details were as follows:

SG-08-02

From (m)
    To (m)
    Length (m)
    Au (g/t)
    Ag (g/t)
    Cu (ppm)
    Pb (ppm)
    Zn (ppm)257.50
    258.05
    .55
    .420
    150.2
    318
    2832
    5393258.05
    258.70
    .65
    3.840
    1564.4
    264
    13100
    13900258.70
    259.10
    .40
    0.075
    68.1
    79
    266
    502263.05
    263.75
    .70
    10.765
    1275.6
    7394
    106000
    146000263.75
    263.95
    .20
    0.115
    62.3
    364
    4916
    31000263.95
    264.70
    .75
    2.606
    587.4
    4327
    76200
    200000264.70
    265.30
    .60
    7.337
    224.1
    2363
    146000
    355000264.30
    266.05
    .75
    22.560
    204.2
    917
    80000
    126000


SG-08-02 was drilled to explore a gap between previous holes
SG-07-14 (5.40 m @ 1.52 g/t gold and 774 g/t silver) and hole SG-07-22 (2.26 m.
@ 1.497 g/t gold 152g/t silver).

Aguila Mexicana: Seven holes  AM-08-01 thru 07 Hole
AM-08-02 intersected 5.05 metres @ 0.49 g/t gold 75.38 g/t silver.

AM-08-02 Details

From (m)
    To (m)
    Length (m)
    Au (g/t)
    Ag (g/t)
    Cu (ppm)
    Pb (ppm)
    Zn (ppm)195.05
    195.90
    .85
    .221
    189.4
    155
    238
    438195.90
    196.80
    .90
    .100
    19.1
    139
    155
    384196.80
    197.90
    1.10
    .245
    82,6
    738
    14400
    34000197.90
    199.10
    1.20
    .905
    42.1
    467
    13800
    46500199.10
    200.10
    1.00
    1.046
    77.1
    1552
    3977


Hole AM-08-04 intersected 3.30 metres grading 0.34 g/t gold and
151 g/t silver.

AM-08-04 Details:

From (m)
    To (m)
    Length (m)
    Au (g/t)
    Ag (g/t)
    Cu (ppm)
    Pb (ppm)
    Zn (ppm)205.10
    206.15
    1.05
    0.309
    85.4
    1092
    4672
    4835206.15
    207.15
    1.00
    0.259
    132.7
    3278
    6780
    1116207.15
    207.80
    .65
    0.600
    277.4
    1017
    1979
    1020207.80
    208.40
    .60
    0.243
    159.4
    693
    786
    693


AM-08-02 AND AM-08-04 generated the first good drill values
from the Aguila Mexicana zone, and they represent viable targets for future
exploration.

Hole SG-08-03 intersected San Gonzalo vein 322.20 -325.7m
(3.7m) 0.41 g/t gold 119 g/t silver which includes

36

---

322.00 -323.70 m (1.7m) 0.2 g/t gold 74.7 g/t silver and 323.70
 325.7m (2.0m) 0.58 g/t gold 156 g/t silver.

Detailed intersections:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn321.40
      322.00
      0.60
      Andesite volcanic with quartz veins
      0.016
      1.6
      33
      126
      423322.00
      322.85
      0.65
      0.215
      74.1
      409
      11500
      2725322.85
      323.70
      0.85
      0.195
      75.2
      389
      2665
      3405323.70
      324.10
      0.40
      0.109
      221.0
      3668
      65000
      3569324.10
      324.90
      0.80
      San Gonzalo vein with quartz breccia
      0.925
      55.0
      264
      6449
      3610324.90
      325.70
      0.80
      0.457
      223.5
      729
      15500
      4012325.70
      327.00
      1.30
      0.288
      31.8
      483
      2241
      2408


Hole SG-08-04 intersected San Gonzalo vein 261.25 -264.6m
(3.35m) 0.5 g/t gold 59 g/t silver.

Detailed intersections as follows:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn261.25
      261.75
      0.50
      San Gonzalo Vein
      0.802
      81.0
      145
      754
      1251261.75
      262.75
      1.00
      0.331
      61.4
      234
      1014
      2002262.75
      263.15
      0.40
      0.040
      11.2
      39
      109
      353263.15
      263.70
      0.55
      0.990
      85.0
      119
      396
      794263.70
      264.60
      0.90
      0.424
      49.7
      208
      440
      702


Hole SG-08-05 did not intersect the San Gonzalo vein but hit a
breccia zone which may be part of the vein system. Values were low:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn437.75
      438.50
      0.75
      Breccia Zone
      0.030
      0.1
      5
      33
      32438.50
      438.90
      0.40
      <0.005
      <0.1
      6
      22
      76438.90
      439.55
      0.65
      0.015
      <0.1
      7
      18
      65439.55
      440.35
      0.80
      0.010
      <0.1
      8
      14
      30


Hole SG-08-06 intersected San Gonzalo 214.05  219.70m (5.65m)
0.88 g/t gold, 235 g/t silver.

Details as follows:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn214.05
      214.85
      0.80
      San Gonzalo vein with Sulphide 
          Minerals
      0.729
      204.0
      2944
      21400
      17600214.85
      215.95
      1.10
      0.523
      95.0
      1189
      5264
      6417215.95
      216.80
      0.65
      0.335
      47.5
      398
      1486
      2918216.80
      218.00
      1.20
      0.360
      87.3
      1960
      5342
      7772218.00
      218.85
      0.85
      3.228
      758.9
      3731
      18500
      19000218.85
      219.70
      0.85
      0.402
      316.1
      7094
      17500
      14800


37

---

Hole ET-08-01 drilled on the eastern side of the ET shoot below
level 9. The hole intersected the Avino vein but gold and silver values are low.

Avino vein 196.90  213.40m (16.5m) .

Details:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn196.90
      198.40
      1.50
      Avino Vein
      0.322
      3.6
      259
      149
      719198.40
      199.90
      1.50
      0.020
      7.8
      97
      68
      554199.90
      201.40
      1.50
      0.054
      5.2
      331
      180
      665201.40
      202.90
      1.50
      <0.005
      2.4
      306
      45
      2079202.90
      204.40
      1.50
      0.090
      1.6
      271
      54
      5950204.40
      205.90
      1.50
      0.005
      0.6
      456
      25
      2784205.90
      207.40
      1.50
      <0.005
      0.8
      168
      16
      4381207.40
      208.90
      1.50
      <0.005
      0.8
      229
      18
      2361208.90
      210.40
      1.50
      0.040
      1.3
      178
      34
      3494210.40
      211.90
      1.50
      0.015
      0.3
      320
      23
      2502211.90
      213.40
      1.50
      0.005
      3.0
      621
      29
      3957


Hole ET-08-02 drilled on west side of ET shoot 50 m west of
workings on level 10.

The hole intersected gold values in the hanging wall of the
main Avino vein, 189.75  194.25m (4.50m) 2.66 g/t gold 19.7 g/t silver. The
overall vein was intersected 189.75  213.50m (23.75m) .

Detailed values as follows:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn189.75
      191.25
      1.50
      Avino Vein
      2.635
      19.4
      692
      724
      817191.25
      192.75
      1.50
      3.225
      12.0
      113
      95
      612192.75
      194.25
      1.50
      2.080
      27.7
      224
      125
      595194.25
      195.75
      1.50
      <0.005
      40.5
      1734
      454
      847195.75
      197.25
      1.50
      <0.005
      3.4
      28
      184
      1074197.25
      198.75
      1.50
      <0.005
      4.0
      42
      168
      690198.75
      200.25
      1.50
      <0.005
      4.9
      201
      352
      1042200.25
      201.75
      1.50
      <0.005
      10.6
      276
      162
      670201.75
      203.25
      1.50
      0.035
      20.3
      68
      320
      1091203.25
      204.75
      1.50
      <0.005
      12.7
      228
      413
      871204.75
      206.25
      1.50
      <0.005
      32.2
      751
      317
      530206.25
      207.75
      1.50
      <0.005
      8.5
      1200
      83
      410207.75
      209.25
      1.50
      <0.005
      10.3
      957
      134
      660209.25
      210.75
      1.50
      <0.005
      25.5
      1180
      185
      522210.75
      212.25
      1.50
      <0.005
      22.9
      2220
      423
      3806212.25
      213.50
      1.25
      <0.005
      36.9
      400
      473
      2021


Hole ET-08-03 Also drilled on the west side of ET workings
approximately 50m beyond end of level 11 1⁄2. Intersected a mineralized breccia in
the hanging wall rock 80.40  84.50m (4.1m) 3.82 g/t gold, 103 g/t silver. The
main vein was intersected 214.55  257.85m (43.3m) 0.52 g/t gold, 43 g/t silver.

38

---

Detailed intersections as follows:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn79.75
      80.40
      0.65
      Breccia Zone
      0.020
      14.7
      409
      40
      208080.40
      81.90
      1.50
      1.396
      48.0
      2641
      148
      43581.90
      83.20
      1.30
      6.720
      174.4
      2456
      327
      2183.20
      84.50
      1.30
      3.703
      96.4
      1815
      818
      94214.55
      216.05
      1.50
      Main Avino Vein
      0.135
      21.2
      315
      241
      217216.05
      217.55
      1.50
      0.109
      40.6
      257
      618
      318217.55
      219.05
      1.50
      3.017
      113.2
      5264
      177
      123219.05
      220.55
      1.50
      0.096
      7.9
      1528
      298
      330220.55
      222.05
      1.50
      0.025
      8.8
      405
      253
      275222.05
      223.66
      1.50
      0.128
      11.9
      520
      687
      391223.56
      225.05
      1.50
      0.049
      9.6
      1592
      5318
      570225.05
      226.55
      1.50
      0.105
      8.4
      631
      331
      750226.55
      228.05
      1.50
      0.084
      21.1
      432
      167
      487226.05
      229.55
      1.50
      0.100
      21.7
      517
      1910
      584229.55
      231.05
      1.50
      0.723
      82.3
      484
      4282
      3006231.05
      232.55
      1.50
      1.310
      94.9
      3753
      565
      674From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn232.55
      234.05
      1.50
      Main Avino Vein
      1.890
      58.4
      574
      474
      619234.05
      235.55
      1.50
      1.658
      69.1
      1117
      412
      687235.55
      237.05
      1.50
      2.756
      53.0
      2590
      396
      711237.05
      238.55
      1.50
      1.065
      28.7
      1816
      280
      410238.55
      240.05
      1.50
      0.219
      66.5
      1263
      916
      416240.05
      241.55
      1.50
      0.185
      45.3
      369
      191
      424241.55
      243.05
      1.50
      0.167
      42.0
      1220
      482
      438243.05
      244.55
      1.50
      0.382
      48.1
      8097
      525
      2111244.55
      246.05
      1.50
      0.648
      60.7
      1638
      766
      716246.05
      247.55
      1.50
      0.506
      49.7
      1311
      549
      415247.55
      249.05
      1.50
      0.125
      39.7
      1343
      911
      475249.05
      250.55
      1.50
      0.160
      78.1
      3430
      790
      737250.55
      252.05
      1.50
      0.135
      92.9
      3617
      551
      506252.05
      253.55
      1.50
      0.130
      44.4
      5739
      351
      603253.55
      255.05
      1.50
      0.070
      42.6
      3395
      796
      357255.05
      256.55
      1.50
      0.045
      30.0
      2971
      365
      374256.55
      257.85
      1.30
      0.025
      31.4
      5772
      1510
      686


Hole ET-08-04 Hit the Avino vein 75m below the lowest working
level 12 of the mine, it intersected the Avino vein from 321.00 - 341.10m
(20.1m) which includes 327.00  330.00m 3m 1.17 g/t gold, 133 g/t silver.

337.50  341.10m (3.6m) 0.04 g/t gold, 128 g/t silver and
327.00  341.10m (14.1m) 81 g/t silver, 0.726 copper.

39

---

Detailed intersections:

From (m)
      To (m)
      Length (m)
      **Description**
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn321.00
      322.50
      1.50
      Main Avino Vein
      0.501
      34.2
      2378
      264
      426322.50
      324.00
      1.50
      1.146
      71.0
      3147
      421
      496324.00
      325.50
      1.50
      0.904
      55.2
      4652
      230
      288325.50
      327.00
      1.50
      0.262
      54.9
      1395
      230
      236327.00
      328.50
      1.50
      2.174
      165.0
      8408
      509
      286328.50
      330.00
      1.50
      0.173
      101.9
      7194
      8582
      3727330.00
      331.50
      1.50
      0.053
      56.0
      4926
      5923
      18300331.50
      333.00
      1.50
      0.095
      54.9
      4081
      2559
      561333.00
      334.50
      1.50
      0.080
      23.1
      1089
      1199
      301334.50
      336.00
      1.50
      0.052
      56.6
      11000
      536
      597336.00
      337.50
      1.50
      0.030
      49.7
      10900
      170
      618337.50
      339.00
      1.50
      0.032
      156.6
      14700
      395
      853339.00
      340.00
      1.00
      0.025
      48.4
      6149
      174
      595340.00
      341.10
      1.10
      0.064
      161.8
      8252
      2170
      1765


Hole ET-08-05 Drilled approximately 80m east of hole
ET-08-04 intersected the Avino vein 293.35  302.70 (9.35m) . It is well off the
ET shoot and did not intersect significant gold or silver values but copper
values are of interest:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn290.95
      292.30
      1.35
      Main Avino Vein
      0.172
      16.7
      533
      3964
      643292.30
      293.35
      1.05
      0.096
      0.5
      581
      5078
      2842293.35
      294.85
      1.50
      0.379
      30.8
      2116
      8000
      559294.85
      296.35
      1.50
      0.050
      12.3
      2654
      7063
      582296.35
      297.60
      1.25
      0.568
      67.3
      3564
      3688
      164297.60
      299.10
      1.50
      0.062
      42.4
      5360
      1771
      688299.10
      300.60
      1.50
      0.020
      31.8
      14900
      896
      3473300.60
      301.70
      1.10
      0.060
      34.4
      11300
      282
      1743301.70
      302.70
      1.00
      0.130
      44.2
      10000
      469
      1265


Hole ET-08-06 Intersects the Avino vein 60m east of final
working face on level 11 1⁄2. The Avino vein is wide: 237.60  288.70m (51.10m)
but gold and silver values are low although some high copper grades were
intersected on the foot wall side of the vein:

From (m)
      To (m)
      Length (m)
      Description
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn237.60
      238.25
      0.65
      Main Avino Vein
      0.140
      74.2
      3526
      7260
      909238.25
      239.75
      1.50
      0.065
      22.4
      2260
      344
      383239.75
      241.25
      1.50
      0.020
      8.7
      883
      43
      528241.25
      242.75
      1.50
      0.115
      10.1
      2249
      374
      1981242.75
      244.25
      1.50
      0.045
      8.7
      2641
      40
      631244.25
      245.75
      1.50
      0.105
      14.4
      3472
      87
      651245.75
      247.25
      1.50
      0.072
      17.1
      4780
      41
      876247.25
      248.75
      1.50
      0.053
      20.5
      6107
      100
      950248.75
      250.25
      1.50
      0.100
      11.0
      4619
      191
      1044250.25
      251.75
      1.50
      0.120
      10.4
      4869
      282
      784


40

---

251.75
    253.25
    1.50
    
      0.035
      4.0
      1261
      45
      662253.25
    254.75
    1.50
      0.163
      14.9
      2553
      78
      835254.75
    256.25
    1.50
      0.045
      25.4
      6483
      95
      734256.25
    257.75
    1.50
      0.015
      12.0
      5544
      40
      871257.75
    259.25
    1.50
      0.025
      39.8
      5758
      217
      521259.25
    260.75
    1.50
      0.025
      20.6
      6136
      89
      465260.75
    262.25
    1.50
      0.015
      10.5
      3202
      74
      327262.25
    263.75
    1.50
      0.059
      24.0
      3670
      105
      533263.75
    265.25
    1.50
      0.049
      28.7
      3252
      183
      718265.25
    266.75
    1.50
      0.053
      14.2
      6129
      112
      584266.75
    268.25
    1.50
      0.156
      47.3
      7192
      217
      399268.25
    269.75
    1.50
      0.102
      19.8
      3342
      125
      326269.75
    271.25
    1.50
      0.030
      9.1
      4101
      38
      414271.25
    272.75
    1.50
      0.010
      9.3
      2611
      94
      455272.75
    274.25
    1.50
      0.020
      7.9
      3355
      41
      391274.25
    275.75
    1.50
      0.020
      16.5
      4405
      58
      496275.75
    277.25
    1.50
      0.076
      82.7
      4570
      422
      979277.25
    278.75
    1.50
      0.084
      58.4
      5545
      956
      593278.75
    280.25
    1.50
      0.010
      16.6
      5749
      74
      659280.25
    281.75
    1.50
      0.020
      18.7
      4592
      68
      575281.75
    283.25
    1.50
      0.015
      16.1
      4219
      74
      651283.25
    284.75
    1.50
      0.038
      23.6
      3526
      7260
      909284.75
    286.25
    1.50
    Main Avino Vein
      <0.005
      6.7
      2841
      22
      1225286.25
    287.75
    1.50
      0.092
      49.4
      25700
      44
      2712287.75
    288.70
    0.95
      0.105
      62.5
      27200
      57
      2669


Hole ET-08-08 Drilled approximately 100m east of the ET-08-01
it intersected the main Avino vein 192.95  203.25m (10.3m) but gold and silver
values were generally low:

From (m)
      To (m)
      Length (m)
      **Description**
      g/t
      ppmAu
      Ag
      Cu
      Pb
      Zn192.95
      194.45
      1.50
      Main Avino Vein
      1.456
      4.6
      318
      57
      508194.45
      195.95
      1.50
      0.431
      4.4
      329
      256
      502195.95
      197.10
      1.15
      0.325
      13.5
      1523
      2446
      3813197.10
      198.60
      1.50
      0.100
      2.5
      133
      355
      1688198.60
      199.70
      1.10
      0.048
      4.4
      101
      36
      1206199.70
      200.80
      1.10
      0.046
      5.7
      69
      72
      896200.80
      201.75
      0.95
      0.203
      27.2
      120
      301
      627201.75
      203.25
      1.50
      0.030
      6.5
      431
      43
      1048


*Proposed
Work Program.*As a result of the numerous ore-grade intersections
encountered at San Gonzalo, a NI 43-101-compliant resource calculation was
underway for this zone. Avino retained David Gunning, P. Eng., a Qualified
Person under NI 43-101, to review all results. Avino also plans to extract and
process a 10,000-tonne bulk sample from San Gonzalo. This program will provide
concentrate for testing at various smelters. In preparation for the sampling,
Avino will re-commission a 250-ton circuit at the mill to facilitate the
processing of lead-silver ore from San Gonzalo.

