---

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
  Washington, D.C.
20549

FORM 10-K/A(Amendment No.
2)

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

For the fiscal year endedJune 30, 2012

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

For the transition period from _______ to_______

Commission file number001-12974

SANTA FE GOLD CORPORATION(Exact name of registrant as specified in its charter)

|Delaware                                        | 84-1094315         
|----------------------------------------------- | -------------------
|(State or other jurisdiction of                 | (I.R.S. Employer   
|incorporation or organization)                  | Identification No.)
|                                                |                    
|6100 Uptown Blvd NE, Suite 600, Albuquerque, NM | 87110              
|(Address of principal executive offices)        | (Zip Code)         

(505) 255-4852(Registrant's telephone number,
including area code)

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

Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.002 par value(Title of class)

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

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

Indicate by check mark whether the issuer (1) filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the past 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. Yes [X]     No
[   ]

Indicate by checkmark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

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

|Large accelerated filer [   ] | Accelerated
      filer [X]      
|----------------------------- | ---------------------------------
|Non-accelerated filer [   ]   | Smaller reporting company [  
  ]

1

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Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [  
]     No [X]

The aggregate market value of the Common Stock of Santa Fe Gold
Corporation held by non-affiliates as of the last business day of the
registrants most recently completed second fiscal quarter was $89,236,672.

As of September 28, 2012, there were 117,537,970 shares of
common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:None.

2

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EXPLANATORY NOTE

****     Santa
Fe Gold Corporation (we, our or the Company) is filing this Amendment No.
2 to its Form 10-K for the fiscal year ended June 30, 2012, which was originally
filed with the Securities and Exchange Commission (SEC) on September 28, 2012.
This Amendment No. 2 to Form 10-K should be read in conjunction with the Form
10-K and the Companys subsequent reports filed with the SEC. Except for the
information specifically amended and restated herein, this form 10-K/A has not
been updated to reflect events, results or developments that occurred after the
date of the original Form 10-K nor does it change any other disclosures
contained in the original Form 10-K.

****This Amendment No. 2 incorporates amendments to our Form 10-K as
follows:

PART I

ITEM 1A.     RISK FACTORS

****     This
report, including Managements Discussion and Analysis of Financial Condition
and Results of Operation, contains forward looking statements that may be
materially affected by numerous risk factors, including those summarized below:

Risk Factors Related to Our Business and Operations

****     We
are dependent upon production of precious metals and industrial minerals from a
limited number of properties, have incurred substantial losses since our
inception in 1991, and may never be profitable.

****     Since
our inception in 1991, we have not been profitable. As of June 30, 2012, our
total accumulated deficit was approximately $64.0 million. To become profitable,
we must identify mineralization and establish reserves, and then either develop
properties ourselves or locate and enter into agreements with third party
operators. We may suffer significant additional losses in the future and may
never be profitable. There can be no assurance we will receive significant
revenue from operations in the foreseeable future, if at all. Even if we do
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis.

****     We
ceased mining operations at our Black Canyon mica property in 2002 after
unsuccessful attempts to begin profitable operations. We have established only
limited probable reserves at our Summit silver-gold property, and have not
established proven or probable reserves at our Ortiz gold property or at our
Planet micaceous iron property. If we are unable to economically produce silver
or gold from our Summit or Ortiz properties, we will be forced to identify and
invest substantial sums in one or more additional properties. Such properties
may not be available to us on favorable terms or at all. Because of the numerous
risks and uncertainties associated with exploration and development of mining
properties, we are unable to predict the extent of any future losses or when we
will become profitable, if at all.

****     We
will require significant additional capital to continue our exploration
activities, and, if warranted, to develop mining operations.

****     We
will require significant additional funding for geological and geochemical
analysis, metallurgical testing, and, if warranted, feasibility studies with
regard to the results of our exploration. We may not benefit from such
investments if we are unable to identify a commercial ore deposit. If we are
successful in identifying reserves, we will require significant additional
capital to establish a mine and construct a mill and other facilities necessary
to mine those reserves. That funding, in turn, will depend upon a number of
factors, including the state of the national and worldwide economy and the price
of gold and other metals. We may not be successful in obtaining the required
financing for these or other purposes, which would adversely affect our ability
to continue operating. Failure to obtain such additional financing could result
in delay or indefinite postponement of further exploration and the possible,
partial or total loss of our potential interest in certain properties.

3

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****     Our
industry is highly competitive, attractive mineral lands are scarce, and we may
not be able to obtain quality properties.

****   We compete with many companies in the mining business, including large,
established mining companies with substantial capabilities, personnel and
financial resources far greater than our own. In addition, there is a limited
supply of desirable mineral properties available for acquisition in the United
States and in other areas where we may conduct exploration activities. For these
reasons, we may be at a competitive disadvantage in acquiring mineral
properties. Competition in the industry is not limited to the acquisition of
mineral properties but also extends to the technical expertise to operate such
properties and the financial ability to fund such properties. Our inability to
compete with other companies in these areas could have a material adverse effect
on our results of operation and business.

****    The
feasibility of mining our Ortiz gold property has not been established, meaning
that we have not completed engineering, permitting or other work necessary to
determine if it is commercially feasible to develop this property.

****   We
currently have established only limited probable reserves on the Summit
silver-gold property and have not established proven or probable reserves on the
Ortiz gold property. A reserve, as defined by regulation of the SEC, is that
part of a mineral deposit that can be economically and legally extracted or
produced at the time of the reserve determination. A reserve requires a
feasibility study demonstrating with reasonable certainty that the deposit can
be economically and legally extracted and produced. We have not received
feasibility studies nor obtained necessary operating permits with regard to the
Ortiz gold property. As a result, we have no reserves at the Ortiz gold
property.