Currently,
Avino is planning is to explore new areas of the property, expand upon
discoveries made in 2008 and follow up on the 2008 mapping and sampling. At
present, trenching and 9,000 metres (29,520 feet) of new drilling have been
proposed for up to 15 areas of the property. The proposals are now under review
by management.

41

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Applications
for permits to the various regulatory agencies were submitted early in the year.
Positive response was obtained in each case and the Company is in a position to
proceed with the bulk sampling program once the reclamation plan has been
submitted and approved. Cost of the program is currently being finalized and the
Company is also working on completing the terms for the buyer of its bulk sample
concentrate.

Refurbishing
work in the mill has already been done in anticipation that the bulk sample
program will proceed. This work includes the reclaim water system, the fine ore
bin, its discharge chutes and the take away conveyor. The process water tank has
been cleaned and ready for service. The ball mill has been serviced and ready
for dynamic testing when the power upgrade has been performed. Mill discharge
pumps, cyclone and a bank of flotation cells have been refurbished. Additional
work is required in the dewatering section of the plant. The plan is to
thickened and vacuum filter the concentrate to produce a concentrate with no
more than 12% moisture for bulk shipping in dump trucks. Mining of the bulk
sample will be contracted out and a crushing circuit is still required. The
Company is looking to purchase a crusher rather than contract out.

We
are planning to acquire and install two crushers to complete the processing
circuit. We will then conduct a bulk sample, which will allow us to fine-tune
the recovery circuit. Metallurgical testing of sample material from San Gonzalo
produced recoveries of up to 90% of contained silver. The bulk sample will also
help confirm mineral grades obtained through diamond drilling. We are also
investigating potential buyers for the San Gonzalo concentrate, and samples have
been shipped to various smelters for testing. We hope to negotiate a contract
for concentrate purchase in 2009.

We
  received all permits needed to mine the San Gonzalo zone. A Reclamation Plan
  has been requested and stipulated in the Environmental Permit granted by SEMARNAT
  (Mexicos federal department responsible for environmental policy). The
  reclamation plan is now being developed for submission.

Our
plan for 2009 is to explore new areas of the Avino property, expand upon
discoveries made in 2008 and follow up on the 2008 mapping and sampling. At
present, trenching and 9,000 metres (29,520 feet) of new drilling have been
proposed for up to 15 areas of the Avino property. The proposals are now under
review by management.

Item 5. Operating and Financial Review and Prospects

The
following discussion and analysis of the operations, results and financial
position of the Company for the year ended December 31, 2008, the eleven month
period ended December 31, 2007 and the year ended January 31, 2007 should be
read in conjunction with the Companys Consolidated Financial Statements and the
notes thereto.

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. In addition, US GAAP requires investments available for sale to be
recorded at fair market value with unrealized gains or losses recognized as part
of comprehensive income (loss) unless a decline in value is considered to be
other than temporary. Effective for fiscal December 31, 2007 the Canadian GAAP
treatment is the same, however in fiscal January 31, 2007 such investments were
recorded in accordance with Canadian GAAP at the lower of cost and market;
long-term investments in marketable securities are written down to market when
impairment is considered other than temporary, in which case the written-down
value becomes the new cost base, and the impairment is charged to operations.
See Note 23 to the financial statements which sets out a reconciliation between
Canadian and US GAAP.

42

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A. Operating Results

Results of Operations

The
results of operations are based on a twelve month period for the fiscal year
ended December 31, 2008, an eleven month period for the fiscal year ended
December 31, 2007, and a twelve month period for the fiscal year ended January
31, 2007. (Refer to Note 2 of the Companys Consolidated Financial Statements)

Twelve months ended December 31, 2008 compared with the
eleven months ended December 31, 2007

Operating and administrative expenses

General
and administrative expenses totaled $1,575,913 for the twelve month period ended
December 31, 2008 compared with $868,527 for the eleven month period ended
December 31, 2007, an increase of $707,386. The significant increases were
$585,800 in stock based compensation and $213,652 related to a write down of the
Mexican sales tax receivable with smaller increases in amortization, management
fees, regulatory fees and salaries by $823, $8,000, $4,646 and $35,744,
respectively. These increases were offset by decreases of $9,813 in general
exploration, $20,490 in office and miscellaneous, $17,256 in professional fees,
$70,000 in shareholder and investor relations and $23,720 in travel and
promotions. Shareholder and investor relations is lower due to expense related
to granting of stock options to investor relations service providers in 2007.

The
stock based compensation was higher due to stock options being granted during
the year where no options were granted in the prior year. During the year, the
Company determined that an allowance should be established for the Mexican
Value-Added Tax (VAT) in the amount of $213,652. However since the end of the
year, the Company has collected in excess of $250,000 and is actively continuing
to apply for the refunds. As mentioned above, smaller increases are attributable
to a twelve month period in the current financial year as compared to an eleven
month period in the prior financial year.

Loss for the year

Loss
for the year was $1,538,876 compared with a loss of $885,863 for the eleven
month period ended December 31, 2007, an increase of $653,013. Generally the
overall general and administrative costs for the current year were lower than
the prior year as mentioned above but these were offset with the VAT allowance,
stock based compensation and a lower amount of interest income with differences
of $213,652, $585,800 and $212,953, respectively. In addition, the Company
recorded a future income tax expense of $98,653 as compared to $501,083 recovery
amount in the prior year.

Eleven months ended December 31, 2007 compared with the
twelve months ended January 31, 2007

Operating and administrative expenses

General
and administrative expenses totaled $868,527 for the eleven month period ended
December 31, 2007 compared with $4,014,734 for the twelve month period ended
January 31, 2007, a decrease of $3,146,207. The largest individual expense
decrease for the period was due to the recognition of stock based compensation
for options to employees in the twelve month period ended January 31, 2007. The
amount charged to operations in the current year was $nil compared to $2,860,603
in the comparative period. Other cost decreases include $88,263 in general
exploration, $4,505 in office and miscellaneous, $13,241 in regulatory and
compliance fees, $14,203 in salaries and benefits, $201,614 in shareholder and
investor relations and $33,261 in travel costs. Offsetting these decreases were
increases of $1,000 in management fees and $69,114 in professional fees.

43

---

The
reasons for the changes to shareholder and investor relations and travel and
entertainment are the same as those for the fourth quarter comparison. The lower
costs that were mostly influenced by the shorter fiscal year were office and
miscellaneous, salaries and benefits, and management fees. Management fees
however, showed a slight increase because there was an increase in the monthly
compensation for the President that took effect part way through the year ended
January 31, 2007. Professional fees were quite higher in the current year
because of legal fees associated with the royalty settlement and prior year
audit fees which turned out to be higher than the estimated year end accrual and
as such the extra amount was charged to the current year. Audit fees had also
risen due to complex accounting issues arising from the acquisition of control
of Cia Minera and the first year of consolidation. General exploration expenses
decreased by a large amount because with control of Cia Minera and the resulting
consolidation, more of these costs are now capitalized. Regulatory and
compliance fees in the twelve month period ended January 31, 2007 were higher
due to the filing fees associated with the $10 million private placement
compared to no such items in the current period. There was no share capital
activity in the current year and this resulted in minimal fees with the
exception of annual sustaining and SEDAR fees.

Loss for the period

Loss
for the eleven month period ended December 31, 2007 was $885,863 compared with a
loss of $3,648,539 for the twelve month period ended January 31, 2007, a
decrease of $2,762,676. Whereas the overall general and administrative costs for
the current year were $3,146,207 lower than the prior year, the other income and
expense items in the current year had a net effect of reducing this difference.
The current period had a decrease of $70,892 in interest and other income and
charges of $759,302 relating to the royalty settlement and $86,155 relating to
the misappropriation of bank funds. The prior year did not incur such other
expenses. The prior year also did not incur a future income tax benefit compared
to the $501,083 that was incurred in the current period.

44

---

B. Liquidity and Capital Resources

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

During
the year, the Company incurred expenditures that increased its mineral property
carrying value on its Mexican properties by $1,762,512. There was very little
activity on its British Columbia properties. At this time, the Company has no
operating revenues but has earned interest income of $146,386 and an option
revenue payment of $25,000. The Company will continue to have significant cash
on hand to earn interest income throughout the current fiscal year. However, the
Companys cash and cash equivalents will continue to be drawn down by operations
and there has been downward pressure on interest rates as well so interest
income is expected to decrease as the current year progresses.

At
December 31, 2008, the Company had working capital of $3,401,467 and cash and
cash equivalents of $3,575,241. The Company is continuing its exploration
program and refurbishing of its mine facility for a bulk sampling program in
Mexico. At December 31, 2008, the Company had incurred approximately $1,000,000
of the annual drilling cost for Mexico which was estimated at $1,200,000. The
annual cost for the bulk sampling program was estimated at $2,500,000 for
capital costs and $400,000 for operating costs. The Company has no significant
plans for the British Columbia properties during the remainder of the fiscal
year. The Company has sufficient cash on hand to finance the planned exploration
work on its mineral properties and maintain administrative operations through
December 31, 2009.

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

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

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

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

D. Trend Information

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

E. Off-Balance Sheet Arrangements

The
Company has no off-balance sheet arrangements.

45

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F. Tabular Disclosure of Contractual Obligations

As at
  December 31, 2008, the Company had the following contractual obligations:

As at
    
    Total
    
    
    <1 year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
      More than 5 yearsDecember 31, 2008,the Company had thefollowing contractualobligations:Drilling Contract
    $
    121,950
    
    $
    121,950
    
    
      -
      
      
      -
      
      
      -Total
    $
    121,950
    
    $
    121,950
    
    
      -
      
      
      -
      
      
      -


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

46

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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.

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 June
20, 2009. The directors are elected for a term of one year at the annual meeting
of shareholders. This years annual meeting will be held on June 26, 2009.

|Name and Present Position          |                                                                                                                                                                                                                                                                                                                                            |                             
|---------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------
|with the
      Company             | Principal Occupation                                                                                                                                                                                                                                                                                                                       | Director/Officer
      Since
|                                   |                                                                                                                                                                                                                                                                                                                                            |                             
|Lloyd J. Andrews Director/Chairman | Chairman and
      Director of Bralorne Gold Mines Ltd. and Coral Gold Resources Ltd.                                                                                                                                                                                                                                                      | June 2005                   
|                                   |                                                                                                                                                                                                                                                                                                                                            |                             
|Michael Baybak Director            | A business
      consultant.                                                                                                                                                                                                                                                                                                               | June 1990                   
|                                   |                                                                                                                                                                                                                                                                                                                                            |                             
|Gary Robertson Director            | 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                 
|                                   |                                                                                                                                                                                                                                                                                                                                            |                             
|David Wolfin(1)Director/President  | Director and VP
      Finance of Berkley Resources Inc., Director and VP Finance of Bralorne
      Gold Mines Ltd., Director and VP, Finance, of Levon Resources
      Ltd., President and Director of Coral Gold Resources Ltd. and Gray
      Rock Resources Ltd. and Director of Mill Bay Ventures Ltd. and Cresval
      Capital Corp. | October 1995                
|                                   |                                                                                                                                                                                                                                                                                                                                            |                             
|Louis Wolfin Director/CEO          | Director and
      Chief Executive Officer of Bralorne Gold Mine Ltd., Coral Gold
      Resources Ltd. and Levon Resources Ltd. and Director of Cresval
      Capital Corp.                                                                                                                                                                | August 1969                 
|                                   |                                                                                                                                                                                                                                                                                                                                            |                             
|Dorothy Chin Corporate Secretary   | Corporate
      Secretary of Bralorne Gold Mines Ltd., Coral Gold Resources Ltd., Gray
      Rock Resources Ltd., Levon Resources Ltd. and Mill Bay Ventures
      Inc.; formerly Corporate Secretary of Dentonia Resources Ltd.                                                                                                           | September 2008              
|                                   |                                                                                                                                                                                                                                                                                                                                            |                             
|Lisa Sharp Chief Financial Officer | Chief Financial
      Officer of Bralorne Gold Mines Ltd., Coral Gold Resources Ltd., Gray
      Rock Resources Ltd., Levon Resources Ltd., Mill Bay Ventures Inc.
      and Sonic Technology Solutions Inc.                                                                                                                               | June 2008                   

(1)Mr. David Wolfin is the son of Mr. Louis Wolfin.

B. Compensation

For
purposes of this Item 6(B), named executive officer of the Company means an
individual who, at any time during the year, was:

| | (a) | the Companys chief executive officer (CEO);  
| | --- | ------------------------------------------------
| |     |                                                 
| | (b) | the Companys chief financial officer
  (CFO);

47

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| | (c) | each of the Companys three most highly compensated
      executive officers, other than the CEO and CFO, who were serving as
      executive officers as at the end of the most recently completed financial
      year and whose total salary and bonus exceeded $150,000; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                 
| | (d) | any additional individuals for whom disclosure would have
      been provided under (c) except that the individuals was not serving as an
      officer of the Company at the end of the most recently completed financial
      years;                                         

each a Named Executive Officer (NEO).

Based on
the foregoing definition, during the last completed fiscal year of the Company,
there were four (4) Named Executive Officers, namely, its CEO, Louis Wolfin, its
President, David Wolfin, its current CFO, Lisa Sharp, and its former CFO, Kevin
Bales.

1)Compensation Discussion
and Analysis

The
Company does not have a compensation program other than paying base salaries,
incentive bonuses, and incentive stock options to the NEOs. The Company
recognizes the need to provide compensation package that will attract and retain
qualified and experienced executives, as well as align the compensation level of
each executive to that executives level of responsibility. The objectives of
base salary are to recognize market pay, and acknowledge the competencies and
skills of individuals. The objectives of incentive bonuses in the form of cash
payments are designed to add a variable component of compensation, based on
corporate and individual performances for executive officers and employees. No
incentive bonuses were paid to executive officers and employees during the most
recently completed fiscal year. The objectives of the stock option are to reward
achievement of long-term financial and operating performance and focus on key
activities and achievements critical to the ongoing success of the Company.
Implementation of a new incentive stock option plan and amendments to the
existing stock option plan are the responsibility of the Companys Compensation
Committee.

The
Company has no other forms of compensation, although payments may be made from
time to time to individuals or companies they control for the provision of
consulting services. Such consulting services are paid for by the Company at
competitive industry rates for work of a similar nature by reputable arms
length services providers.

The
process for determining executive compensation relies solely on discussions
amongst the board of directors of the Company (the Board) with the input from
and upon the recommendations of the Compensation Committee, without any formal
objectives criteria and analysis.

Actual
compensation will vary based on the performance of the executives relative to
the achievement of goals and the price of the Companys securities.

Compensation
      Element
    Description
    Compensation ObjectivesAnnual Base Salary (all NEOs)
    Salary is market-competitive, fixed level of
      compensation
    Retain qualified leaders, motivate strong
      business performance.Incentive Bonuses
    Cash payment to add variable component to
      compensation
    Based on corporate and individual performances
      of key personnel.Incentive Stock Option (all NEOs)
    Equity grants are made in the form of stock
      options. The amount of grant will be dependent on individual and corporate
      performance.
    Retain qualified leaders, motivate strong
      business performance.


48

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2)Summary Compensation
Table

The following
  table sets forth particulars concerning the compensation paid or accrued for
  services rendered to the Company in all capacities during the most recently
  completed financial year ended December 31, 2008 of the Company to its NEOs:

Name and principal position
      Year
      Salary ($)
      Share-
        based awards ($)
      Option-
        based awards ($) (*)
      Non-equity incentive plan compensation **($)**
      Pension value ($)
      All
        other compensation ($)
      Total compensation ($)Annual incentive
        plans
      Long-term incentive
        plansLouis Wolfin 
        CEO and Director
      2008
      NIL
      NIL
      NIL
      NIL
      NIL
      NIL
      NIL
      NILLisa Sharp (1)
        CFO
      2008
      $11,106
      NIL
      NIL
      NIL
      NIL
      NIL
      NIL
      $11,106David Wolfin (2)
        President and 
        Director
      2008
      $96,000
      NIL
      NIL
      NIL
      NIL
      NIL
      NIL
      $96,000Kevin Bales 
        Former CFO
      2008
      $6,352
      NIL
      NIL
      NIL
      NIL
      NIL
      NIL
      $6,352


* The methodology used to calculate the grant date fair value
is the last closing price of the Companys shares before the date of the stock
option grant less the exercise price.