****     At
the Summit silver-gold property, a qualified independent engineering firm has
completed an engineering study that concluded there would be minimal risk in
proceeding to development and mining on the basis of estimates of mineralized
material. Subsequently, we have established probable reserves. However, our
early stage estimate carries significant risks associated with factors including
but not limited to the following:

| |  | The limited amount of drilling completed to date. The
      Summit deposit is defined by only 78,000 feet of drilling in 88 drill
      holes. These holes are spaced to intersect the mineralized zone up to 200
      feet apart, a drilling density insufficient for detailed mine planning in
      this style of epithermal precious metals deposit. As a result, mine plans
      are preliminary in nature and details must be developed in conjunction
      with underground development.                                                                                                                                                                                                                                                                                                                                           
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Process and metallurgical testing has been limited to
      small pilot plant and bench scale testing. This causes uncertainty in
      metallurgical recovery and operating factors when scaling up to the full
      sized commercial plant. Although operating results to date at the Banner
      mill indicate that the mill will perform satisfactorily, additional fine
      tuning is necessary in order to optimize recovery of precious metals.                                                                                                                                                                                                                                                                                                                                                                                   
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Samples collected for metallurgical testing were selected
      from drill core from various parts of the Summit deposit and from samples
      taken from old underground workings located in the upper part of the
      deposit. Because of the small number and size of samples available for
      metallurgical testing, metallurgical results may not accurately
      characterize the deposit as a whole.                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | The project has no significant operating history upon
      which to base estimates of operating costs and capital requirements. As a
      result, estimations of mineralized material, mining and process recoveries
      and operating costs have been based to a large extent upon the
      interpretation of geologic data from drill holes, and upon engineering
      estimates that derive forecasts of operating costs from anticipated
      tonnages and grades of mineralized material to be mined and processed, the
      configuration of the deposit, expected recovery rates of gold and silver
      from the mineralized material, comparable facility and equipment costs,
      and climatic conditions and other factors. Estimates of operating costs
      and capital requirements are preliminary estimates only.
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Commonly in new projects, actual construction costs,
      operating costs and economic returns differ materially from those
      initially estimated. Accordingly, there can be no assurance that the
      Summit mine or Banner mill can be brought into operation within the time frame or at the cost anticipated by the Company, or that the forecasted operating results can be achieved.                                                                                                                                                                                                                                                                                                                                                                                                                                            

4

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****    Substantial
additional work and expenditures are required to demonstrate economic viability
for the Ortiz project. The mineralized materials identified to date have not and
may never demonstrate economic viability. The feasibility of mining has not
been, and may never be, established. Whether a mineral deposit can be
commercially viable depends upon a number of factors, including the particular
attributes of the deposit, including size, grade and proximity to
infrastructure; metal prices, which can be highly variable; and government
regulations, including environmental and reclamation obligations. If we are
unable to establish some or all of our mineralized material as proven or
probable reserves in sufficient quantities to justify commercial operations, we
may not be able to raise sufficient capital to develop a mine. If we are unable
to establish such reserves, the market value of our securities may decline.

**      
*Fluctuating gold and silver prices could negatively impact our business
plan.*

****   The potential for profitability of gold and silver mining operations at
our Summit silver-gold property and at our Ortiz gold property and the values of
these properties are directly related to the market prices of gold and silver.
The prices of gold and silver may also have a significant influence on the
market price of our common stock. In the event that we obtain positive
feasibility results and progress to a point where a commercial production
decision can be made, our decision to put a mine into production and to commit
the funds necessary for that purpose must be made long before any revenue from
production would be received. A decrease in the price of gold or silver at any
time during future development or mining may prevent our properties from being
economically mined or result in the impairment of assets as a result of lower
gold or silver prices. The prices of gold and silver are affected by numerous
factors beyond our control, including inflation, fluctuation of the United
States dollar and foreign currencies, global and regional demand, the purchase
or sale of gold by central banks, and the political and economic conditions of
major gold producing countries throughout the world.

****     During
the last five years, the average annual market price of gold has progressively
increased from $695 per ounce to $1572 per ounce, as shown in the table below.
Information was obtained from Kitco.com:

Average Annual Market Price of Gold, 2007-2011 (per
ounce)

2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011$
    695
    
    $
    872
    
    $
    972
    
    $
    1225
    
    $
    1572


****    During
the last five years, the average annual market price of silver has increased
from $13.38 per ounce to $35.12 per ounce, as shown in the table below.
Information was obtained from Kitco.com:

Average Annual Market Price of Silver, 2007-2011 (per ounce)

2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011$
    13.38
    
    $
    14.99
    
    $
    14.67
    
    $
    20.19
    
    $
    35.12


****     Although
it may be possible for us to protect against future gold and silver price
fluctuations through hedging programs, the volatility of metal prices represents
a substantial risk that is impossible to completely eliminate by planning or
technical expertise. In the event gold or silver prices decline and remain low
for prolonged periods of time, we might be unable to continue with development
and mining of our Summit silver-gold property or to develop our Ortiz gold
property or produce any significant revenue.

****     The
continuation of commercial mining operations of our Summit silver-gold property
or any proposal for development of our Ortiz gold property will be subject to
permitting requirements that could cause us to delay, suspend or terminate our
mining and development plans.

****     Mining
and processing operations at the Summit silver-gold property or at the Ortiz
gold property require permits from the state and federal governments. We may be
unable to obtain such permits in a timely manner, on reasonable terms, or at
all. If we cannot obtain or maintain the necessary permits, or if there is a
delay in receiving such permits, our timetable and business plan for development
and mining of one or both of these properties could be adversely affected.

5

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****    We
may not be able to obtain an adequate supply of water to complete desired
development and mining of our Summit silver-gold property or of our Ortiz gold
property.

****  For
successful development, we will need to obtain the rights for a sufficient
amount of water to service the mining and processing operation. Our lease with
Ortiz Mines, Inc. gives us all rights that Ortiz Mines, Inc. may have to
initiate and use water and water rights in connection with the property,
including among others the right to drill, pump, divert, transport and use water
from wells, containment areas and drainages. However there can be no assurance
we will be able to exercise our rights under the lease agreement or obtain
access to the amount of water needed to operate a mine at the property. For our
Summit silver-gold property, this risk is mitigated in that sufficient water for
mining purposes can be purchased and trucked to the Summit property; and
sufficient water is available for processing purposes on our Lordsburg mill site
property, for which water we have usage rights.

*We may be at risk of losing title to our Ortiz gold property lease if we
fail to perform our obligations.*

****    Under
the terms of our lease with Ortiz Mines, Inc., we are required to meet certain
obligations as is common in a mineral lease of this type. Among other
requirements, we must begin mineral production by February 2015 (February 2022
in certain circumstances), make annual payments, meet minimum expenditure
requirements, pay a sliding-scale production royalty based on the price of gold
and comply with all governmental permitting and other regulations. If we fail to
make payments or meet expenditure requirements in a timely manner or to perform
our other obligations as required under the lease, we are at risk that the lease
could be cancelled.

*The reserve estimations at our Summit property are imprecise.*

****     Although
we have relied on expert independent consultants to calculate the reserve
estimations disclosed in our reports, such estimations are necessarily imprecise
because they depend upon the judgment of the individuals who review the
geological and engineering information and upon statistical inferences drawn
from only limited drilling and sampling. If the Summit mining operation were to
encounter mineralization or geologic conditions different from those predicted,
reserve estimations might have to be adjusted and mining plans altered. Changes
to the planned operations could adversely affect forecast costs and
profitability.

*The future prices of mica and feldspathic sand are uncertain.*

****    According
to published information, mica prices have varied over the past several years,
and the outlook for future mica prices is unclear. Manufactured sand prices in
the Phoenix area generally have fluctuated over the past several years, with
demand driven by the state of the housing, construction, and recreational
markets, which in recent years has undergone a dramatic decline. There are
numerous factors beyond our control that could affect markets for both mica and
feldspathic sand. No assurance can be given as to future prices or demand for
products, if any, that could be produced from our Black Canyon mica project. Any
decline in prices could have a material adverse effect on project economics.

****    Titles
to unpatented claims can be uncertain, and we are at risk of loss of ownership
of our Black Canyon mica property and a portion of our Summit and Lordsburg
properties.

****     Our
property holdings at the Black Canyon mica property and a portion of our
holdings at our Summit and Lordsburg properties consist of unpatented mining
claims and unpatented mill site claims located on public land and held pursuant
to the General Mining Law of 1872. The validity of such unpatented mining claims
may be subject to title defects and may be contested. Because a substantial
portion of all mineral exploration, development and mining in the United States
occurs on unpatented mining claims, this uncertainty is inherent in the mining
industry. We have not obtained a title opinion on our entire property, with the
attendant risk that title to some claims, particularly title to undeveloped
property, may be defective. Although we believe that our claims are in good
standing and held according to industry practice, we remain at risk that the
mining claims may be forfeited either to the United States or to rival private
claimants due to failure to comply with statutory requirements as to location
and maintenance of the claims or challenges as to whether a discovery of a
valuable mineral exists on every claim.

6

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****    In
recent years the United States Congress has considered amendments to the General
Mining Law of 1872, some of which would lower the value of unpatented mining
claims by restricting activities and imposing additional user fees or production
royalties. If enacted, these legislative changes could have an adverse impact on
our operations.

*The development and completion of our properties entail significant risks.*

****     
The development of mineral deposits involves significant risks that even the
best evaluation, experience and knowledge cannot eliminate. The economic
feasibility of our mining properties is based upon a number of factors,
including estimations of reserves and mineralized material, extraction and
process recoveries, engineering, capital and operating costs, future production
rates and future prices of gold, silver, copper, mica, feldspathic sand and
micaceous iron oxide.

****    Our
properties have no significant operating history upon which to base estimates of
operating costs and capital requirements.

****     As
a result, estimations of mineralized material and reserves, mining and process
recoveries and operating costs must be based to a large extent upon the
interpretation of geologic data obtained from drill holes, and upon scoping and
feasibility estimates that derive forecasts of operating costs from anticipated
tonnages and grades of mineralized material and reserves to be mined and
processed, the configuration of the mineralized deposits, expected recovery
rates of minerals, comparable facility and equipment costs, and climatic
conditions and other factors. Commonly in new projects, actual construction
costs, operating costs and economic returns differ materially from those
initially estimated. Accordingly, there can be no assurance that our properties
can be developed within the time frames or at the costs anticipated, or that any
forecasted operating results can be achieved.

****     The
nature of mineral exploration and production activities involves a high degree
of risk and the possibility of uninsured losses that could materially and
adversely affect our operations.

****     Exploration
for minerals is highly speculative and involves greater risk than many other
businesses. Most exploration programs fail to result in the discovery of
economic mineralization. Our exploration and mining efforts are subject to the
operating hazards and risks common to the industry, such as:

| |  | economically insufficient
      mineralized materials;                  
| |  | ------------------------------------------------------------------------
| |  | decrease in reserves due to lower
      metal prices;                   
| |  | fluctuations in production cost
      that may make mining uneconomical;
| |  | unanticipated variations in grade
      and other geologic problems;    
| |  | unusual or unexpected formations;                                       
| |  | difficult surface or underground
      conditions;                      
| |  | failure of pit walls or dams;                                           
| |  | metallurgical and other
      processing problems;                      
| |  | environmental hazards;                                                  
| |  | water conditions;                                                       
| |  | mechanical and equipment
      performance problems;                    
| |  | scarcity or high cost of skilled
      labor                            
| |  | scarcity or high cost of mining
      equipment                         
| |  | industrial accidents;                                                   
| |  | personal injury, fire, flooding,
      cave-ins and landslides;         
| |  | labor disputes; and                                                     
| |  | governmental regulations.                                               

****     Any
of these risks can adversely affect the feasibility of development of our
properties, production quantities and rates, and costs and expenditures. We
currently have no insurance to guard against any of these risks. If we determine
that capitalized costs associated with any of our mineral properties are likely
not to be recovered, a write-down of our investment would be necessary. All of
these factors may result in unrecoverable losses or cause us to incur potential liabilities, which could
have a material adverse effect on our financial position.