(1)Ms. Lisa Sharp was appointed CFO of the Company
on June 9, 2008.

(2) The Company paid an aggregate of $96,000 to
Intermark Capital Corp., a private BC corporation, controlled by David Wolfin,
President and a director of the Company, for management advisory services.

Annual Base Salary

Base
Salary for the NEOs are determined by the Board upon the recommendation of the
Compensation Committee and its recommendations are reached primarily by
comparison of the remuneration paid by other reporting issuers with the same
size and industry and with publicly available information on remuneration that
the Compensation Committee feels is suitable.

The
Annual Base Salary paid to the NEOs shall, for the purpose of establishing
appropriate increases, be reviewed annually by the Board upon the recommendation
of the Compensation Committee thereof as part of the annual review of executive
officers. The decision on whether to grant an increase to the executives base
salary and the amount of any such increase shall be in the sole discretion of
the Board and Compensation Committee thereof.

Long Term Incentive Plan (LTIP)

The
Company does not have a LTIP, pursuant to which cash or non-cash compensation
intended to serve as an incentive for performance (whereby performance is
measured by reference to financial performance or the price of the Companys
securities), was paid or distributed to the NEO during the most recently
completed financial year ended December 31, 2008.

Option Based Award

An
Option Based Award is in the form of the grant of an incentive stock option. The
objective of the incentive stock option is to reward NEOs, employees and
directors individual performance at the discretion of the Board upon the
recommendation of the Compensation Committee. The plan currently used by the
Company is 2008 Stock Option Plan.

49

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The Company
  currently maintains a formal stock option plan (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. For details
  of the option plan please refer to Particulars of Matters to be Act Upon
  in the Information Circular filed with the SEC on May 19, 2009.

The 2008
Stock Option Plan is administered by the Compensation Committee pursuant to the
2008 Stock Option Plan. The process the Company uses to grant option-based
awards to executive officers is upon the recommendations of the Compensation
Committee to the Board of Directors.

The role
of the Compensation Committee is to recommend to the Board the compensation of
the Companys directors and the NEOs which the Committee feels is suitable.

To date,
stock options to purchase a total of up to 1,854,500 shares have been granted
and remain outstanding under the Plan, leaving 203,973 options available for
issuance. All previous grants of option-based awards are taken into account when
considering new grants.

3)Incentive Plan Awards

Outstanding share-based awards and option-based awards

The following
  table sets forth the options granted to the NEOs to purchase or acquire securities
  of the Company outstanding at the end of the most recently completed financial
  year ended December 31, 2008:

Option-based Awards
      Share-based AwardsName
      Number of securities
        underlying unexercised options (#)
      Option exercise
        price ($)
      Option expiration
        date
      Value of unexercised
        in- the-money options ($)(1)
      Number of shares or
        units of shares that have not vested (#)
      Market or payout value of share-based awards that have not vested ($)(1)Louis Wolfin 
        CEO and 
        Director
      100,000 
        180,000 
        65,000
      $1.35 
        $3.99 
        $1.65
      April 5, 2010 
        April 26, 2011 
        Feb. 27, 2013
      Nil
      Nil
      NilLisa Sharp 
        CFO
      Nil
      N/A
      N/A
      N/A
      N/A
      N/ADavid Wolfin 
        President and 
        Director
      40,000 
        200,000 
        65,000
      $1.35 
        $3.99 
        $1.65
      April 5, 2010 
        April 26, 2011 
        Feb. 27, 2013
      Nil
      Nil
      NilKevin Bales 
        Former CFO
      35,000 
        50,000
      $3.99 
        $1.65
      Dec 31, 2008 
        Dec 31, 2008
      Nil
      Nil
      Nil


(1)No value was attributed to unexercised options
that were out of the money on December 31, 2008.

Incentive plan awards  value vested or earned during the
year

The
following table sets forth the value vested or earned during the year of
option-based awards, share-based awards and non-equity incentive plan
compensation paid to NEOs during the most recently completed financial year
ended December 31, 2008:

50

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Name
    Option-based awards  Value
      vested during the year ($)(1)
    Share-based awards  Value
      vested during the year ($)
    Non-equity incentive plan
      compensation  Value earned during the year
      ($)Louis Wolfin CEO & Director
    Nil
    Nil
    NilLisa Sharp CFO
    N/A
    N/A
    N/ADavid Wolfin President &Director
    Nil
    Nil
    Nil


(1)No value was attributed to unexercised vested
options that were out of the money on December 31, 2008.

4)Pension Plan Benefits

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

5)Termination and Change of
  Control Benefits

The
Company does not have any employment contracts with the NEOs, and there are no
contractual provisions for termination of employment or change in
responsibilities.

6)Director Compensation

The
following table sets forth the value of all compensation paid to the directors
during the most recently completed financial year ended December 31, 2008:

Name
    Fees earned
      ($)
    Share- based
      awards ($)
    Option- based
      awards ($)(1)
    Non-equity incentive plan
      compensation ($)
    Pension value
      ($)
    All other compensation
      ($)
    Total ($)Lloyd Andrews
    $6,000
    NIL
    NIL
    NIL
    NIL
    NIL
    $6,000Michael Baybak
    $3,000
    NIL
    NIL
    NIL
    NIL
    NIL
    $3,000Gary Robertson
    $6,000
    NIL
    NIL
    NIL
    NIL
    NIL
    $6,000Victor Chevillon(2)
    NIL
    NIL
    NIL
    NIL
    NIL
    NIL
    NIL


(1)The methodology used to calculate the grant date
fair value is the last closing price of the Companys shares before the date of
the stock option grant less the exercise price. (2)Mr. Chevillon
resigned as a director of the Company in May 2009.

The Company
  pays its independent directors $750 per quarter. Each independent director is
  also paid $250 per quarter for each committee he serves as a member. Directors
  who are also executive officers do not receive any compensation in their capacity
  as directors.

Incentive stock options have been granted to non-employee directors of the
Company to purchase an aggregate of 180,000 shares of the Company at a price of
$1.35 per share exercisable on or before April 5, 2010 and September 26, 2010,
of which 17,500 have been exercised; 380,000 shares of the Company at a price of
$3.99 per share exercisable on or before April 26, 2011, none of which have been
exercised; and 140,000 shares of the Company at a price of $1.65 per share
exercisable on or before September 27, 2013, none of which have been exercised.

51

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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.

C.      Board Practices

The
Board 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. Directors are
elected for a term of one year at the annual general meeting. At the Annual
General Meeting, held on June 26, 2009, the shareholders elected Messrs.
Andrews, Baybak, Robertson, Wolfin, and Wolfin as directors.

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

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

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

Mandate of the Board of Directors, its Committees and
Management

The role
  of the Board is to oversee the conduct of the Companys business, including
  the supervision of management, and determining the Companys strategy.
  Management is responsible for the Companys day to day operations, including
  proposing its strategic direction and presenting budgets and business plans
  to the Board 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, the chief executive
  officer and the chief financial 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.

52

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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 Audit Committee has direct
communications channels with the Companys auditors. The Audit Committee reviews
the Companys financial statements and related managements discussion and
analysis of financial and operating results. The Audit Committee can retain
legal, accounting or other advisors.

The
Audit Committee currently consists of three directors (Messrs. David Wolfin,
Lloyd J. 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 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.

53

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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 as appropriate. When considering nominees to the Board, the Corporate
Governance 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 Corporate Governance Committee is
also responsible for the Companys corporate governance guidelines. The
Corporate Governance Committee may retain legal or other advisors.

The
Corporate Governance Committee currently consists of three directors (Messrs.
Lloyd J. Andrews, Gary Robertson and Louis Wolfin). Messrs. Andrews and
Robertson are unrelated directors. It is intended that the Corporate Governance
Committee will eventually be comprised solely of unrelated and independent
directors.

D.      Employees

As at
December 31, 2008, the Company has 11 employees located in Mexico, nine with Cia
Minera and two with Oniva.

E.      Share Ownership

The
following table sets forth the share ownership of the directors and officers of
the Company as of May 5, 2009.

Name of
      Beneficial Owner
    
    Number of Shares
    
    PercentLloyd Andrews
    
    6,500
    
    *Michael Bayback
    
    2,400
    
    *Gary Robertson
    
    13,000
    
    *David Wolfin
    
    74,700
    
    *Louis Wolfin
    
    4,345
    
    *Dorothy Chin
    
    Nil
    
    N/ALisa Sharp
    
    Nil
    
    N/A*Less than one percent


Outstanding Options

The
following information, as of May 5, 2009, reflects outstanding options held by
the Named Executive Officers:

ExerciseNo. of Shares
    
    Date of Grant
    
    Price
    
    Expiration DateLouis Wolfin
    100,000
    
    April 5, 2005
    
    $1.35
    
    April 5, 2010CEO & Director
    180,000
    
    April 26, 2006
    
    $3.99
    
    April 26, 201165,000
    
    Feb. 27, 2008
    
    $1.65
    
    Feb. 27, 2013


54

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ExerciseNo. of Shares
    
    Date of Grant
    
    Price
    
    Expiration DateLisa Sharp
    Nil
    
    N/A
    
    N/A
    
    N/ACFODavid Wolfin
    40,000
    
    April 5, 2005
    
    $1.35
    
    April 5, 2010President &
    200,000
    
    April 26, 2006
    
    $3.99
    
    April 26, 2011Director
    65,000
    
    Feb. 27, 2008
    
    $1.65
    
    Feb. 27, 2013


Item 7. Major Shareholders and Related Party
Transactions

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

To
the knowledge of 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 June 26, 2009, to the knowledge of the Company, no person who owned more than
five (5%) percent of the outstanding shares of each class of the Companys
voting securities.

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

During
the year ended December 31, 2008, the Company paid, or made provision for the
future payment of the following amounts to related parties:

| | i)    | $188,158 (December 31, 2007 - $153,733; January 31, 2007
      - $119,857) for administrative expenses (rent, salaries, office supplies
      and other miscellaneous disbursements) to Oniva International Services
      Corp (Oniva International), a private company beneficially owned by the
      Company and a number of other public companies related through common
      directors;
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                  
| | ii)   | $96,000 (December 31, 2007 - $88,000; January 31, 2007 -
      $87,000) to a private company controlled by a director of the Company for
      management fees;                                                                                                                                                                                                                                  
| |       |                                                                                                                                                                                                                                                                                                                                                                                                  
| | iii)  | $30,000 (December 31, 2007 - $ 27,500; January 31, 2007 -
      $30,000) to a private company controlled by a director of a related
      company for consulting fees;                                                                                                                                                                                                                           
| |       |                                                                                                                                                                                                                                                                                                                                                                                                  
| | iv)   | $16,789 (December 31, 2007 - $Nil; January 31, 2007 -
      $Nil) to a private company controlled by a director for geological
      consulting services;                                                                                                                                                                                                                                        
| |       |                                                                                                                                                                                                                                                                                                                                                                                                  
| | v)    | $34,698 (December 31, 2007 - $36,100; January 31, 2007 -
      $36,600) to a private company controlled by a director of a related
      company for geological consulting services;                                                                                                                                                                                                             
| |       |                                                                                                                                                                                                                                                                                                                                                                                                  
| | vi)   | $Nil (December 31, 2007 - $40,513; January 31, 2007 -
      $84,279) for investor relations services to National Media Associates, a
      business significantly influenced by a director of the Company;                                                                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                                                  
| | vii)  | $Nil (December 31, 2007 - $65,577; January 31, 2007 -
      $53,837) in drilling expenses to ABC Drilling Services Inc. (ABC
      Drilling), a private drilling company owned by Oniva International;
      and                                                                                                                                                                               
| |       |                                                                                                                                                                                                                                                                                                                                                                                                  
| | viii) | $15,000 (December 31, 2007 - $13,750; January 31, 2007 -
      $7,500) to directors of the Company for directors
fees.                                                                                                                                                                                                                                                                           

55

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The
amounts due to related parties consist of $145,011 (December 31, 2007 -
$147,424) due to Oniva; $9,000 (December 31, 2007 - $18,250) due to directors of
the Company for directors fees; $Nil (December 31, 2007 - $3,707) due to a
director of a related public company for expense reimbursements; $16,789
(December 31, 2007 - $Nil) due to a director of the Company for geological
services; $Nil (December 31, 2007 - $2,684) due to a company controlled by a
director of a related public company for geological services; and $Nil (December
31, 2007 - $4,578) due to ABC Drilling.

All
related party transactions are recorded at the value agreed upon by the Company
and the related party. The amounts due from and due to related parties are
non-interest bearing, non-secured and with no stated terms of repayment.

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

Not
Applicable.

Item 8. Financial Information

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

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

- Audit Report of Independent Registered Public Accounting Firm;
- Consolidated Balance Sheets as at December 31, 2008 and December 31, 2007;
- Consolidated Statements of Operations and Comprehensive Loss for the year
  ended December 31, 2008, the eleven months ended December 31, 2007 and the
  year ended January 31, 2007;
- Consolidated Statements of Shareholders Equity for the year ended December
  31, 2008, the eleven months ended December 31, 2007 and the year ended January
  31, 2007;
- Consolidated Statements of Cash Flows for the year ended December 31, 2008,
  the eleven months ended December 31, 2007 and the year ended January 31, 2007;
  and
- Notes to the Consolidated Financial Statements for the year ended December
  31, 2008, the eleven months ended December 31, 2007 and the year ended January
  31, 2007.

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**

As
of June 26, 2009, there were 319 holders of record in the United States holding
23.28% of the Companys outstanding common shares representing approximately
78.18% of the total shareholders. The Companys common shares are issued in
registered form and the percentage of shares reported to be

56

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held by record holders in the United States is taken from the
records of the Computershare Investor Services Inc. in the City of Vancouver,
the registrar and transfer agent for the common shares.

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

TSX-V(Canadian Dollars)Last Six Months
      
      High
      
      LowJune 2009
      
      0.82
      
      0.60May 2009
      
      0.62
      
      0.475April 2009
      
      0.59
      
      0.38March 2009
      
      0.80
      
      0.53February 2009
      
      0.83
      
      0.57January 2009
      
      0.73
      
      0.502008
      
      High
      
      LowFourth Quarter ended December 31, 2008
      
      0.99
      
      0.18Third Quarter ended September 30, 2008
      
      1.38
      
      0.77Second Quarter ended June 30, 2008
      
      1.70
      
      1.34First Quarter ended March 31, 2008
      
      1.74
      
      1.552007
      
      High
      
      LowFourth Quarter ended December 31, 2007
      
      1.83
      
      1.46Third Quarter ended October 31, 2007
      
      2.07
      
      1.53Second Quarter ended July 31, 2007
      
      2.30
      
      1.69First Quarter ended April 30, 2007
      
      2.75
      
      1.83Last Five Fiscal Years
      
      High
      
      Low2008
      
      1.78
      
      0.182007(1)
      
      2.75
      
      1.462007(2)
      
      4.48
      
      1.502006
      
      2.29
      
      1.112005
      
      2.50
      
      1.00


(1)Year ended December 31,
2007 consisted of eleven months. (2)Year ended January 31, 2007
consisted of twelve months.

**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 OTCBB, under the symbol ASGMF.

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

Not
Applicable.

**E.**     **Dilution**

Not
Applicable.

57

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**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.

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.

58

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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.

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

The
Company entered into a share exchange agreement dated for reference June 9, 2004
with Pedro Sanchez Mejorada, Fernando Ysita Del Hoyo, Francisco Ysita del Hoyo,
Bernardo Ysita del Hoyo, Carlos Ysita del Hoyo, Manuel Ysita del Hoyo, Eduardo
Ysita del Hoyo, Mercedes Ysita del Hoyo, Cia Minera and Promotora in connection
with the acquisition of the remaining 51% interest in Cia Minera. The
consideration to be paid by the Company for the 51% interest consists of four
million common shares of the Company. This agreement was subject to a number of
conditions including a satisfactory due diligence review and final regulatory
approval. The TSX-V approved the agreement on October 18, 2005. 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 and the acquisition
of a further 1.1% from an estate for no additional consideration was completed
on December 21, 2007. On February 16, 2009, the Companys subsidiary, Cia
Minera, held a Shareholders Meeting to increase the capital through
capitalization of loans advanced to Cia Minera by the Company. As a result, the
Companys ownership interest in Cia Minera has increased to 99.28% .

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

The
Company has a contractual minimum drilling commitment for the exploration of its
mineral properties in Durango, Mexico. As at December 31, 2008 the Company is
committed to drilling services at an estimated cost of $121,950, (services
denominated in USD$100,123). Alternatively, the Company could terminate the
contract at a cost of $54,200 (USD$44,499). Management expects that the
Companys drilling services requirement in fiscal 2009 will likely exceed the
minimum commitment amount.

59

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The
Company entered into an agreement in which monthly operation services will be
performed through to September 2009 in Durango, Mexico at a total committed cost
of $93,177 (services denominated in US$76,500).

Please
refer to Note 15 of the financial statements included elsewhere in this Annual
Report (Item 17) for further disclosure regarding material commitments.

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

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

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

**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.

60

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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

61

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income. Distributions of income that had previously been taxed
will result in a corresponding reduction of basis in the shares and will not be
taxed again as a distribution to the shareholder.

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

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

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.

62

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

Controlled Foreign Corporations

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

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

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

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

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

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

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

63

---

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

United States Information Reporting and Backup Withholding

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

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

Filing of Information Returns

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

**F.**     **Dividends
and Paying Agents**

Not
Applicable.

**G.**     **Statement
by Experts**

Not
Applicable.

**H.**     **Documents
on Display**

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

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

**I.**     **Subsidiary
Information**

None.

Item 11. Quantitative and Qualitative Disclosures about
Market Risk

Not
Applicable.

Item 12. Description of Securities Other than Equity
Securities

Not
Applicable.

64

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Part II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

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

None.

Item 15T. Controls and Procedures

Disclosure Controls and Procedures

As
required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our
principal executive officer and principal financial officer evaluated our
companys disclosure controls and procedures (as defined in rules 13a-15(e) and
15d-15(e) of the Exchange Act) as of the end of the period covered by this
annual report on Form 20-F. Based on the evaluation, these officers concluded
that as of the end of the period covered by this Annual Report on Form 20-F, our
disclosure controls and procedures were not effective to ensure that the
information required to be disclosed by our company in reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time period specified in the rules and forms of the Securities and
Exchange Commission. These disclosure controls and procedures include controls
and procedures designed to ensure that such information is accumulated and
communicated to our companys management, including our companys principal
executive officer and principal financial officer, to allow timely decisions
regarding required disclosure. The conclusion that our disclosure controls and
procedures were not effective was due to the presence of material weaknesses in
internal control over financial reporting as identified below under the heading
Managements Report on Internal Control Over Financial Reporting.

Management
anticipates that such disclosure controls and procedures will not be effective
until the material weaknesses are remediated. Our company intends to remediate
the material weaknesses as set out below.

Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues, if any, within our
company have been detected.

Managements Report on Internal Control Over Financial
Reporting

Our
companys management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act) for our company. Our companys internal control
over financial reporting is designed to provide reasonable assurance, not
absolute assurance, regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
Canadian generally accepted accounting principles. Internal control over
financial reporting includes those policies and procedures that: (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our companys assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with Canadian generally
accepted accounting principles, and that our companys receipts and expenditures
are being made only in accordance with authorizations of our management and
directors; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of assets that could
have a material effect on our financial statements.

65

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

Our
management, including our principal executive officer and principal financial
officer, along with an independent consultant, conducted an evaluation of the
design and operation of our internal control over financial reporting as of
December 31, 2008 based on the criteria set forth in Internal Control 
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. This evaluation included review of the documentation of
controls, evaluation of the design effectiveness of controls, testing of the
operating effectiveness of controls and a conclusion on this evaluation. Based
on this evaluation, our management concluded our internal control over financial
reporting was not effective as at December 31, 2008 due to the following
material weaknesses: (i) inadequate segregation of duties and effective risk
assessment; (ii) insufficient written policies and procedures for accounting,
financial reporting and corporate governance; and (iii) insufficient disaster
recovery plans.

Our
company has taken steps to enhance and improve the design of our internal
controls over financial reporting, however these steps were not complete as of
December 31, 2008. During the period covered by this annual report on Form 20-F,
we have not been able to remediate the material weaknesses identified above. To
remediate such weaknesses, we plan to implement the following changes during our
fiscal year ending December 31, 2009: (i) address inadequate segregation of
duties and ineffective risk management; (ii) adopt sufficient written policies
and procedures for accounting, financial reporting and corporate governance; and
(iii) implement a disaster recovery plan.

Our
internal control over financial reporting was not subject to attestation by our
independent registered public accounting firm pursuant to the rules of the
Securities and Exchange Commission that permit us to provide only managements
report in this annual report.

Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues, if any, within our
company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake.

Changes in Internal Control Over Financial Reporting

There
were no changes in internal control over financial reporting in the year ended
December 31, 2008. However, as a result of the evaluation of our internal
control over financial reporting as of December 31, 2008, conducted by our
principal executive officer, principal financial officer and an independent
consultant, we expect to make such changes in the year ended December 31, 2009.

Item 16A. Audit Committee Financial Expert

The
Board determined that Mr. Gary Robertson is qualified as an Audit Committee
Financial Expert. Mr. Robertson is independent as determined by the NASDAQ
listing rules.

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.

66

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Item 16C. Principal Accountant Fees and Services

The
independent auditor for the year ended December 31, 2008, the eleven-month
period ended December 31, 2007 and for the year ended January 31, 2007 was
Manning Elliott LLP.

Audit Fees

The
aggregate fees billed by Manning Elliott LLP for professional services rendered
for the audit of the Companys year ended December 31, 2008 were $64,500
(December 31, 2007: $85,000; January 31, 2007: $101,800).

Audit-Related Fees

The
  audit-related fees billed by Manning Elliott LLP for the year ended December
  31, 2008 were $2,880 (December 31, 2007: $4,636; January 31, 2007: $5,438).

Tax Fees

The
  tax fees billed by Manning Elliott LLP for the year ended December 31, 2008
  are estimated to be $4,000 (December 31, 2007: $4,830; January 31, 2007: $3,000).

All Other Fees

The
  aggregate fees billed by Manning Elliott LLP for advisory and review services
  relating to the Companys annual report on Form 20-F for the year ended
  December 31, 2008 are estimated to be $5,000 (December 31, 2007: $5,460; January
  31, 2007: $4,500).

The
Audit Committee approved 100% of the fees paid to the principal accountant for
audit-related, tax and other fees in the fiscal year 2008. 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.

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.

67

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Part III

Item 17. Financial Statements

The
following financial statements pertaining to the Company are filed as part of
this Annual Report:

| | Audit Report of
      Independent Registered Public Accounting Firm                                                                                                                      | 70        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------
| |                                                                                                                                                                                          |           
| | Consolidated Balance
      Sheets as at December 31, 2008 and December 31, 2007                                                                                                          | 71        
| |                                                                                                                                                                                          |           
| | Consolidated Statements
      of Operations and Comprehensive Loss for the year ended December 31, 2008,
      eleven months ended December 31, 2007 and the year ended January 31, 2007 | 72        
| |                                                                                                                                                                                          |           
| | Consolidated Statements
      of Shareholders Equity for the year ended December 31, 2008, eleven
      months ended December 31, 2007 and the year ended January 31, 2007              | 73        
| |                                                                                                                                                                                          |           
| | Consolidated Statements
      of Cash Flows for the year ended December 31, 2008, eleven months ended
      December 31, 2007, and the year ended January 31, 2007                       | 74        
| |                                                                                                                                                                                          |           
| | Notes to the
      Consolidated Financial Statements for the year ended December 31, 2008,
      eleven months ended December 31, 2007, and the year ended January 31, 2007              | 75 thru 99

Item 18. Financial Statements

See Item
17.

Item 19. Exhibits

|Exhibit Number | Name                                                                               
|-------------- | -----------------------------------------------------------------------------------
|               |                                                                                    
|1.1            | Memorandum of
        Avino Silver & Gold Mines Ltd.*                              
|               |                                                                                    
|1.2.           | Articles of
        Avino Silver & Gold Mines Ltd.*                                
|               |                                                                                    
|4.1            | Share Purchase
        Agreement dated March 22, 2004*                             
|               |                                                                                    
|8.1            | List
        of Subsidiaries                                                       
|               |                                                                                    
|12.1           | Certification
        of the Principal Executive Officer                           
|               |                                                                                    
|12.2           | Certification
        of the Principal Financial Officer                           
|               |                                                                                    
|13.1           | Certificate
        under the Sarbanes-Oxley Act of the Principal Executive Officer
|               |                                                                                    
|13.2           | Certificate under
        the Sarbanes-Oxley Act of the Principal Financial Officer

__________________________________________* Previously
filed.

68

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AVINO SILVER & GOLD MINES LTD.

Consolidated Financial Statements

For the year ended December 31, 2008,the eleven-months ended December 31, 2007 and the year
endedJanuary 31, 2007







69

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|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|-------------------------------------------------------

To the Shareholders of Avino Silver & Gold Mines Ltd.

We have audited the consolidated balance sheets of Avino Silver
& Gold Mines Ltd. as at December 31, 2008 and 2007 and January 31, 2007 and
the consolidated statements of operations and comprehensive loss, shareholders
equity , and cash flows for the year ended December 31, 2008, the eleven-month
period ended December 31, 2007 and the year ended January 31, 2007. These
consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of the Companys internal control
over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation.

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 2008 and 2007 and January 31, 2007 and the results of its
operations and its cash flows for the year ended December 31, 2008, the
eleven-month period ended December 31, 2007 and the year ended January 31, 2007
in accordance with Canadian generally accepted accounting principles.

/s/ Manning Elliott LLP

CHARTERED ACCOUNTANTS

Vancouver, British Columbia

April 28, 2009

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

The standards of the Public Company Accounting Oversight Board
(United States) require the addition of an explanatory paragraph when the
financial statements are affected by conditions and events that cast substantial
doubt on the Companys ability to continue as a going concern, such as those
described in Note 1 to the financial statements. Although we conducted our
audits in accordance with both Canadian generally accepted auditing standards
and the standards of the Public Company Accounting Oversight Board (United
States), our report to the shareholders dated April 28, 2009, is expressed in
accordance with Canadian reporting standards which do not permit a reference to
such conditions and events in the auditors report when these are adequately
disclosed in the financial statements.

/s/ Manning Elliott LLP

CHARTERED ACCOUNTANTS

Vancouver, British Columbia

April 28, 2009

70

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|AVINO SILVER & GOLD MINES LTD.       
|-------------------------------------
|Consolidated Balance Sheets          
|(Expressed in
      Canadian dollars)

|                                                    |   | December 31, |   |   | December 31, |  
|--------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                    |   | 2008         |   |   | 2007         |  
|                                                    |   |              |   |   |              |  
|ASSETS                                              |   |              |   |   |              |  
|Current                                             |   |              |   |   |              |  
|Cash and
      cash equivalents                     | $ | 3,575,241    |   | $ | 6,342,481    |  
|Interest receivable                                 |   | 2,939        |   |   | 19,183       |  
|Sales tax
      recoverable (Note 9)                |   | 387,007      |   |   | 394,549      |  
|Prepaid
      expenses and other assets             |   | 11,487       |   |   | 32,317       |  
|                                                    |   |              |   |   |              |  
|                                                    |   | 3,976,674    |   |   | 6,788,530    |  
|                                                    |   |              |   |   |              |  
|Property, Plant & Equipment (Note
      6)          |   | 1,176,013    |   |   | 1,085,390    |  
|Reclamation Bonds                                   |   | 5,500        |   |   | 5,500        |  
|Mineral Properties (Note 7)                         |   | 14,861,524   |   |   | 13,096,805   |  
|Investments
      in Related Companies (Note 8)     |   | 106,519      |   |   | 214,715      |  
|                                                    |   |              |   |   |              |  
|                                                    | $ | 20,126,230   |   | $ | 21,190,940   |  
|                                                    |   |              |   |   |              |  
|LIABILITIES                                         |   |              |   |   |              |  
|Current                                             |   |              |   |   |              |  
|Accounts
      payable and accrued liabilities      | $ | 404,407      |   | $ | 520,710      |  
|Amounts due to
      related parties (Note 13(a))   |   | 170,800      |   |   | 176,788      |  
|                                                    |   |              |   |   |              |  
|                                                    |   | 575,207      |   |   | 697,498      |  
|                                                    |   |              |   |   |              |  
|Future income tax liability                         |   | 1,933,569    |   |   | 1,834,916    |  
|                                                    |   |              |   |   |              |  
|                                                    |   | 2,508,776    |   |   | 2,532,414    |  
|SHAREHOLDERS EQUITY                                |   |              |   |   |              |  
|Share Capital (Note 10)                             |   | 33,112,072   |   |   | 33,112,072   |  
|Contributed Surplus                                 |   | 7,893,742    |   |   | 7,287,742    |  
|Treasury Shares (14,180 Shares, at cost)            |   | (101,869     | ) |   | (101,869     | )
|                                                    |   |              |   |   |              |  
|                                                    |   | 40,903,945   |   |   | 40,297,945   |  
|                                                    |   |              |   |   |              |  
|Accumulated other comprehensive
      (loss) income |   | (103,566     | ) |   | 4,630        |  
|Deficit                                             |   | (23,182,925  | ) |   | (21,644,049  | )
|                                                    |   |              |   |   |              |  
|                                                    |   | (23,286,491  | ) |   | (21,639,419  | )
|                                                    |   |              |   |   |              |  
|                                                    |   | 17,617,454   |   |   | 18,658,526   |  
|                                                    |   |              |   |   |              |  
|                                                    | $ | 20,126,230   |   | $ | 21,190,940   |  
|                                                    |   |              |   |   |              |  
|Nature of Operations  Note 1                       |   |              |   |   |              |  
|Subsequent Events  Note 22                         |   |              |   |   |              |  

Approved by the Board of Directors:

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

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

71

---

|AVINO SILVER & GOLD MINES LTD.                                    
|------------------------------------------------------------------
|Consolidated Statements of Operations and Comprehensive
      Loss
|(Expressed in
      Canadian dollars)                             

|                                                                   |   |              |   |   | (Note 2       | ) |   |             |  
|------------------------------------------------------------------ | - | ------------ | - | - | ------------- | - | - | ----------- | -
|                                                                   |   |              |   |   | Eleven-months |   |   |             |  
|                                                                   |   | Year ended   |   |   | ended         |   |   | Year ended  |  
|                                                                   |   | December 31, |   |   | December 31,  |   |   | January 31, |  
|                                                                   |   | 2008         |   |   | 2007          |   |   | 2007        |  
|                                                                   |   |              |   |   |               |   |   |             |  
|Operating and Administrative Expenses                              |   |              |   |   |               |   |   |             |  
|Amortization                                                       | $ | 2,869        |   | $ | 2,046         |   | $ | 2,677       |  
|General exploration                                                |   | 8,823        |   |   | 18,636        |   |   | 106,899     |  
|Investor relations (Note 12)                                       |   | 193,192      |   |   | 263,192       |   |   | 464,806     |  
|Management fees                                                    |   | 96,000       |   |   | 88,000        |   |   | 87,000      |  
|Office and miscellaneous                                           |   | 121,353      |   |   | 141,843       |   |   | 146,348     |  
|Professional fees                                                  |   | 179,299      |   |   | 196,555       |   |   | 127,441     |  
|Regulatory and compliance fees                                     |   | 25,821       |   |   | 21,175        |   |   | 34,416      |  
|Salaries and benefits                                              |   | 109,354      |   |   | 73,610        |   |   | 87,813      |  
|Sales tax recoverable written off (Note
      9)                   |   | 213,652      |   |   | -             |   |   | -           |  
|Stock-based compensation (Note 11)                                 |   | 585,800      |   |   | -             |   |   | 2,860,603   |  
|Travel and promotion                                               |   | 39,750       |   |   | 63,470        |   |   | 96,731      |  
|                                                                   |   | 1,575,913    |   |   | 868,527       |   |   | 4,014,734   |  
|                                                                   |   |              |   |   |               |   |   |             |  
|Other Income (Expenses)                                            |   |              |   |   |               |   |   |             |  
|Interest income                                                    |   | 146,386      |   |   | 359,339       |   |   | 430,231     |  
|Foreign exchange loss                                              |   | (38,481      | ) |   | (32,301       | ) |   | (30,455     | )
|Litigation settlement (Note 19)                                    |   | 2,785        |   |   | (759,302      | ) |   | -           |  
|Mineral property option revenue (Note 7)                           |   | 25,000       |   |   | -             |   |   | -           |  
|Misappropriation loss (Note 20)                                    |   | -            |   |   | (86,155       | ) |   | -           |  
|Equity loss
      (Note 4)                                         |   | -            |   |   | -             |   |   | (33,581     | )
|                                                                   |   |              |   |   |               |   |   |             |  
|                                                                   |   |              |   |   |               |   |   |             |  
|LOSS BEFORE INCOME TAX                                             |   | (1,440,223   | ) |   | (1,386,946    | ) |   | (3,648,539  | )
|Future income tax
      recovery (expense) (Note 18)               |   | (98,653      | ) |   | 501,083       |   |   | -           |  
|                                                                   |   |              |   |   |               |   |   |             |  
|NET LOSS                                                           |   | (1,538,876   | ) |   | (885,863      | ) |   | (3,648,539  | )
|                                                                   |   |              |   |   |               |   |   |             |  
|Other Comprehensive Loss                                           |   |              |   |   |               |   |   |             |  
|Unrealized loss on investments in related
      companies (Note 8) |   | (108,196     | ) |   | (12,487       | ) |   | -           |  
|                                                                   |   |              |   |   |               |   |   |             |  
|COMPREHENSIVE LOSS                                                 | $ | (1,647,072   | ) | $ | (898,350      | ) | $ | -           |  
|                                                                   |   |              |   |   |               |   |   |             |  
|Loss per Share - Basic and Diluted                                 | $ | (0.07        | ) | $ | (0.04         | ) | $ | (0.20       | )
|                                                                   |   |              |   |   |               |   |   |             |  
|Weighted Average Number of Shares Outstanding                      |   | 20,584,727   |   |   | 20,584,727    |   |   | 18,385,007  |  

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

72

---

|AVINO SILVER & GOLD MINES LTD.                                                                                         
|-----------------------------------------------------------------------------------------------------------------------
|Consolidated Statements of Shareholders Equity                                                                        
|For the year ended December 31, 2008, eleven month period
      ended December 31, 2007 and year ended January 31, 2007
|(Expressed in
      Canadian dollars)                                                                                  

AccumulatedNumber of
      
    
      