7

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****     Our
ongoing operations, including past mining activities, are subject to
environmental risks that could expose us to significant liability and delay,
suspension or termination of our operations.

****     All
phases of our operations will be subject to federal, state and local
environmental regulations. These regulations mandate, among other things, the
maintenance of air and water quality standards and land reclamation. They also
set forth limitations on the generation, transportation, storage and disposal of
solid and hazardous waste. Environmental legislation is evolving in a manner
that will require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of
proposed projects, and a heightened degree of responsibility for companies and
their officers, directors and employees. Future changes in environmental
regulation, if any, may adversely affect our operations, make our operations
prohibitively expensive, or prohibit them altogether. Environmental hazards may
exist on the Black Canyon mica property, the Summit silver-gold property, the
Lordsburg property, the Ortiz gold property, and the Planet micaceous iron oxide
property and on properties in which we may hold interests in the future that are
unknown to us at the present. Failure to comply with applicable environmental
laws, regulations and permitting requirements may result in enforcement actions,
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.

**      
*Production, if any, at our projects may involve the use of hazardous
materials.*

****     Should
these materials leak or otherwise be discharged from their containment systems,
then we may become subject to liability for hazards. We have not purchased
insurance for environmental risks including potential liability for pollution or
other hazards as a result of the disposal of waste products occurring from
exploration and production, as it is not generally available at a reasonable
price.

****     In
addition to environmental regulations, we are subject to a wide variety of laws
and regulations directly and indirectly relating to mining that often change and
could adversely affect our business.

****     We
are subject to extensive United States federal, state and local laws and
regulations related to mine prospecting, development, transportation,
production, exports, taxes, labor standards, occupational health and safety,
waste disposal, protection and remediation of the environment, mine safety,
hazardous materials, toxic substances and other matters. These laws and
regulation frequently change. New laws and regulations or more stringent
enforcement of existing ones could have a material adverse impact on us, causing
a delay or reduction in production, increasing costs and preventing an expansion
of mining activities.

****     We
depend on a limited number of personnel and the loss of any of these individuals
could adversely affect our business.

****     We
are highly dependent on nine persons, namely Mr. Pierce Carson, our chairman,
president and chief executive officer; Mr. Michael Martinez, our principal
financial officer and treasurer; Mr. Ryan Carson, our secretary and assistant
treasurer; Mr. John White, our vice president of operations; Mr. Erland
Anderson, technical manager mining; Mr. Patrick Freeman, senior consultant; Mr.
Dennis Dalton, Summit mine manager; Mr. Michael Duncan, Summit mine
superintendent; and Mr. Curtis Floyd, vice president Lordsburg milling
operations. We rely heavily on these nine individuals for the conduct of our
business, and the loss of any of them could significantly and adversely affect
our business. In that event, we would be forced to identify and retain a
suitable replacement, which we may not be able to accomplish on terms acceptable
to us. We have no life insurance on the life of any officer.

****     We
have not sought an advisory stockholder vote to approve the compensation of our
named executive officers.

****     Rule
14a-21 under the Securities Exchange Act requires us to provide a separate
shareholder advisory vote in our proxy statements to approve the compensation of
our named executive officers, not less frequently than once every three years
(say-on-pay vote). To date, we have not submitted to our stockholders to vote
on a proposal to approve an advisory resolution regarding our compensation
program for our named executive officers. Consequently, our board has not considered the
outcome of our say-on-pay vote results when determining future compensation
policies and pay levels for our named executive officers. Our board of directors
has adopted a resolution setting the date for our Annual Meeting of Stockholders
to be held for July 30, 2013. At our annual meeting, we will be asking our
stockholders to vote on a proposal to approve an advisory resolution regarding
our compensation program for our named executive officers. We will consider the
outcome of our say-on-pay vote results when determining future compensation
policies and pay levels for our named executive officers.

8

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****     Our
Chief Executive Officer may face a conflict of interest relating to the
acquisition of mineral properties by the Company.

****    We
have an agreement with Mr. Carson, which pre-dates his joining the Company as an
officer and director, under which he identified properties that constitute
potential acquisition targets. Although Mr. Carson has no pre-existing interest
in the targeted properties, under the agreement he stands to gain if we acquire
an identified property and either place it into production or sell it. This
arrangement gives rise to potential conflicts of interest with regard to whether
or not we should acquire a targeted property and the price we agree to pay for
the property. While we have sought to mitigate the risk inherent in the
arrangement with Mr. Carson by careful evaluation by the Board of Directors of
any proposed transaction, this step may not be sufficient to eliminate the risk
entirely. Acquisitions of the Summit silver-gold property and Ortiz gold
property are subject to the property identification agreement with Mr. Carson.

****    Delaware
law and our Articles of Incorporation may protect our directors from certain
types of lawsuits. Delaware law provides that our directors will not be liable
to our stockholders or to us for monetary damages for all but certain types of
conduct as directors of the Company.

****     Our
Articles of Incorporation permit us to indemnify our directors and officers
against all damages incurred in connection with our business to the fullest
extent provided or allowed by law. The exculpation provisions may have the
effect of preventing stockholders from recovering damages against our directors
caused by their negligence, poor judgment or other circumstances. The
indemnification provisions may require us to use our limited assets to defend
our directors and officers against claims, including claims arising out of their
negligence, poor judgment, or other circumstances.

Risks Related to our Common Stock

****     
The sale of our common stock by selling stockholders may depress the price
of our common stock due to the limited trading market that exists.