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    Other
      
    
    TotalCommon
      
    
      
      
    
    Share
      
    
    Treasury
      
    
    Contributed
      
    
    
      
    
    Comprehensive
      
    
    ShareholdersShares
      
    
      Capital Stock
      
    
    Receivable
      
    
    Shares
      
    
    Surplus
      
    
    Deficit
      
    
    Income (Loss)
      
    
    EquityBalance, January 31, 2006
    
    11,962,075
      
    $
      19,264,265
      
    $
    (5,940
      )
    $
    (101,869
      )
    $
    1,070,699
      
    $
    (17,109,647
      )
    $
    -
      
    $
    3,117,508Net loss for the year
    
    
      
    
      
      
    
    
      
    
    
      
    
    
      
    
    (3,648,539
      )
    
    
      
    
    (3,648,539
      )Common shares issued for
      cash:Private Placement
    
    5,000,000
      
    
      10,000,000
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    10,000,000Fair value of
      warrants issued for privateplacement
    
    
      
    
      (3,578,383
      )
    
    -
      
    
    -
      
    
    3,578,383
      
    
    -
      
    
    -
      
    
    -Share issuance
      costs
    
    
      
    
      (823,728
      )
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    (823,728
      )Exercise of options
    
    456,700
      
    
      585,866
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    585,866Exercise of
      warrants
    
    1,250
      
    
      3,125
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    3,125Shares issued for Cia Minera
      acquisition
    
    3,164,702
      
    
      7,215,521
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    7,215,521Transfer from contributed
      surplus onexercise of options
    
    -
      
    
      443,831
      
    
    -
      
    
    -
      
    
    (443,831
      )
    
    -
      
    
    -
      
    
    -Transfer from contributed
      surplus onexercise of warrants
    
    -
      
    
      1,575
      
    
    -
      
    
    -
      
    
    (1,575
      )
    
    -
      
    
    -
      
    
    -Stock-based compensation expense
    
    -
      
    
      -
      
    
    -
      
    
    -
      
    
    3,056,203
      
    
    -
      
    
    -
      
    
    3,056,203Balance, January 31, 2007
    
    20,584,727
      
    
      33,112,072
      
    
    (5,940
      )
    
    (101,869
      )
    
    7,259,879
      
    
    (20,758,186
      )
    
    -
      
    
    19,505,956Transitional adjustment for fair value ofinvestments
    
    -
      
    
      -
      
    
    -
      
    
    
      
    
    -
      
    
    -
      
    
    17,117
      
    
    17,117Shares issued for proceeds
      receivable
    
    
      
    
      
      
    
    5,940
      
    
    
      
    
    
      
    
    
      
    
    
      
    
    5,940Net loss for the period
    
    -
      
    
      -
      
    
    -
      
    
    -
      
    
    -
      
    
    (885,863
      )
    
    -
      
    
    (885,863
      )Unrealized loss on
      investments
    
    -
      
    
      -
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    (12,487
      )
    
    (12,487
      )Stock-based compensation (Note 11)
    
    -
      
    
      -
      
    
    -
      
    
    -
      
    
    27,863
      
    
    -
      
    
    -
      
    
    27,863Balance, December 31, 2007
    
    20,584,727
      
    
      33,112,072
      
    
    -
      
    
    (101,869
      )
    
    7,287,742
      
    
    (21,644,049
      )
    
    4,630
      
    
    18,658,526Net loss for the year
    
    -
      
    
      -
      
    
    -
      
    
    -
      
    
    -
      
    
    (1,538,876
      )
    
    -
      
    
    (1,538,876
      )Unrealized loss on
      investments
    
    -
      
    
      -
      
    
    -
      
    
    -
      
    
    -
      
    
    -
      
    
    (108,196
      )
    
    (108,196
      )Stock-based compensation (Note 11)
    
    -
      
    
      -
      
    
    -
      
    
    -
      
    
    606,000
      
    
    -
      
    
    -
      
    
    606,000Balance, December 31, 2008
    
    20,584,727
      
    $
      33,112,072
      
    $
    -
      
    $
    (101,869
      )
    $
    7,893,742
      
    $
    (23,182,925
      )
    $
    (103,566
      )
    $
    17,617,454


Theaccompanyingnotes are anintegralpart of theseconsolidatedfinancialstatements

73

---

|AVINO SILVER & GOLD MINES LTD.       
|-------------------------------------
|Consolidated Statements of Cash Flows
|(Expressed in
      Canadian dollars)

|                                                                      |   |              |   |   | (Note 2        | ) |   |                  |  
|--------------------------------------------------------------------- | - | ------------ | - | - | -------------- | - | - | ---------------- | -
|                                                                      |   | Year ended   |   |   | Eleven-months  |   |   |                  |  
|                                                                      |   | December 31, |   |   | ended December |   |   | Year ended       |  
|                                                                      |   | 2008         |   |   | 31, 2007       |   |   | January 31, 2007 |  
|CASH PROVIDED BY (USED IN):                                           |   |              |   |   |                |   |   |                  |  
|OPERATING ACTIVITIES                                                  |   |              |   |   |                |   |   |                  |  
|Net loss                                                              | $ | (1,538,876   | ) | $ | (885,863       | ) | $ | (3,648,539       | )
|Adjustments for non-cash items:                                       |   |              |   |   |                |   |   |                  |  
|Amortization                                                          |   | 2,869        |   |   | 2,046          |   |   | 2,677            |  
|Sales tax recoverable written off                                     |   | 213,652      |   |   | -              |   |   | -3               |  
|Stock-based compensation                                              |   | 585,800      |   |   | -              |   |   | 2,860,603        |  
|Stock-based compensation included in investor
      relations         |   | 20,200       |   |   | 27,863         |   |   | 195,600          |  
|Equity loss                                                           |   | -            |   |   | -              |   |   | 33,581           |  
|Future income tax expense (recovery)                                  |   | 98,653       |   |   | (501,083       | ) |   | -                |  
|                                                                      |   | (617,702     | ) |   | (1,357,037     | ) |   | (556,078         | )
|Net change in
      non-cash working capital (Note 14)                |   | (291,327     | ) |   | (987,164       | ) |   | 61,750           |  
|                                                                      |   | (909,029     | ) |   | (2,344,201     | ) |   | (494,328         | )
|                                                                      |   |              |   |   |                |   |   |                  |  
|FINANCING ACTIVITIES                                                  |   |              |   |   |                |   |   |                  |  
|Collection of share proceeds receivable                               |   | -            |   |   | 5,940          |   |   | 56,732           |  
|Shares issued for cash, net                                           |   | -            |   |   | -              |   |   | 9,511,593        |  
|                                                                      |   | -            |   |   | 5,940          |   |   | 9,568,325        |  
|                                                                      |   |              |   |   |                |   |   |                  |  
|INVESTING ACTIVITIES                                                  |   |              |   |   |                |   |   |                  |  
|Advances to Cia Minera prior to acquisition
      of control          |   | -            |   |   | -              |   |   | (297,485         | )
|Mineral property exploration expenditures                             |   | (1,764,719   | ) |   | (2,292,156     | ) |   | (777,586         | )
|Property, plant and equipment purchases                               |   | (93,492      | ) |   | (72,208        | ) |   | (18,331          | )
|Reclamation bonds                                                     |   | -            |   |   | -              |   |   | (2,500           | )
|                                                                      |   | (1,858,211   | ) |   | (2,364,364     | ) |   | (1,095,902       | )
|Increase (decrease) in cash and cash equivalents                      |   | (2,767,240   | ) |   | (4,702,625     | ) |   | 7,978,095        |  
|CASH AND CASH EQUIVALENTS,Beginning                                   |   | 6,342,481    |   |   | 11,045,106     |   |   | 3,067,011        |  
|CASH AND CASH
      EQUIVALENTS,Ending                                | $ | 3,575,241    |   | $ | 6,342,481      |   | $ | 11,045,106       |  
|                                                                      |   |              |   |   |                |   |   |                  |  
|SUPPLEMENTARY CASH FLOW DISCLOSURES                                   |   |              |   |   |                |   |   |                  |  
|Cash paid for:                                                        |   |              |   |   |                |   |   |                  |  
|Interest expense                                                      | $ | -            |   | $ | 87             |   | $ | 16               |  
|3,164,702 shares issued for
      acquisition of Cia Minera -Non-cash |   |              |   |   |                |   |   |                  |  
|investing                                                             |   | -            |   |   | -              |   |   | 7,215,520        |  

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

74

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended
      December 31, 2007, and the year ended January 31, 2007
|(Expressed in
      Canadian dollars)                                                                                 

NOTE 1 - NATURE OF OPERATIONS

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

The Company is in the exploration stage and is in the process
of determining whether these properties contain ore reserves which are
economically recoverable.

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

These audited consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting principles
(GAAP) 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 be required to raise new financing through the sale
of shares or issuance of debt to continue with the exploration and development
of its mineral properties. Although management intends to secure additional
financing as may be required, there can be no assurance that management will be
successful in its efforts to secure additional financing 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. These audited
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

NOTE 2 - CHANGE OF FISCAL YEAR END

During 2007, the Company changed its fiscal year end from
January 31stto December 31stto correspond to the
December 31stfiscal year end of the Companys Mexican operating
subsidiaries, which report on a calendar year basis. The effect of this change
resulted in a comparative eleven months fiscal period ended December 31, 2007
for the consolidated statements of operations and comprehensive loss,
shareholders equity, and cash flows.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

|i) | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | These consolidated financial statements have been
      prepared in Canadian Dollars in accordance with Canadian generally
      accepted accounting principles and include the accounts of the Company and
      its Mexican subsidiaries. A summary of the differences between accounting
      principles generally accepted in Canada and those generally accepted in
      the United States is contained in Note 24. All significant inter-company
      balances and transactions have been eliminated on consolidation. The
      Companys Mexican subsidiaries are Oniva Silver and Gold Mines S.A.,
      (Oniva Silver) which is wholly-owned, Promotora Avino, S.A. De C.V.
      (Promotora) in which the Company has a direct 79.09% ownership, and
      Compania Minera Mexicana de Avino, S.A. de C.V. (Cia Minera) in which
      the Company has a 50.0% direct ownership and an additional 39.35% indirect
      effective ownership held through Promotora.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The Company acquired control of Promotora and Cia Minera
      on July 17, 2006 (see Note 4). Prior to the acquisition of control, the
      Company accounted for its 49% ownership of Cia Minera using the equity
      method. Under the equity method, the Companys original investment in Cia
      Minera was recorded at cost, and subsequently adjusted to reflect the
      Companys share of earnings or loss in Cia Minera.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

75

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

|i)   | Basis of presentation(continued)                                                                                                                                                                                                                                         
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                          
|     | These consolidated financial statements include the net
      assets and operations of the Promotora and Cia Minera subsidiaries on a
      consolidated basis beginning from July 17, 2006 onward.                                                                      
|     |                                                                                                                                                                                                                                                                          
|ii)  | Cash and cash equivalents                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                          
|     | The Company considers all highly liquid instruments with
      original maturities of three months or less on the date of purchase to be
      cash equivalents. Cash equivalents are carried at cost, plus accrued
      interest, which approximates fair market value.
|     |                                                                                                                                                                                                                                                                          
|iii) | Property, plant and equipment                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                          
|     | Property, plant and equipment is stated at cost less
      accumulated amortization. Amortization is recorded over the estimated
      useful lives of the assets on the declining balance basis at the following
      annual rates:                                    

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


|    | The mine mill, machinery, plant facilities and equipment
      (see Note 6) were acquired on July 17, 2006 and are not in active use, as
      the Company is in the process of refurbishing these assets. Accordingly,
      these assets are considered to be under reconstruction and no amortization
      has been recorded on them.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|iv) | Mineral properties, deferred exploration and
      development expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company follows CICA Accounting Guideline 11,
      Enterprises in the Development Stage. Mineral property acquisition,
      exploration and development costs are deferred until the property to which
      they relate is placed into production, sold, allowed to lapse or
      abandoned. Mineral property acquisition costs include the cash
      consideration and the fair value of common shares issued for mineral
      property interests based on the observed trading price of the shares.
      Mineral exploration costs such as field labour and consultants, geology
      and assaying, and mining claims are capitalized and carried at cost until
      the properties to which they relate are placed into production, sold or
      management determines a permanent impairment in value. Development costs
      incurred to access ore bodies identified in the current mining plan will
      be expensed as incurred after production has commenced.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Development costs necessary to extend a mine beyond those
      areas identified in the current mining plan and which are incurred to
      access additional reserves are deferred until the incremental reserves are
      mined. Mineral properties and development costs, including the mineral
      acquisition and direct mineral exploration costs relating to the current
      mining plan, will be depleted and amortized using the units-of-production
      method over the estimated life of the ore body based on proven and
      probable reserves once commercial production commences.                                                                                                                                                                                                                                                                                                                                                                              

76

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

|v)    | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | Investments in the shares of companies over which Avino
      has the ability to exercise significant influence, but not control, are
      accounted for using equity method. Accordingly, the Company includes its
      share of the investees net income or loss for the year in its operations.
      The investment is initially recorded at cost and increased or decreased
      for the Companys share of net income or loss respectively. In those
      instances where the Companys share in the investees cumulative net
      losses exceeds the carrying amount of the Companys investment, the
      Company records its share of the investees losses as a liability only if
      it has determined that it has ongoing obligations or commitments towards
      the investee. In those circumstances where the Company has no ongoing
      obligations or commitments to support the investee, the Company records
      cumulative losses only to the extent of the carrying amount of the
      investment.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | Investments in shares of public companies traded on an
      active market over which Avino does not have control or exercises
      significant influence are classified as available-for-sale and accounted
      for at fair market value, based upon quoted market share prices at the
      consolidated balance sheet date. Unrealized gains or losses on these
      investments are recorded as other comprehensive income or loss, unless a
      decline in value is considered to be other than temporary. Purchases and
      sales of investments are measured on a settlement date basis.                                                                                                                                                                                                                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|vi)   | Translation of foreign currencies and foreign
      subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | The Companys integrated Mexican foreign subsidiaries are
      financially and operationally dependent on the Company. The Company uses
      the temporal method to translate the accounts of its integrated foreign
      operations into Canadian dollars. Monetary assets and liabilities are
      translated at the exchange rates in effect at the balance sheet date.
      Non-monetary assets and liabilities are translated at historical rates.
      Revenues and expenses are translated at rates in effect during the period,
      except for amortization, which is translated on the same basis as the
      related assets. The resulting exchange gains or losses are recognized in
      income.                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|vii)  | Comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | Effective February 1, 2007 comprehensive loss is
      comprised of the sum of the net loss and other comprehensive income or
      loss which includes unrealized gains or losses from changes in the fair
      market value of available-for-sale investments, changes in the fair market
      value of derivative instruments designated as cash flow hedges and
      currency translation adjustments on self-sustaining foreign operations.
      The Company does not have any derivative instruments or self-sustaining
      foreign operations and currently the Companys other comprehensive income
      (loss) is comprised only of changes in the fair value of the Companys
      available-for-sale investments.                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|viii) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | (a) | Classification                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Financial instruments are classified into one of five
      categories: held-for-trading, held-to-maturity investments, loans and
      receivables, available-for-sale financial assets or other financial
      liabilities. All financial instruments are measured at fair value except
      for loans and receivables, held-to-maturity investments and other
      financial liabilities which are measured at amortized cost. Subsequent
      measurement and accounting for changes in the value of these investments
      will depend on their initial classification as follows: held-for-trading
      financials assets are measured at fair value with changes in fair value
      recognized in operations. Available-for-sale financial instruments are
      measured at fair value with changes in fair value recorded in other
      comprehensive income until the change in value is realized or the
      instrument is derecognized or permanently impaired.