****     Due
to a number of factors, including the lack of listing of our common stock on a
national securities exchange, the trading volume in our common stock has
historically been limited. Trading volume over the last 3 months has averaged
approximately 120,000 shares per day. As a result, the sale of a significant
amount of common stock by selling shareholders may depress the price of our
common stock and the price of our common stock may decline.

****    Completion
of one or more new acquisitions could result in the issuance of a significant
amount of additional common stock, which may depress the trading price of our
common stock.

****  Acquisition
of one or more additional mineral properties, conceptually, could result in the
issuance of a significant amount of common stock. Such issuance could depress
the trading price of our common stock.

**      
*Our stock price may be volatile and as a result you could lose all or part
of your investment.*

****     In
addition to volatility associated with OTC securities in general, the value of
your investment could decline due to the impact of any of the following factors
upon the market price of our common stock:

| |  | changes in the worldwide prices
      for gold or silver;               
| |  | ------------------------------------------------------------------------
| |  | disappointing results from our
      exploration or development efforts;
| |  | failure to meet our revenue or
      profit goals or operating budget;  
| |  | decline in demand for our common
      stock;                           

9

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| |  | downward revisions in securities
      analysts estimates or changes in general market conditions;
| |  | ---------------------------------------------------------------------------------------------------
| |  | technological innovations by
      competitors or in competing technologies;                       
| |  | investor perception of our
      industry or our prospects; and                                    
| |  | general economic trends.                                                                           

****     In
addition, stock markets have experienced extreme price and volume fluctuations
and the market prices of securities generally have been highly volatile. These
fluctuations commonly are unrelated to operating performance of a company and
may adversely affect the market price of our common stock. As a result,
investors may be unable to resell their shares at a fair price.

****     A
small number of existing shareholders own a significant portion of our common
stock, which could limit your ability to influence the outcome of any
shareholder vote.

****   Our
executive officers and directors, together with our three largest shareholders,
beneficially own approximately 35% of our common stock as of the date of this
report. Under our Articles of Incorporation and Delaware law, the vote of a
majority of the shares outstanding is generally required to approve most
shareholder action. As a result, these individuals and entities will be able to
influence the outcome of shareholder votes for the foreseeable future, including
votes concerning the election of directors, amendments to our Articles of
Incorporation or proposed mergers or other significant corporate
transactions.

****     We
have never paid dividends on our common stock and we do not anticipate paying
any in the foreseeable future.

****     We
have not paid dividends on our common stock to date, and we may not be in a
position to pay dividends in the foreseeable future. Our ability to pay
dividends will depend on our ability to successfully develop one or more
properties and generate revenue from operations. Further, our initial earnings,
if any, will likely be retained to finance our growth. Any future dividends will
depend upon our earnings, our then-existing financial requirements and other
factors and will be at the discretion of our Board of Directors.

ITEM 2.        PROPERTIES

Summit Silver-Gold Project

Overview

****    Santa
Fe Gold acquired the Summit silver-gold project in May 2006. The project
includes the underground Summit silver-gold mine and related property consisting
of 117 acres of patented mining claims and 740 acres of unpatented mining claims
in Grant County, southwestern New Mexico; and the Banner mill, including mineral
processing equipment consisting of a crushing and screening plant, a ball mill
and a 400 ton-per-day flotation plant, and related property consisting of
approximately 1,500 acres of wholly owned and leased patented and unpatented
mining claims, located approximately 57 miles south of the Summit mine near
Lordsburg, Hidalgo County, New Mexico. We own and operate the Summit project
under the Lordsburg Mining Company, a wholly-owned subsidiary.

****     Construction
of the Banner mill and development of the Summit mine have been the focus of our
activities since 2008. In April 2007, we received results of an engineering
study that concluded the Summit deposit would form the basis of an economically
viable underground mining operation. In December 2007, we arranged financing of
$13.5 million by way of a private placement of senior secured convertible
debentures. We began construction activities during 2008, including development
of the Summit mine and construction of the Banner mill. Ore generated in the
process of developing the mine was stockpiled for later processing. Construction
of the Banner mill was completed in mid-2009 and construction of the tailings
disposal impoundment was completed in early 2010. We commenced processing
operations at the Banner mill in April 2010. Trial sales of ore as silica flux
material commenced in the second quarter of 2010 and trial sales of precious
metals flotation concentrate began in the third quarter of 2010. Mine
development is on-going, and at the end of June 2012 we had constructed over
12,400 feet of new underground openings. The Summit mine achieved commercial
production in Q2 of calendar 2012.

10

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****     The
Summit mining and processing operation involves underground mining of silver and
gold ore from the Summit mine and trucking of the ore 57 miles to the Banner
mill site where metallurgical processing takes place. At full production, mining
is planned to be carried out at a rate of 400 tons per day (120,000 tons per
year). At the Banner site, processing is accomplished through conventional
crushing, grinding and selective flotation to yield a bulk sulfide concentrate
containing the recoverable precious metals.

****     Since
start-up in April 2010, the mill has demonstrated the ability to produce a high
value gold-silver concentrate that averages around 10 ounces per ton gold and
500 ounces per ton silver. We are marketing this concentrate under a sales
contract for 2012 to a German smelter and are exploring other marketing options.
We also are producing siliceous flux material, involving crushing and screening
of Summit ore, and then direct shipping of the resulting beneficiated product to
copper smelters for use as smelter converter flux. We sold siliceous flux
material to two Arizona smelters in 2011 and are continuing sales to the same
smelters during 2012. Sales of siliceous flux material are in addition to sales
of concentrate produced at the Banner mill.

Location and Access

****   The
Summit silver-gold property is located in a rugged and isolated setting in Grant
County, southwestern New Mexico, near the Arizona state line. The property lies
within the Steeple Rock Mining District, which has recorded notable historic
production of gold, silver, base metals and fluorspar from several mines,
currently inoperative, including Carlisle, East Camp and Norman King.

****     The
property is accessible by paved and gravel road approximately 15 miles northeast
from Arizona State Highway 75 N and the town of Duncan, Arizona. Electric power
is not available on or near the property and is generated on-site in connection
with the Summit mining operation. Water for limited usage is available on and
near the property.

****     The
terrain of the property is rugged, with steep canyons and ridges. Elevations
range from 4,500 feet to 6,200 feet above sea level. The Summit siliceous
mineralized structure forms a prominent northwesterly trending ridge.

****     The
Banner mill site lies 57 miles to the south of the Summit property near the town
of Lordsburg, Hidalgo County, New Mexico. Lordsburg is connected to Duncan,
Arizona via US Highway 70. The Banner mill site is accessible from Lordsburg by
a 4-mile paved road. Utilities on site include water and electric power. The
Lordsburg area is well supported by transportation services including trucking
and rail services, and by a wide range of fabrication, construction and other
support services. The labor force required for the plant operation is sourced
locally.

Figure X.1

Claim Boundary Map



11

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Mineral Title

****    Our
holdings at the Summit silver-gold property in Grant County, New Mexico consist
of 10 patented federal mining claims totaling approximately 117 acres and 62
unpatented federal mining claims totaling approximately 740 acres. Our holdings
at and adjacent to the Banner mill site in Hidalgo County, New Mexico consist of
86 wholly-owned patented federal mining claims, 16 wholly-owned unpatented
mining claims, 17 leased patented mining claims and 6 leased unpatented mining
claims, aggregating approximately 1,500 acres. All wholly-owned claims are held
in the name of Lordsburg Mining. The unpatented mining claims are located on
public land and held pursuant to the General Mining Law of 1872. We fully own
the mining rights and believe the claims are in good standing in accordance with
the mining laws of the United States.

****     In
order to maintain our claims in good standing, for our patented mining claims we
must pay annual property taxes to Grant and Hidalgo Counties, and for our
unpatented mining claims we must pay annual assessment fees to the Bureau of
Land Management and record the payment of rental fees with Grant and Hidalgo
Counties. We are current on property taxes related to our patented claims.
Annual assessment and recording costs for our unpatented claims total
approximately $12,000. We have paid the required fees for the 2012 and 2013
assessment years (September 1, 2011 through August 31, 2013).

****    
The Summit property is subject to underlying net smelter return royalties capped
at $4,000,000 and to a net-proceeds interest on sales of unbeneficiated
mineralized rock with an end price of $2,400,000. The Summit acquisition is
subject to a property identification agreement between us and our President and
Chief Executive Officer.SeeItem 13. Certain Relationships
and Related Transactions.

**      
*History**of Mining and Exploration*

****     The
Summit silver-gold property lies within the Steeple Rock district, which is one
of the historic mining areas in the southwest United States. The former mines
produced gold, silver and base metals from underground mining of epithermal vein
systems. Prospecting activity dates back to before 1860. The first recorded
production was from the Carlisle property, which operated from 1880-1897. A
number of other mines including the Norman King and Billali also opened up
during the 1880s but ceased operation by the turn of the century. Following
this early production, the district was largely dormant until the 1930s-mid
1940s when several mines operated. Subsequently sporadic small-scale operations
continued until the 1990s on various deposits including the Summit, Center,
Mount Royal and Carlisle deposits.

**** The
US Bureau of Mines estimated that between 1880 and 1986 the Steeple Rock
district produced at least 148,000 ounces of gold, 3.3 million ounces of silver,
1.2 million pounds of copper, and 5 million pounds of lead and 4 million pounds
of zinc. In addition, there was unrecorded precious and base metal production as
part of silica flux shipments. Some 6,500 tons of fluorspar also were produced.

**** In
the late 1970s, Summit Minerals Inc. is reported to have shipped about 30,000
tons of mineralized material from the Summit property to ASARCOs El Paso
smelter as direct shipping silica flux grading 0.102 ounces per ton gold and
4.95 ounces per ton silver.

****    Exploration
work estimated to have cost in excess of $8.0 million was carried out on the
Summit silver-gold property from 1984-1992. This work included drilling totaling
104,700 feet on the Summit and adjacent structures, of which 78,000 feet was
directed to the Summit structure. In 1984-85, Inspiration Mines Inc. reportedly
spent about $1.5 million conducting underground development, shallow core
drilling and sampling and mapping. In 1988-89, Novagold Resources Inc.
reportedly expended approximately $2.0 million in surface and airborne
geophysical surveys, underground mapping and sampling, and core drilling.
Novagolds drilling identified a significant block of mineralized material in
the Summit vein. From 1989-1992, Biron Bay Resources Ltd., in joint venture with
Novagold, conducted extensive exploration, drilled 88 core holes, and reportedly
spent over $5.0 million extending and improving the level of confidence in the
mineralized material at the Summit vein and in defining exploration potential in
adjacent and outlying vein structures.

12

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**      
*Geology and Mineralization*

****   The
Steeple Rock district contains numerous structurally controlled epithermal vein
systems. The veins are controlled by conjugate fault systems that cut a thick
pile of Tertiary volcanic rocks of intermediate composition. The deposits are
localized along structurally controlled, hydrothermally altered zones cutting
the volcanic host rocks. The dominant structures trend northwesterly and dip
steeply. Secondary veins trend easterly and north-northwesterly. The veins can
be traced for distances of up to several miles along strike and have widths that
range up to 100 feet or more.

****   The
epithermal veins have formed as open-space filling by a mixture of quartz,
carbonate minerals and wallrock fragments and show evidence of multiple episodes
of brecciation and re-cementation. Gold occurs as fine free grains or as
electrum. Silver is found as argentite or in sulfosalts. Base metal sulfides
including chalcopyrite, sphalerite and galena are common in certain deposits but
rare in others. Gangue minerals usually consist of quartz, pyrite, calcite,
barite and fluorite. Alteration of the volcanic country rocks adjacent to the
veins commonly consists of sericitization, argillization and silicification.