77

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

|viii) | Financial instruments (continued)
|----- | ---------------------------------
|      |                                  
|      | (a)                              
|      |                                  
|      |                                  
|      |                                  
|      | (b)                              
|      |                                  
|      |                                  
|      |                                  
|      | (c)                              
|      |                                  
|      |                                  
|      |                                  
|      | (d)                              
|      |                                  
|      |                                  
|      |                                  
|      | (e)                              
|      |                                  
|      |                                  
|      |                                  
|      | (f)                              
|      |                                  
|      |                                  
|      |                                  
|      | (g)                              
|      |                                  
|      |                                  

78

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

|viii) | Financial instruments (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | (h)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ix)   | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | The preparation of financial statements in accordance
      with Canadian generally accepted accounting principles requires management
      to make estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reported periods. Significant
      areas requiring the use of estimates relate to the recoverability or
      valuation of sales taxes recoverable, property, plant, equipment, and
      mineral properties, the valuation of asset retirement obligations, useful
      lives for amortization, recognition and disclosure of future income tax
      assets and liabilities, and stock-based compensation. Actual results could
      differ from those estimates.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|x)    | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | The Company follows the asset and liability method of
      accounting for income taxes. Future income tax assets and liabilities are
      determined based on temporary differences between the accounting and taxes
      bases for existing assets and liabilities, and are measured using the tax
      rates expected to apply when these differences reverse. A valuation
      allowance is recorded against any future income tax asset if it is more
      likely than not that the asset will not be realized.                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | The Company follows CICA Emerging Issues Committee
      Abstract 146 Flow-Through Shares. Canadian tax legislation permits
      a company to issue securities referred to as flow-through shares whereby
      the Company assigns the tax deductions arising from the related resource
      expenditures, to the shareholders. When resource expenditures are
      renounced to the investors and the Company has reasonable assurance that
      the expenditures will be completed, a future income tax liability is
      recognized for the net tax effect of the deductions renounced, and share
      capital is reduced.                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | If the Company has sufficient unrecognized tax losses
      carried forward or other unrecognized future income tax assets to offset
      all or part of this future income tax liability, a portion of such
      unrecognized future income tax assets is recorded as a future income tax
      recovery up to the amount of the future income tax liability that would
      otherwise be recognized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

79

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

|xi)   | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | The Company follows CICA Handbook Section 3870 Stock
      Based Compensation and Other Stock-Based Payments. Accordingly the
      Company recognizes stock-based compensation expense for the estimated fair
      value of stock-based payments. Compensation costs attributable to stock
      options or similar equity instruments granted to employees are measured at
      the fair value at the grant date using the Black-Scholes option pricing
      model, and are expensed over the expected vesting period. Transactions in
      which goods or services are received from non-employees in exchange for
      the issuance of equity instruments are accounted for based on the fair
      value of the consideration received or the fair value of the equity
      instruments issued, whichever is more reliably measurable. Consideration
      received on the exercise of stock options is recorded as share capital
      with a corresponding reduction in the contributed surplus related to the
      options exercised.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|xii)  | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | Basic loss per share is calculated using the weighted
      average number of common shares outstanding during the year. Diluted loss
      per share is calculated giving effect to the potential dilution that would
      occur if securities or other contracts to issue common shares were
      exercised or converted to common shares using the treasury method. The
      treasury method assumes that proceeds received from the exercise of stock
      options and warrants are used to repurchase common shares at the
      prevailing market rate. Stock options and warrants are dilutive when the
      average market prices of the common shares during the year exceed the
      exercise prices of the options and warrants.                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | For the year ended December 31, 2008, the period ended
      December 31, 2007 and the year ended January 31, 2007, the existence of
      warrants and options affects the calculation of loss per share on a fully
      diluted basis. As the affect of this dilution is to reduce the reported
      loss per share (anti-dilutive), fully diluted loss per share information
      has not been shown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|xiii) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      | The Company recognizes the fair value of its liability
      for asset retirement obligations, including site restoration costs in the
      year in which such liabilities are incurred and can be reasonably
      estimated. Upon recognition of an asset retirement obligation, the site
      restoration costs are capitalized as a part of the mineral property. In
      periods subsequent to initial measurement, the asset retirement obligation
      is adjusted for both the passage of time and revisions to the original
      estimates. If the obligation is settled for other than the carrying amount
      of the liability, a gain or loss on the settlement is recognized. The
      Company estimated its site restoration costs as at December 31, 2008 to be
      $nil (December 31, 2007 - $nil) as significant disturbance of sites giving
      rise to restoration obligations has not yet
occurred.                                                                                                                 

80

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

|xiv) | Impairment of long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | The recoverability of long-lived assets, which includes
      property, plant, equipment, and mineral properties is assessed for
      impairment annually or whenever events or changes in circumstances
      indicate that the carrying amount may not be recoverable. Recoverability
      is based on factors such as future asset utilization and the future
      undiscounted cash flows expected to result from the use or sale of the
      related assets. An impairment loss is recognized when the carrying amount
      of an asset that is held and used exceeds the projected undiscounted
      future net cash flows expected from its use and disposal less costs to
      sell, and is measured as the amount by which the carrying amount of the
      asset exceeds its fair value, which is measured based on discounted cash
      flows when quoted market prices are not available.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | Impairment in the carrying value of non-producing mineral
      properties may occur when one of the following conditions
exists:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|    | Once impairment has been determined in the carrying value
      of a mineral property, it will be written-down to fair value. Amounts
      shown for mineral properties reflect costs incurred to date, less
      impairments, and are not intended to reflect present or future
    values.                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                             
|xv) | New Accounting Standards                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                             
|    | Effective January 1, 2008, the Company adopted the
      following new accounting standards issued by the Canadian Institute of
      Chartered Accountants (CICA). These accounting policy changes were
      adopted on a prospective basis with no restatement of prior period
      consolidated financial statements:

| | a) | CICA Section 1400 General Standards of Financial
      Statement Presentationprovides revised guidance on managements
      responsibility to assess and disclose the Companys ability to continue as
      a going concern. The required disclosure is included in Note 1 to the
      financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | b) | CICA Section 1535 Capital Disclosuresrequires the
      disclosure of both qualitative and quantitative information that provides
      users of financial statements with information to evaluate the entitys
      objectives, policies and procedures for managing capital. The required
      disclosure is included in Note 16 to these financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | c) | CICA Section 3862 Financial Instruments - Disclosuresand CICA Section 3863 Financial Instruments - Presentationreplace Section 3861 Financial Instruments - Disclosure and
      Presentation. Section 3862 provides users with information to evaluate
      the significant of the financial instruments of the entitys financial
      position and performance, nature and extent of risks arising from
      financial instruments, and how the entity manages those risks. Section
      3863 deals with the classification of financial instruments, related
      interest, dividends, losses and gains and the circumstances in which
      financial assets and financial liabilities are offset. The adoption of
      these new standards did not result in a material impact on the companys
      financial statements and the enhanced disclosures of financial instrument
      risks are included in Note 3 (viii).

81

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

|xvi) | Recent Accounting Pronouncements
|---- | --------------------------------
|     |                                 
|     | (a)                             
|     |                                 
|     | (b)                             
|     |                                 
|     | (c)                             
|     |                                 
|     | (d)                             

82

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 4 - ACQUISITION OF COMPANIA MINERA MEXICANA DE AVINO,
S.A. DE C.V.

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

The historic operations of Cia Minera involved the mining of
commercial grade ores which produced silver, gold and copper. This plant and
mine ceased operations in November 2001 due to low metal prices and the closure
of a smelter. The Company is evaluating the re-activation of the mine and has
commenced exploration activities on Cia Mineras mineral properties in the state
of Durango, Mexico (see Note 7).

The July 17, 2006 acquisition was accomplished by a share
exchange in which the Company issued 3,164,702 shares as consideration for the
purchase of the additional 39.25% interest in Cia Minera. The shares issued as
consideration were valued based on the July 17, 2006 closing market price per
share of $2.28. The acquisition was accounted for using the purchase method and
these consolidated financial statements include the assets, liabilities and
operations of these subsidiaries beginning on July 17, 2006, the date of
acquisition of control. The acquisition of the 39.25% interest described above
did not include an effective 1.1% interest to be acquired from an estate subject
to approval and transfer of the shares to the Company by the trustee for that
estate. On December 21, 2007 approval was received and the Company obtained the
1.1% interest from the estate for no additional consideration. As at December
31, 2007 and 2008 the Companys ownership interest in Cia Minera is 89.35% .
(See Note 22(a)) The cost of the acquisition of Cia Minera was comprised as
follows:

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

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

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

83

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 4 - ACQUISITION OF COMPANIA MINERA MEXICANA DE AVINO,
S.A. DE C.V. (Continued)

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

Prior to fiscal 2006, the Company had determined that it did
not have a commitment or obligation to Cia Minera and accordingly did not record
its equity interest in the losses of Cia Minera. During fiscal 2006 the Company
determined that it had a commitment to Cia Minera. Accordingly, it began to
recognize in operations its equity interest in the losses of Cia Minera. In
fiscal 2006, the Company recognized into operations its interest in previously
unrecorded equity losses of Cia Minera in the amount $342,596. During the year
ended January 31, 2007 the Company recognized a further $33,581 of equity losses
in Cia Minera, resulting in cumulative equity losses recognized of $376,177 in
Cia Minera prior to the acquisition of control on July 17, 2006.

NOTE 5 - NON-CONTROLLING INTEREST

The Company has an 89.35% interest in its subsidiary Cia
Minera, and the remaining 10.65% portion is presented as a non-controlling
interest. (See Note 22(a)) The non-controlling interest in Cia Mineras
cumulative losses has been recorded as a net amount recoverable by the Company
from Cia Minera, net of a valuation allowance, since the owners of the 10.65%
minority interest in Cia Minera do not have a demonstrated commitment towards
funding their share of Cia Mineras net losses. Accordingly, the non-controlling
interest in the Cia Minera operating losses recoverable are not recognized as an
asset in these financial statements.

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

|Non-controlling interest in Cia Minera
      recoverable at acquisition, July 17, 2006 | $ | 111,874  |  
|-------------------------------------------------------------------------------------- | - | -------- | -
|Non-controlling interest in Cia Mineras net loss
      recoverable since acquisition  |   | 226,591  |  
|Loss valuation allowance                                                               |   | (338,465 | )
|                                                                                       |   |          |  
|Non-controlling interest - net carrying amount                                         | $ |         |  

NOTE 6  PROPERTY, PLANT AND EQUIPMENT

|                                    |   |           |  |   |              |  |   | December 31,   |  |   | December 31,         | 
|----------------------------------- | - | --------- |  | - | ------------ |  | - | -------------- |  | - | -------------------- | 
|                                    |   |           |  |   | Accumulated  |  |   | 2008           |  |   | 2007                 | 
|                                    |   | Cost      |  |   | Amortization |  |   | Net Book Value |  |   | Net
      Book Value | 
|Office equipment, furniture and     |   |           |  |   |              |  |   |                |  |   |                      | 
|fixtures                            | $ | 5,512     |  | $ | 4,318        |  | $ | 1,194          |  | $ | 1,493                | 
|Computer equipment                  |   | 27,642    |  |   | 4,714        |  |   | 22,928         |  |   | 22,309               | 
|Mine mill, machinery and            |   |           |  |   |              |  |   |                |  |   |                      | 
|processing plant                    |   | 1,105,621 |  |   | -            |  |   | 1,105,621      |  |   | 1,016,823            | 
|Mine facilities
      and equipment |   | 48,416    |  |   | 2,146        |  |   | 46,270         |  |   | 44,765               | 
|                                    |   |           |  |   |              |  |   |                |  |   |                      | 
|                                    | $ | 1,187,191 |  | $ | 11,178       |  | $ | 1,176,013      |  | $ | 1,085,390            | 

84

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 7 - MINERAL PROPERTIES

|                            |   |            |  |   | British  |  |   |        |  |   |            | 
|--------------------------- | - | ---------- |  | - | -------- |  | - | ------ |  | - | ---------- | 
|                            |   | Durango    |  |   | Columbia |  |   | Yukon  |  |   |            | 
|                            |   | Mexico     |  |   | Canada   |  |   | Canada |  |   | Total      | 
|                            |   |            |  |   |          |  |   |        |  |   |            | 
|Balance, January 31, 2007   | $ | 10,225,805 |  | $ | 538,649  |  | $ | 1      |  | $ | 10,764,455 | 
|                            |   |            |  |   |          |  |   |        |  |   |            | 
|Exploration costs incurred  |   |            |  |   |          |  |   |        |  |   |            | 
|during year:                |   |            |  |   |          |  |   |        |  |   |            | 
|Assays                      |   | 59,901     |  |   | 1,379    |  |   | -      |  |   | 61,280     | 
|Assessment and taxes        |   | 13,198     |  |   | 139      |  |   | -      |  |   | 13,337     | 
|Drilling                    |   | 1,891,527  |  |   | 65,577   |  |   | -      |  |   | 1,957,104  | 
|Field supplies and services |   | -          |  |   | 911      |  |   | -      |  |   | 911        | 
|Geological                  |   | 298,706    |  |   | 1,012    |  |   | -      |  |   | 299,718    | 
|Balance, December 31, 2007  | $ | 12,489,137 |  | $ | 607,667  |  | $ | 1      |  | $ | 13,096,805 | 
|                            |   |            |  |   |          |  |   |        |  |   |            | 
|Exploration costs incurred  |   |            |  |   |          |  |   |        |  |   |            | 
|during year:                |   |            |  |   |          |  |   |        |  |   |            | 
|Assays                      |   | 98,442     |  |   | 67       |  |   | 303    |  |   | 98,812     | 
|Assessment and taxes        |   | 60,565     |  |   | -        |  |   | -      |  |   | 60,565     | 
|Drilling                    |   | 1,276,941  |  |   | -        |  |   | -      |  |   | 1,276,941  | 
|Geological                  |   | 326,564    |  |   | 387      |  |   | 1,450  |  |   | 328,401    | 
|                            |   |            |  |   |          |  |   |        |  |   |            | 
|Balance, December 31, 2008  | $ | 14,251,649 |  | $ | 608,121  |  | $ | 1,754  |  | $ | 14,861,524 | 

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

|(a) | Durango, Mexico                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company acquired the Durango mineral properties
      through the acquisition of Cia Minera during the January 31, 2007 year-end
      (see Note 4). The Companys subsidiary Cia Minera owns 42 mineral claims
      in the state of Durango, Mexico.                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In addition four core mineral claims are under leased
      concessions  exploitation rights to and for the Unification La Platosa,
      are granted by a lease agreement, to Cia Minera from Minerales de Avino SA
      de CV. The two concessions, Primer Rey and Avino y Emma, are included in
      the lease agreement, but are discrete and lie under the town of San Jose
      de Avino. The agreement is valid until October 31, 2010. An ongoing
      dispute regarding royalties on the leased mineral claims was settled
      during the period ended December 31, 2007 (see Note 19).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Companys mineral claims in Mexico are divided into
      the following four properties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | (i) | Avino mine area property                                                                                                                                                                                                                                                                                                                                            
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Avino mine property is situated around the towns of
      Panucho de Coronado and San Jose de Avino and surrounding the formerly
      producing Avino mine. There are four exploration concessions covering
      154.4 hectares, 24 exploitation concessions covering 1,284.7 hectares and
      one leased exploitation concession covering 98.83
  hectares.

85

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 7 - MINERAL PROPERTIES (Continued)

|(a) | Durango, Mexico (continued)                                                                              
|--- | ---------------------------------------------------------------------------------------------------------
|    |                                                                                                          
|    | (ii)                                                                                                     
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|    | (iii)                                                                                                    
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|    | (iv)                                                                                                     
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|(b) | British Columbia, Canada                                                                                 
|    |                                                                                                          
|    | The Companys mineral claims in British
        Columbia are divided into the following three properties:
|    |                                                                                                          
|    | (i)                                                                                                      
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|    | (ii)                                                                                                     
|    |                                                                                                          
|    |                                                                                                          
|    |                                                                                                          
|    | (iii)                                                                                                    
|    |                                                                                                          
|    |                                                                                                          

86

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 7 - MINERAL PROPERTIES (Continued)

|(c) | Yukon, Canada                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                    
|    | In 2003 the Company acquired a 100% interest in 14 quartz
      leases, located in the Mayo Mining Division of the Yukon, Canada by
      issuing 200,000 common shares at a price of $0.50 per share for total
      consideration of $100,000. The property was written down to a nominal
      value of $1 in fiscal 2006 by a charge to operations of
$103,242.
|    |                                                                                                                                                                                                                                                                                                                                                                    
|    | On November 12, 2008, the Company entered into an option
      agreement with Mega Silver Inc. (Mega Silver), whereby Mega Silver can
      earn the excusive right and option to acquire a 100% title and interest in
      the Eagle Property located in the Yukon Territory.                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                    
|    | To earn a 75% interest in the Eagle Property, Mega Silver
      must:                                                                                                                                                                                                                                                                                              

| | • | Incur Exploration Costs totalling $7.1 million
      over five years       
| | - | ---------------------------------------------------------------------------
| |   |                                                                            
| | • | Make total cash payments of $400,000 over five
      years to Avino.       
| |   |                                                                            
| | • | Issue 500,000 common shares of Mega Silver in
      Years 4 and 5 to Avino.

After earning a 75% interest, Mega Silver may either elect to
form a Joint Venture with Avino, or earn an additional 25% interest, whereby
Mega Silver must:

| | • | Take the property into production within 3 years, subject
      to a 2.5% Net Smelter Return and minimum $200,000 annual advance royalty
      payments payable for 5 years or until production begins (also see Note
      22(c)).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the year, the Company received $25,000 upon execution of
the agreement which was recorded in income.

NOTE 8 - INVESTMENTS IN RELATED COMPANIES

Investments in related companies comprise the following:

|                         |   |         |  |   |                      |   |   | December 31, |  |   | December 31, | 
|------------------------ | - | ------- |  | - | -------------------- | - | - | ------------ |  | - | ------------ | 
|                         |   |         |  |   | Accumulated          |   |   | 2008         |  |   | 2007         | 
|                         |   |         |  |   | Unrealized           |   |   | Fair         |  |   | Fair         | 
|                         |   | Cost    |  |   | Gains
      (losses) |   |   | Value        |  |   | Value        | 
|                         |   |         |  |   |                      |   |   |              |  |   |              | 
|Bralorne Gold Mines Ltd. | $ | 205,848 |  | $ | (116,274             | ) | $ | 89,574       |  | $ | 197,064      | 
|Levon Resources Ltd.     |   | 4,236   |  |   | 12,708               |   |   | 16,944       |  |   | 17,650       | 

87

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

|Oniva International Services |   |         |  |   |          |   |   |         |  |   |         | 
|---------------------------- | - | ------- |  | - | -------- | - | - | ------- |  | - | ------- | 
|Corporation                  |   | 1       |  |   | -        |   |   | 1       |  |   | 1       | 
|                             | $ | 210,085 |  | $ | (103,566 | ) | $ | 106,519 |  | $ | 214,715 | 

Investments in related parties include the following marketable
securities as at December 31, 2008: During the year ended December 31, 2008, the
Company recognized a $108,196 (December 31, 2007 - $12,487) unrealized loss on
investments in related companies classified as available-for-sale in other
comprehensive income, representing the change in fair value during the
period.