****     The
principal vein structure on the Summit silver-gold property is the Summit
structure, which can be traced for 3,000 feet from southeast to northwest. The
Billali structure forms a farther 2,000 foot continuation of the Summit
structure in a northwesterly direction across an east-west fault. The Summit and
Billali structures dip steeply to the northeast. These structures form segments
of the East Camp Fault, which constitutes the main ore control in this part of
the Steeple Rock district. The core drilling carried out from 1984-1992 tested
both the Summit and Billali vein structures. Of the two, results from the Summit
structure were the more promising with respect to vein continuity and economic
potential.

****    The
Summit mineralized vein occurs within a wide, structurally controlled zone of
hydrothermally altered volcanic rocks. Silver and gold mineralization is
epithermal in style and consists of silver sulfides and electrum or native gold
along with lesser pyrite, sphalerite and chalcopyrite. Precious metals contents,
which are relatively low at the surface, increase significantly with depth for
several hundred feet, apparently a reflection of vertical mineral zoning within
the deposit. Below 1,000-1,500 feet, the precious metals contents appear to
decrease although little deeper drilling was carried out. The main block of
mineralized material, which occurs along the footwall of the structure, has been
shown by extensive drilling to trend northwesterly about 1,500 feet in strike
length and to extend 1,000 feet down dip. The true width of mineralization
across the footwall mineralized zone ranges from 6 feet to over 50 feet and
averages 10-15 feet.

**      
*Ore Reserve*

****    Chapman,
Wood and Griswold, Inc. (CWG), an independent geological engineering firm,
carried out studies and reviews of the mineral classification of Summit
mineralization. In February 2010, CWG concluded that a portion of the
mineralized material in the footwall zone can be classified as a Probable
Reserve under the SECs Industry Guide 7.

****The Company revised the CWG reserve estimate as of June 30, 2012 by
removing the volume of material mined originally estimated from each individual
hole used for the original reserve calculation. This method automatically
adjusts the grade of the remaining reserve. The mineral reserve as of June 30,
2012 is estimated as follows:

13

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Probable Reserve (Footwall Zone)

Tons
    Grade (oz/ton)(1)
    Contained ouncesAu
    Ag
    Au
    AgInplace,
      diluted(2)(3)
    573,890
    0.148
    10.74
    84,936
    6,163,579Minable @ 90% extraction
    516,501
    0.148
    10.74
    76,442
    5,547,221Ounces in conc. at 80% rec.
    
    
    
    61,154
  4,437,777


| | (1) | Assays cut to 0.45 oz Au/t and 45.0 oz Ag/ton                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Diluted with 1.0 foot at grade on each wall. Minimum
      6.0-foot horizontal width.                                                    
| | (3) | Cutoff grade 0.16 oz Au equivalent per ton, using a 60:1
      gold-silver price ratio and equivalent recoveries for gold and
    silver.

**       *Mineralized Material*

****     During
the evaluation of the Summit Mine mineral resource base, CWG noted significant
quantities of mineralized material that cannot be classified as Reserves, as
follows:

Tons
    Grade
    **(oz/ton)**Au
    Ag1.
    Single-hole, isolated blocks
      within the footwall zone; inplace, diluted.
    71,380
    0.144
    5.442.
    Mineralization peripheral to the Probable
      Reserve in the footwall zone; inplace, diluted.
    370,000
    0.067
    4.193.
    Mineralization in a
      hangingwall section of the structure; inplace, undiluted at a 5-foot
      minimum horizontal width.
    196,000
    0.092
    3.80


****    CWG
stated this mineralized material has the potential to be upgraded to Reserve
status following further definition by drilling and/or underground development.

*Project Economic Estimate*

****    At
gold and silver prices of $1,000 and $16.67 respectively, and assuming 80%
metallurgical recovery, in May 2011 CWG estimated Summit revenues over an
initial five-year mine life would total approximately $144 million, and direct
operating profit would total approximately $91 million. Direct operating costs
were estimated as $84.50 per ton of ore milled or $364 per ounce of gold
equivalent produced. The total capital cost to bring the mine into production
was estimated as $18.5 million. The estimated capital cost is inclusive of mine
development, mill construction, bonding requirements, and project management and
working capital. CWG estimated the project could be brought into full production
during 2011. Actual commercial production was achieved in Q2 of 2012.

**       *Metallurgical Testing*

****     Conventional
processing including crushing, grinding and milling of Summit ore to produce a
bulk sulfide flotation concentrate containing the recoverable precious metals
was evaluated and tested at bench scale. Preliminary bench scale flotation tests
indicated that a precious metals recovery of 80-86% with a concentration ratio
of 70 to 1 would be reasonably achievable. Operating results to date at the
Banner mill reflect relatively low recoveries due to processing of low grade
development ore and of oxidized ores. Metallurgical testing and operational
adjustments are underway that are anticipated to achieve improved operating
results. Currently we are marketing the concentrate to a smelter, but believe
that alternatively the concentrate could be treated to produce either a dore or
pure gold and silver metal products, or could be marketed to a third-party
precious metals processing operation for final extraction of gold and
silver.

14

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****     Processing
for silica flux material requires only crushing and screening of the ore to
yield a specified size fraction upgraded in silica content to meet smelter
requirements. Along with the higher silica content, the precious metals content
also is upgraded in the silica flux material. After crushing and screening, the
crushed material that does not meet smelter specifications for silica flux is
processed through the flotation plant.

*Mineral Processing Equipment*

****     With
the purchase of Lordsburg Mining in May 2006, we acquired an inactive 400
ton-per-day flotation plant, including ball mill and ancillary equipment.
Subsequently, in June 2008, we purchased crushing, screening and conveying
equipment. In order to utilize the flotation plant for mineral processing, we
transported it from its previous location near Winston, Sierra County, New
Mexico, refurbished it as necessary and erected it at the Banner mill site in
Hidalgo County. In addition to the processing equipment acquired in 2006, we
also acquired and installed other necessary equipment.