Bralorne Gold Mines Ltd. (Bralorne)

The Companys investment in Bralorne consists of 179,149 common
shares with a quoted market value of $89,575 as at December 31, 2008 (December
31, 2007 - $197,064). Bralorne is a public company with common directors.

NOTE 8 - INVESTMENTS IN RELATED COMPANIES (Continued)

Levon Resources Ltd. (Levon)

The Companys investment in Levon consists of 141,200 common
shares with a quoted market value of $16,944 as at December 31, 2008 (December
31, 2007 - $17,650). Levon is a public company with common directors.

Oniva International Services Corporation (Oniva)

The Company owns a 16.67% interest in Oniva, a private company
with common management, which provides office and administration services to the
Company. The remaining 83.33% is shared equally between five other companies
that are related by some common directors and management. See Note 15 for
disclosure on the Companys commitment to Oniva.

NOTE 9 - SALES TAX RECOVERABLE

The Companys sales tax recoverable consists primarily of the
Mexican Value-Added Tax (VAT) recoverable. Although the Company has been
pursuing the collection of the VAT, management wrote down the value of the VAT
recoverable in the amount of $213,652 (MXN$2,228,352) during 2008 to reflect the
assessment of the recoverable amount.

NOTE 10 - SHARE CAPITAL

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

88

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

During the year ended December 31, 2008
there were no warrants issued, exercised or expired. On February 29, 2008, the
TSX Venture Exchange approved the extension of the expiry date for the warrants
expiring on March 20, 2008. The new expiry date for these warrants is March 20,
2009. Subsequent to the year end, the TSX Venture Exchange granted approval to
extend these warrants to March 20, 2010 as disclosed in Note 22.

Details of share purchase warrants
outstanding as of December 31, 2008 and 2007 are:

| |                |                | Warrants   
| | -------------- | -------------- | -----------
| | Expiry Date    | Exercise Price | Outstanding
| |                |                |            
| | March 20, 2009 | $2.50          | 2,498,750  

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

89

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 10 - SHARE CAPITAL (Continued)

|                                                  |  |                   |   |   | Weighted Average | 
|------------------------------------------------- |  | ----------------- | - | - | ---------------- | 
|                                                  |  | Underlying Shares |   |   | Exercised Price  | 
|                                                  |  |                   |   |   |                  | 
|Stock options outstanding,
      January 31, 2007 |  | 1,476,300         |   | $ | 3.25             | 
|Expired or cancelled                              |  | (25,000           | ) | $ | 3.99             | 
|                                                  |  |                   |   |   |                  | 
|Stock options outstanding, December 31, 2007      |  | 1,451,300         |   | $ | 3.23             | 
|Granted                                           |  | 600,000           |   | $ | 1.65             | 
|Expired or cancelled                              |  | (196,800          | ) | $ | 1.97             | 
|                                                  |  |                   |   |   |                  | 
|Stock options outstanding, December 31, 2008      |  | 1,854,500         |   | $ | 2.85             | 

Details of stock options outstanding are:

|                   |                | December 31, 2008, |                         
|------------------ | -------------- | ------------------ | ------------------------
|                   |                | Stock Options      | December 31, 2007, Stock
|Expiry Date        | Exercise Price | Outstanding        | Options Outstanding     
|October 21, 2008   | $1.20          | -                  | 41,800                  
|April 5, 2010      | $1.35          | 262,000            | 262,000                 
|September 26, 2010 | $1.35          | 52,500             | 52,500                  
|March 15, 2011     | $2.72          | 120,000            | 120,000                 
|April 26, 2011     | $3.99          | 940,000            | 1,000,000               
|February 26, 2013  | $1.65          | 480,000            | -                       
|                   |                | 1,854,500          | 1,476,300               

As of December 31, 2008, 1,854,500 stock options (December 31,
2007  1,451,300) were exercisable with a weighted average remaining contractual
life of 2.62 years (December 31, 2007  3.03 years).

NOTE 11  STOCK-BASED COMPENSATION

During 2008 the Company granted stock options to various
officers, directors, consultants and employees of the Company to purchase up to
a total of 600,000 common shares at an exercise price of $1.65 per share
pursuant to the Companys stock option plan. The options vested immediately and
are exercisable on or before February 26, 2013. The Company recorded stock-based
compensation expense in the amount of $585,800 (December 31, 2007 - $Nil;
January 31, 2007 - $2,860,603). In addition the Company recorded stock based
compensation expenses of $20,200 (December 31, 2007 - $27,863; January 31, 2007
- $195,600) for shareholder and investor relations.

During the 2008 year, 41,800 options expired and 155,000 stock
options were forfeited or cancelled.

Option-pricing requires the use of highly subjective estimates
and assumptions including the expected stock price volatility. Changes in the
underlying assumptions can materially affect the fair value estimates.

90

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 11  STOCK-BASED COMPENSATION (Continued)

The fair value of the options granted to officers, directors
and employees was calculated using the Black-Scholes model with following
weighted average assumptions and resulting grant date fair value:

|                                                |   | Year Ended   |  |  | Period Ended |  |   | Year Ended  | 
|----------------------------------------------- | - | ------------ |  |  | ------------ |  | - | ----------- | 
|                                                |   | December 31, |  |  | December 31, |  |   | January 31, | 
|                                                |   | 2008         |  |  | 2007         |  |   | 2007        | 
|Assumptions:                                    |   |              |  |  |              |  |   |             | 
|Risk-free interest rate                         |   | 3.32%        |  |  |             |  |   | 4.40%       | 
|Expected dividend yield                         |   |             |  |  |             |  |   |            | 
|Expected option life (years)                    |   | 5            |  |  |             |  |   | 5           | 
|Expected stock price
      volatility           |   | 78.23%       |  |  |             |  |   | 91%         | 
|Weighted average
      fair value at grant date | $ | 1.01         |  |  |             |  | $ | 2.89        | 

NOTE 12  INVESTOR RELATIONS EXPENSES

Investor relations expenses consist of expenses related to
disseminated publications and other communications with shareholders, required
by regulatory or otherwise. In addition, the fair values of stock options
granted to investor relations consultants are included in shareholder and
investor relations expenses. The fair values of the stock options is calculated
using the Black-Scholes option pricing model and is measured and expensed over
the 12 month period over which services are provided and the options vest.
During 2008 investor relations consultants were granted 20,000 stock options
(December 31, 2007  Nil; January 31, 2007  130,000) The shareholder and
investor relations expense for 2008 includes $20,200 (December 31, 2007 -
$27,863; January 31, 2007 - $195,600) for the fair value of stock options
vesting to investor relations consultants. The fair values of these options were
calculated using the Black-Scholes model with following weighted average
assumptions and resulting grant date fair values:

|                                                |   | Year Ended   |  |  | Period       |  |   | Year Ended  | 
|----------------------------------------------- | - | ------------ |  |  | ------------ |  | - | ----------- | 
|                                                |   | December 31, |  |  | Ended        |  |   | January 31, | 
|                                                |   | 2008         |  |  | December 31, |  |   | 2007        | 
|                                                |   |              |  |  | 2007         |  |   |             | 
|Assumptions:                                    |   |              |  |  |              |  |   |             | 
|Risk-free interest rate (%)                     |   | 3.32%        |  |  | 3.5          |  |   | 4.1         | 
|Expected dividend yield (%)                     |   |             |  |  |             |  |   |            | 
|Expected option life (years)                    |   | 5            |  |  | 3.0          |  |   | 4.7         | 
|Expected stock price
      volatility (%)       |   | 78.23        |  |  | 90           |  |   | 90          | 
|Weighted average
      fair value at grant date | $ | 1.01         |  |  | -            |  | $ | 2.72        | 

91

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 13 - RELATED PARTY TRANSACTIONS AND BALANCES

In the normal course of operations the Company transacts with
companies related to Avinos directors or officers. The balances and
transactions with related parties not disclosed elsewhere in these financial
statements are as follows:

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

| |                                    |   | December 31, 2008 |  |   | December 31, 2007 | 
| | ---------------------------------- | - | ----------------- |  | - | ----------------- | 
| | Directors                          | $ | 9,000             |  | $ | 18,250            | 
| | ABC Drilling Services Inc.         |   | -                 |  |   | 4,578             | 
| | Chevillon Exploration              |   | 16,789            |  |   | -                 | 
| | Frobisher Securities Ltd.          |   | -                 |  |   | 3,707             | 
| | Oniva International Services Corp. |   | 145,011           |  |   | 147,424           | 
| | Sampson Engineering Inc.           |   | -                 |  |   | 2,684             | 
| | Wear Wolfin Design Ltd.            |   | -                 |  |   | 145               | 
| |                                    | $ | 170,800           |  | $ | 176,788           | 

|    | The amounts due to related parties are non-interest
      bearing, unsecured and due on demand.                               
|--- | ------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                               
|(b) | The Company recorded the following amounts for management
      and consulting services provided by the following
  companies:

| |                               |   | Year Ended        |  |   | Period Ended      |  |   | Year Ended       | 
| | ----------------------------- | - | ----------------- |  | - | ----------------- |  | - | ---------------- | 
| |                               |   | December 31, 2008 |  |   | December 31, 2007 |  |   | January 31, 2007 | 
| |                               |   |                   |  |   |                   |  |   |                  | 
| | Intermark Capital Corp        | $ | 96,000            |  | $ | 88,000            |  | $ | 87,000           | 
| | Wear Wolfin Design
      Ltd. |   | 30,000            |  |   | 27,500            |  |   | 30,000           | 
| |                               | $ | 126,000           |  | $ | 115,500           |  | $ | 117,000          | 

|(c) | The Company recorded the following amounts for other
      services provided by the following companies:
|--- | --------------------------------------------------------------------------------------------------------

| |                                  |   | Year Ended        |  |   | Period Ended      |   |   | Year Ended       | 
| | -------------------------------- | - | ----------------- |  | - | ----------------- | - | - | ---------------- | 
| |                                  |   | December 31, 2008 |  |   | December 31, 2007 |   |   | January 31, 2007 | 
| | ABC Drilling Services Inc.       | $ | -                 |  | $ | 65,577            |   | $ | 53,837           | 
| | Bralorne Gold Mines Ltd.         |   | -                 |  |   | -                 |   |   | 6,854            | 
| | Chevillon Exploration Consulting |   | 16,789            |  |   | -                 |   |   | -                | 
| | Sampson Engineering Inc.         |   | 34,698            |  |   | 36,100            |   |   | 36,600           | 
| | National Media Associates        |   | -                 |  |   | (40,513           | ) |   | 84,279           | 
| |                                  | $ | 51,487            |  | $ | 142,190           |   | $ | 181,570          | 

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

| |                                |   | Year Ended        |  |   | Period Ended      |  |   | Year Ended       | 
| | ------------------------------ | - | ----------------- |  | - | ----------------- |  | - | ---------------- | 
| |                                |   | December 31, 2008 |  |   | December 31, 2007 |  |   | January 31, 2007 | 
| |                                |   |                   |  |   |                   |  |   |                  | 
| | Salaries and benefits          | $ | 109,354           |  | $ | 72,365            |  | $ | 59,523           | 
| | Office and
      miscellaneous |   | 78,804            |  |   | 81,368            |  |   | 60,334           | 
| |                                | $ | 188,158           |  | $ | 153,733           |  | $ | 119,857          | 

92

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 13 - RELATED PARTY TRANSACTIONS AND BALANCES
(Continued)

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

NOTE 14 - SUPPLEMENTARY CASH FLOW INFORMATION

|                                             |   | December 31, |   |   | December 31, |   |   | January 31, |  
|-------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------- | -
|                                             |   | 2008         |   |   | 2007         |   |   | 2007        |  
|Net change in non-cash working
      capital |   |              |   |   |              |   |   |             |  
|items:                                       |   |              |   |   |              |   |   |             |  
|Interest receivable                          | $ | 16,244       |   | $ | 18,996       |   | $ | (38,179     | )
|Sales taxes recoverable                      |   | (206,110     | ) |   | (338,069     | ) |   | (61,665     | )
|Prepaid expenses                             |   | 20,830       |   |   | 21,725       |   |   | (40,497     | )
|Due from related parties                     |   | -            |   |   | 65,770       |   |   | 17,230      |  
|Accounts payable and                         |   |              |   |   |              |   |   |             |  
|accrued liabilities                          |   | (116,303     | ) |   | (790,850     | ) |   | 224,755     |  
|Due to related parties                       |   | (5,988       | ) |   | 35,264       |   |   | (39,894     | )
|                                             |   |              |   |   |              |   |   |             |  
|                                             | $ | (291,327     | ) | $ | (987,164     | ) | $ | 61,750      |  

NOTE 15 - COMMITMENTS

The Company entered into a cost sharing agreement dated October
1, 1997, and amended November 1, 2003 to reimburse Oniva for a percentage of its
overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on
behalf of the Company, and to pay a percentage fee based on the total overhead
and corporate expenses. The agreement may be terminated with one-month notice by
either party. Transactions and balances with Oniva are disclosed in Note 13.

The Company has a contractual minimum drilling commitment for
the exploration of its mineral properties in Durango, Mexico. As at December 31,
2008 the Company is committed to drilling services at an estimated cost of
$121,950 (services denominated in USD$100,123). Alternatively, the Company could
terminate the contract at a cost of $54,200 (USD$44,499). Management expects
that the Companys drilling services requirement in fiscal 2009 will likely
exceed the minimum commitment amount.

The Company has also entered into an agreement in which monthly
operating services will be performed through to September 2009 in Durango,
Mexico at a total committed cost of $93,177 (services denominated in
USD$76,500).

The Companys subsidiary has various lease agreements for their
office premises, use of land and internet at the mine site. The future lease
obligations are as follows including the drilling and services agreement noted
above:

Amount2009
    $
    234,2992010
    
    9,1982011
    
    6,6402012
    
    6,6402013
    
    6,640$
    263,417


93

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 16  CAPITAL MANAGEMENT

The Companys objectives when managing capital are to safeguard
the Companys ability to continue as a going concern in order to pursue the
exploration and development of its properties and to maintain flexible capital
structure for its projects for the benefit of its stakeholders. In the
management of capital, the Company includes the components of shareholders
equity as well as cash and cash equivalents.

The Company manages the capital structure and makes adjustments
  to it in light of changes in economic conditions and the risk characteristics
  of the underlying assets. To maintain or adjust the capital structure, the Company
  may attempt to issue new shares or adjust the amount of cash and cash equivalents.
  Management reviews the capital structure on an ongoing basis and believes that
  this approach, given the relative size of the Company, is reasonable.

NOTE 17 - SEGMENTED INFORMATION

The Companys operations are limited to one industry segment,
being the acquisition, exploration and development of mineral properties.
Regional geographic information pertaining to the Companys mineral properties
is disclosed in Note 7.

NOTE 18 - INCOME TAXES

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

|                                                           |   | Year Ended   |   |   | Period Ended |   |   | Year Ended  |  
|---------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------- | -
|                                                           |   | December 31, |   |   | December 31, |   |   | January 31, |  
|                                                           |   | 2008         |   |   | 2007         |   |   | 2007        |  
|Statutory rate                                             |   | 31.00%       |   |   | 34.12%       |   |   | 34.12%      |  
|                                                           |   |              |   |   |              |   |   |             |  
|Income taxes recovered at the Canadian                     |   |              |   |   |              |   |   |             |  
|statutory rate                                             | $ | 446,469      |   | $ | 473,225      |   | $ | 1,244,882   |  
|Less permanent differences:                                |   |              |   |   |              |   |   |             |  
|Stock-based compensation                                   |   | (181,598     | ) |   |             |   |   | (976,038    | )
|Investor relations
      expense for stock options granted |   | (6,262       | ) |   | (9,507       | ) |   | (66,739     | )
|Reduction for effect of lower Mexican
      tax rates      |   | (7,160       | ) |   | (64,829      | ) |   | (10,644     | )
|Equity based accounting
      loss for interest in Cia     |   |              |   |   |              |   |   |             |  
|Minera Mexicana
      de Avino, S.A. de C.V.               |   |             |   |   |             |   |   | (11,458     | )
|Other non-tax
      deductible expenses                    |   | (762         | ) |   | (1,574       | ) |   | (3,373      | )
|                                                           |   |              |   |   |              |   |   |             |  
|Effect of temporary differences:                           |   |              |   |   |              |   |   |             |  
|Share issuance costs                                       |   | 51,071       |   |   | 71,239       |   |   | 71,239      |  
|                                                           |   |              |   |   |              |   |   |             |  
|Valuation allowance on benefit of tax loss                 |   | (301,758     | ) |   | (468,554     | ) |   | (247,869    | )
|                                                           |   |              |   |   |              |   |   |             |  
|Benefit of Mexican tax losses recognized on reduction of   |   |              |   |   |              |   |   |             |  
|future income tax liability                                |   | (98,653      | ) |   | 501,083      |   |   |            |  
|Income tax
      recovery recognized in the year           | $ | (98,653      | ) | $ | 501,083      |   | $ |            |  

94

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 18 - INCOME TAXES (Continued)

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

|                                                                            |   | December 31, |   |   | December 31, |  
|--------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                                            |   | 2008         |   |   | 2007         |  
|Expected tax recovery rate                                                  |   | 27%          |   |   | 29%          |  
|Non-capital tax losses carried forward                                      | $ | 1,219,963    |   | $ | 1,092,322    |  
|Capital tax losses carried forward                                          |   | 323,886      |   |   | 213,470      |  
|Canadian exploration expenses, Canadian development
      expenses and      |   |              |   |   |              |  
|foreign exploration,
      and development expenses in excess of book value |   |              |   |   |              |  
|of Canadian mineral properties                                              |   | 441,491      |   |   | 507,413      |  
|Share issuance costs                                                        |   | 88,963       |   |   | 143,329      |  
|Tax basis of investments in related companies in excess of
      book value |   | 47,740       |   |   | 30,793       |  
|Undeducted capital cost allowance in excess
      of book value of Canadian |   |              |   |   |              |  
|equipment                                                                   |   | 56,246       |   |   | 60,325       |  
|Future income tax assets                                                    |   | 2,178,289    |   |   | 2,047,652    |  
|Less: valuation
      allowance                                             |   | (2,178,289   | ) |   | (2,047,652   | )
|Net tax assets                                                              | $ |             |   | $ |             |  

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

The future income tax liability presented in these consolidated
financial statements is due to the difference in the carrying amounts and tax
bases of the Mexican mineral properties, mine plant and equipment, which were
acquired in the purchase of Cia Minera (see Note 4). The carrying values of the
Mexican mineral properties, mine plant and equipment reflect the fair values
assigned on the acquisition of control of Cia Minera based on a share exchange,
while the tax bases of these assets are historical undeducted tax amounts that
were nil on acquisition. The future tax liability is attributable to assets in
the tax jurisdiction of Mexico and is presented net of Mexican tax losses
carried forward. The approximate tax effects of each type of temporary
difference that gives rise to future income tax liabilities are as follows:

|                                                               |   | December 31, |   |   | December 31, |  
|-------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                               |   | 2008         |   |   | 2007         |  
|Mexican statutory rate                                         |   | 28%          |   |   | 28%          |  
|Book value of mineral properties in excess of tax bases        | $ | 3,382,547    |   | $ | 2,889,045    |  
|Book value of plant and equipment in excess
      of tax bases |   | 275,092      |   |   | 275,266      |  
|Less: Mexican tax
      losses carried forward                 |   | (1,724,070   | ) |   | (1,329,395   | )
|Future income tax liability                                    | $ | 1,933,569    |   | $ | 1,834,916    |  

95

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 18 - INCOME TAXES (Continued)

The Company has capital losses of $1,472,210 carried forward
and $4,663,163 in non-capital tax losses carried forward available to reduce
future Canadian taxable income. The capital losses can be carried forward
indefinitely unless used. Additionally, the Company has $6,157,392 (denominated
in MEX$62,287,279) in tax losses which are available to reduce future Mexican
taxable income. The Companys Canadian non-capital tax losses and Mexican tax
losses, if unused, expire as follows:

Year of Expiry
    
    Canada
    
    
    Mexico2009
    $
    904,279
    
    $
    2010
    
    343,690
    
    
    1,373,8532014
    
    568,450
    
    
    2016
    
    
    
    
    3,623,2462017
    
    
    
    
    1,160,2932025
    
    799,044
    
    
    2026
    
    646,331
    
    
    2027
    
    643,498
    
    
    2028
    
    757,871
    
    
    $
    4,663,163
    
    $
    6,157,392


NOTE 19  LITIGATION SETTLEMENT

The Companys subsidiary Cia Minera leases four core mineral
claims in consideration for royalties. The lessor had contested the underlying
royalty agreement, and had filed a legal action claiming royalties were owed
from years prior to the Companys acquisition of control of Cia Minera. An
amicable settlement was negotiated during the period ended December 31, 2007
whereby the Company settled the dispute at a cost of $1,497,604 (settlement
denominated in USD$1,500,000).

During the period ended December 31, 2007, the Company recorded
  a litigation settlement expense of $759,302 which was the $1,497,604 amount
  less a prior year accrual of $738,302. The Company paid a $1,398,457 (USD$1,400,000)
  portion of the settlement in the year ended December 31, 2007 and the $99,130
  balance owing (USD$100,000) was paid during the year ended December 31, 2008.
  This payment during the year resulted in a credit to the litigation settlement
  of $2,785 due to the foreign exchange difference on the settlement date.

NOTE 20 - MISAPPROPRIATION LOSS

During fiscal December 31, 2007, the Company incurred a
misappropriation loss of MXN$930,000 (CAD$86,155) as a result of a fraudulent
disbursement initiated by an unknown third party who was able to access the
Companys Mexican bank account. The Companys legal representative and the
Mexican authorities are attempting to retrieve the funds, however there is no
guarantee that these funds will be recovered and the Company has fully provided
for this loss. The Company has taken stringent steps as a result of this loss
including the use of another banks services and has added additional internal
controls over banking transactions to prevent the reoccurrence of such a loss in
the future.

96

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 21  COMPARATIVE FIGURES

Certain prior year comparative figures have been reclassified
to conform to the financial statements presentation adopted for fiscal 2008.

NOTE 22  SUBSEQUENT EVENTS

|(a) | On February 16, 2009, the Companys subsidiary, Cia
      Minera, held a Shareholders Meeting to increase the capital through
      capitalization of loans advanced to Cia Minera by the Company. As a
      result, the Companys ownership interest in Cia Minera has increased to
      99.28%.                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | On February 25, 2009, the Company amended the term of the
      warrants issued pursuant to a private placement in March of 2006. The
      amendment extends the expiry date of 2,498,750 warrants from March 20,
      2009 to March 20, 2010.                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(c) | On April 1, 2009 the option agreement with Mega Silver
      (see Note 7(c)) was amended as follows. After earning a 75% interest, an
      additional 25% interest can be acquired by Mega Silver if commercial
      production commences. Once a commercial production decision is made Mega
      Silver shall pay the Company $200,000; and $200,000 on or before each
      yearly anniversary of the production decision until the later of the fifth
      anniversary or the date commercial production
commences.

NOTE 23 - 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 in most respects conform to accounting principals
generally accepted in the United States (US GAAP). There are certain material
differences between Canadian and US GAAP and if these consolidated financial
statements were prepared in accordance with US GAAP, the impact would be as
follows:

|                                                       |   | December 31, |   |   | December 31, |  
|------------------------------------------------------ | - | ------------ | - | - | ------------ | -
|                                                       |   | 2008         |   |   | 2007         |  
|Balance sheets                                         |   |              |   |   |              |  
|Total assets under Canadian GAAP                       | $ | 20,126,230   |   | $ | 21,190,940   |  
|Deferred
      exploration expenditures (ii)           |   | (14,861,524  | ) |   | (13,096,805  | )
|                                                       |   |              |   |   |              |  
|Total assets
      under US GAAP                       | $ | 5,264,706    |   | $ | 8,094,135    |  
|                                                       |   |              |   |   |              |  
|Total liabilities under Canadian GAAP                  | $ | 2,508,776    |   | $ | 2,532,414    |  
|Future income taxes related to mineral properties (ii) |   | (1,933,569   | ) |   | (1,834,916   | )
|                                                       |   |              |   |   |              |  
|Total liabilities under US GAAP                        | $ | 575,207      |   | $ | 697,498      |  
|                                                       |   |              |   |   |              |  
|Total deficit under Canadian GAAP                      | $ | (23,182,925  | ) | $ | (21,644,049  | )
|Future income taxes related to mineral properties (ii) |   | (402,390     | ) |   | (501,083     | )
|Deferred exploration expenditures (ii)                 |   | (14,861,524  | ) |   | (13,096,805  | )
|                                                       |   |              |   |   |              |  
|Total deficit under US GAAP                            | $ | (38,446,839  | ) | $ | (35,241,937  | )

97

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 23 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

|                                                             |   | December 31, |   |   | December 31, |   |   | January 31, |  
|------------------------------------------------------------ | - | ------------ | - | - | ------------ | - | - | ----------- | -
|                                                             |   | 2008         |   |   | 2007         |   |   | 2007        |  
|Consolidated statements of
      operations                  |   |              |   |   |              |   |   |             |  
|Loss for year under Canadian GAAP                            | $ | (1,538,876   | ) | $ | (885,863     | ) | $ | (3,684,539  | )
|Future income taxes related to mineral
      properties (ii) |   | 98,653       |   |   | (501,083     | ) |   | -           |  
|Exploration
      expenses (ii)                              |   | (1,764,719   | ) |   | (2,332,350   | ) |   | (10,277,556 | )
|Net loss for the year under US GAAP (iii)                    |   | (3,204,942   | ) |   | (3,719,296   | ) |   | (13,962,095 | )
|Comprehensive income (loss) items:                           |   |              |   |   |              |   |   |             |  
|Unrealized gain (loss) on investments (i)                    |   | (108,196     | ) |   | (12,487      | ) |   | 17,116      |  
|                                                             |   |              |   |   |              |   |   |             |  
|Net comprehensive loss                                       | $ | (3,313,138   | ) | $ | (3,731,783   | ) | $ | (13,944,979 | )
|                                                             |   |              |   |   |              |   |   |             |  
|Loss per share under US GAAP - basic and diluted             | $ | (0.16        | ) | $ | (0.18        | ) | $ | (0.76       | )

|                                                     |   | December 31, |   |   | December 31, |   |   | January 31, |  
|---------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ----------- | -
|                                                     |   | 2008         |   |   | 2007         |   |   | 2007        |  
|                                                     |   |              |   |   |              |   |   |             |  
|Statements of cash flows                             |   |              |   |   |              |   |   |             |  
|Cash flows used in operating activities under        |   |              |   |   |              |   |   |             |  
|Canadian GAAP                                        | $ | (909,029     | ) | $ | (2,344,201   | ) | $ | (494,328    | )
|Mineral properties
      expenditures (ii)           |   | (1,764,719   | ) |   | (2,292,156   | ) |   | (751,981    | )
|Cash flows used in operating activities              |   |              |   |   |              |   |   |             |  
|under US GAAP                                        | $ | (2,673,748   | ) | $ | (4,636,357   | ) | $ | (1,246,309  | )
|                                                     |   |              |   |   |              |   |   |             |  
|Cash flows (used in) from investing activities under |   |              |   |   |              |   |   |             |  
|Canadian GAAP                                        | $ | (1,858,211   | ) | $ | (2,364,364   | ) | $ | (1,095,902  | )
|Mineral properties
      expenditures (ii)           |   | 1,764,719    |   |   | 2,292,156    |   |   | 751,981     |  
|                                                     |   |              |   |   |              |   |   |             |  
|Cash flows (used in) from investing activities       |   |              |   |   |              |   |   |             |  
|under US GAAP                                        | $ | (93,492      | ) | $ | (72,208      | ) | $ | (343,921    | )

|i)  | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | US GAAP requires investments available for sale to be
      recorded at fair market value with unrealized gains or losses recognized
      as part of comprehensive income (loss) unless a decline in value is
      considered to be other than temporary. Effective for fiscal December 31,
      2007 the Canadian GAAP treatment is the same, however in fiscal January
      31, 2007 such investments were recorded in accordance with Canadian GAAP
      at the lower of cost and market; long-term investments in marketable
      securities are written down to market when impairment is considered other
      than temporary, in which case the written-down value becomes the new cost
      base, and the impairment is charged to operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|ii) | Mineral properties and deferred exploration
      expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Canadian GAAP permits the deferral of costs for the
      acquisition of mineral properties and exploration expenditures subject to
      periodic assessments for impairment. US GAAP requires that exploration
      expenditures relating to unproven mineral properties as well as
      acquisition costs to be expensed as incurred. For US GAAP cash flow
      statement purposes, mineral property acquisition and exploration
      expenditures would be shown under operating activities rather than
      investing activities.                                                                                                                                                                                                                  

98

---

|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 23 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

|iii) | Recent adopted accounting standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | In September 2006, the FASB issued SFAS No. 157, Fair
      Value Measurements. The objective of SFAS No. 157 is to increase
      consistency and comparability in fair value measurements and to expand
      disclosures about fair value measurements. SFAS No. 157 defines fair
      value, establishes a framework for measuring fair value in generally
      accepted accounting principles, and expands disclosures about fair value
      measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any
      new fair value measurements. The provisions of SFAS No. 157 are effective
      for fair value measurements made in fiscal years beginning after November
      15, 2007. The adoption of this statement did not have a material effect on
      the Companys reported financial position or results of
  operations.                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | In February 2007, the FASB issued SFAS No. 159, The
      Fair Value Option for Financial Assets and Financial Liabilities 
      Including an Amendment of FASB Statement No. 115. This statement
      permits entities to choose to measure many financial instruments and
      certain other items at fair value. Most of the provisions of SFAS No. 159
      apply only to entities that elect the fair value option. However, the
      amendment to SFAS No. 115, Accounting for Certain Investments in Debt
      and Equity Securities, applies to all entities with available-for-sale
      and trading securities. SFAS No. 159 is effective as of the beginning of
      an entitys first fiscal year that begins after November 15, 2007. Early
      adoption is permitted as of the beginning of a fiscal year that begins on
      or before November 15, 2007, provided the entity also elects to apply the
      provision of SFAS No. 157, Fair Value Measurements. The adoption of
      this statement did not have a material effect on the Companys reported
      financial position or results of operations.                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|iv)  | Recently issued accounting
pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | In May 2008, the Financial Accounting Standards Board
      (FASB) issued SFAS No. 162, The Hierarchy of Generally Accepted
      Accounting Principles. SFAS 162 identifies the sources of accounting
      principles and the framework for selecting the principles to be used in
      the preparation financial statements of non-governmental entities that are
      presented in conformity with generally accepted accounting principles in
      the United Sates. It is effective 60 days following the SECs approval of
      the Public Company Accounting Oversight Board amendments to AU Section
      411, The Meaning of Present Fairly in Conformity With Generally
      Accepted Accounting Principles.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | In March 2008, the FASB issued SFAS No. 161,
      Disclosures about Derivative Instruments and Hedging Activities  an
      amendment to FASB Statement No. 133.SFAS No. 161 is intended to
      improve financial standards for derivative instruments and hedging
      activities by requiring enhanced disclosures to enable investors to better
      understand their effects on an entitys financial position, financial
      performance, and cash flows. Entities are required to provide enhanced
      disclosures about: (a) how and why an entity uses derivative instruments;
      (b) how derivative instruments and related hedged items are accounted for
      under Statement 133 and its related interpretations; and (c) how
      derivative instruments and related hedged items affect an entitys
      financial position, financial performance, and cash flows. It is effective
      for financial statements issued for fiscal years beginning after November
      15, 2008, with early adoption encouraged. The Company is currently
      evaluating the impact of SFAS No. 161 on its financial statements, and the
      adoption of this statement is not expected to have a material effect on
      the Companys financial statements.

99

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|AVINO SILVER & GOLD MINES LTD.                                                                                        
|----------------------------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                                        
|For the year ended December 31, 2008, eleven-months ended December
      31, 2007, and the year ended January 31, 2007
|(Expressed in Canadian
      dollars)                                                                                 

NOTE 23 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (Continued)

|iv) | Recent adopted accounting standards
    (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | In December 2007, the FASB issued SFAS No. 141 (revised
      2007), Business Combinations. SFAS No. 141 (revised 2007)
      establishes principles and requirements for how the acquirer of a business
      recognizes and measures in its financial statements the identifiable
      assets acquired, the liabilities assumed, and any noncontrolling interest
      in the acquiree. The statement also provides guidance for recognizing and
      measuring the goodwill acquired in the business combination and determines
      what information to disclose to enable users of the financial statements
      to evaluate the nature and financial effects of the business combination.
      SFAS No. 141 (revised 2007) applies prospectively to business combinations
      for which the acquisition date is on or after the beginning of the first
      annual reporting period beginning on or after December 15, 2008. The
      adoption of this statement is not expected to have a material effect on
      the Companys future reported financial position or results of
      operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | In December 2007, the FASB issued SFAS No. 160,
      Noncontrolling Interests in Consolidated Financial Statements - an
      amendment of ARB No. 51.SFAS No. 160 establishes accounting and
      reporting standards for the noncontrolling interest in a subsidiary and
      for the deconsolidation of a subsidiary. SFAS No. 160 is effective for
      fiscal years, and interim periods within those fiscal years, beginning on
      or after December 15, 2008. The adoption of this statement is not expected
      to have a material effect on the Companys future reported financial
      position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

100

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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.

|Dated: July 15, 2009 | AVINO SILVER & GOLD MINES LTD.
|-------------------- | ------------------------------
|                     |                               
|                     |                               
|                     | By: /s/ David
      Wolfin    
|                     | David Wolfin, President       
|                     | (Principal Executive Officer) 

101

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|Exhibit Number | Name                                                                               
|-------------- | -----------------------------------------------------------------------------------
|               |                                                                                    
|1.1            | Memorandum of
        Avino Silver & Gold Mines Ltd.*                              
|               |                                                                                    
|1.2.           | Articles of
        Avino Silver & Gold Mines Ltd.*                                
|               |                                                                                    
|4.1            | Share Purchase
        Agreement dated March 22, 2004*                             
|               |                                                                                    
|8.1            | List
        of Subsidiaries                                                       
|               |                                                                                    
|12.1           | Certification
        of the Principal Executive Officer                           
|               |                                                                                    
|12.2           | Certification
        of the Principal Financial Officer                           
|               |                                                                                    
|13.1           | Certificate
        under the Sarbanes-Oxley Act of the Principal Executive Officer
|               |                                                                                    
|13.2           | Certificate under
        the Sarbanes-Oxley Act of the Principal Financial Officer

___________________________________* Previously filed.

102

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