*Permits*

****     
With the purchase of Lordsburg Mining in 2006, we acquired existing operating
permits for the Summit property and the Banner mill site. The New Mexico Mining
and Minerals Division issued these permits to Lordsburg Mining pursuant to the
New Mexico Mining Act. We modified and revised these permits as necessary in
order to commence mining at the Summit mine and resume mineral processing
operations at the Banner mill.

****     Permit
No. GR001ME at the Summit mine allows operation of a minimal impact mine. As
surface disturbance expands, it will be necessary to modify the permit and to
post financial assurance for reclamation. Pursuant to the current permit, we are
conducting underground mining operations.

****     Permit
No. H1001RE at the Banner mill site is for an existing mining operation and
authorizes us to conduct mining and reclamation operations according to the
conditions stipulated in the permit. We have addressed all proposed mining
disturbances under a closeout plan secured by financial assurance. We applied
for and received modification and revision of the permit to allow resumption of
flotation milling, construction of a tailings impoundment and discharge of
tailings. We also have applied or will apply for other necessary permits,
including air quality permits for the Banner mill and Summit mine.

*Development Activities*

****     In
December 2007 we arranged for $13.5 million in capital for project development.
We carried out construction activities in 2008 and 2009. Underground mine
development is on-going. The Banner mill began processing operations in April
2010. The Summit mine achieved commercial production in Q2 of calendar 2012.

****     At
the Summit mine, a seven hundred foot 12 x 13 decline ramp intersected the
predicted mineralized body in February 2009. From that point, two development
headings were driven in the main mineralized structure, one an incline to the
southeast planned to intersect old workings and to serve as a secondary escape
and a source of additional ventilation, and the other a decline to the northwest
toward additional mineralized bodies identified in previous drilling. The
southeastern heading achieved its objectives in October 2009. The northwestern
heading encountered the southern extensions of the predicted mineralized bodies
in August 2009. Other level drifts have been developed from the original
northwest heading to develop stope panels. Over 12,400 feet of underground
development has been accomplished and work is proceeding on several headings.
Stope development and test mining of ore bodies has been carried out and an ore
panel referred to as the S-1 stopewas developed for extraction by blasthole
stoping. Blasthole drill levels were driven in this panel at vertical intervals
of 50 feet at four elevations, with the objective of beginning blasthole stoping
operations and ramping up production to the full production rate of 400 tons per
day. Stoping commenced in November of 2011, and the production rate goal was
achieved at the mine during Q2 of calendar 2012. Assays of mineralized bodies
encountered to date show variable silver and gold values, with occasional very
high grades encountered, as is to be expected from this style of epithermal
mineralization. Mineralized material encountered in mine development activities
is segregated at the mine and trucked to the Lordsburg mill site. Development
operations are proceeding on the basis of two 10-hour shifts five days a week.
Present operations are focused on accelerating access to higher grade portions
of the mineral resource to the northwest and below the current development
level.

15

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****     At
the Banner mill, processing operations commenced in April 2010. Commissioning of
the mill proceeded satisfactorily. Sales of ore as silica flux and sales of
precious metals flotation concentrates began in 2010. Ramp-up of mill throughput
is taking place in conjunction with increased output from the Summit mine. The
mill and flux output are expected to match the mine full tonnage production rate
in Q3 of calendar 2012.

*Operating Results*

****     Ongoing
development has resulted in increased production of mineralized material from
the Summit mine. Resulting materials processed through the Banner mill or
shipped as smelter flux for fiscal year 2012 (July 2011 through June 2012)
totaled 54,679 dry tons averaging 4.55 opt (ounces per ton) Ag and 0.080 opt Au.
Approximately 45% of this production was derived from the S-1 and S-2 stoping
areas, and the remainder came from development drifts in the S-1 and N-1
areas.

****Production for the fiscal year ended June 30, 2012 is summarized as
follows:

|Material
      Destination                | Dry
      Tons | opt
      Ag | opt
      Au
|----------------------------------------- | -------------- | ------------ | ------------
|                                          |                |              |             
|Asarco Smelter (Hayden AZ)                | 12,016         | 5.42         | 0.081       
|Freeport McMoran Smelter (Miami AZ)       | 12,605         | 4.45         | 0.081       
|Banner Mill (Lordsburg NM)                | 30,057         | 4.24         | 0.079       
|                                          |                |              |             
|Total Production July 2011 thru June 2012 | 54,678         | 4.55         | 0.080       

****   
Total production from inception in 2010 through the fiscal year ended June 30,
2012 is summarized as follows:

|Material
      Destination                | Dry
      Tons | opt
      Ag | opt
      Au
|----------------------------------------- | -------------- | ------------ | ------------
|                                          |                |              |             
|Asarco Smelter (Hayden AZ)                | 17,141         | 5.92         | 0.085       
|Freeport McMoran Smelter (Miami AZ)       | 14,878         | 4.54         | 0.078       
|Banner Mill (Lordsburg NM)                | 59,023         | 4.02         | 0.070       
|                                          |                |              |             
|Total Production July 2010 thru June 2012 | 91,011         | 4.46         | 0.074       

****The Banner mill produces a flotation concentrate which during fiscal
year 2012 was shipped to the Aurubis smelter in Germany. During the fiscal year,
181.2 tons of concentrate were sold to Aurubis with a total payable metal
content (after smelter payment deductions) of 1,413 ounces of gold and 80,299
ounces of silver. The total flux shipments of 24,621 tons yielded 1,299 ounces
of payable gold and 103,548 ounces of payable silver. Combined metal production
was 2,712 ounces of payable gold and 183,847 ounces of payable silver.

*Potential Expansion of Proposed Initial Operation*

****     Establishment
of the proposed mining operation at Summit potentially allows the Company to
further expand the current base of mineralized material at the Summit deposit
and to develop other properties in the Steeple Rock mining district. The Banner
flotation mill at Lordsburg also might generate mining and processing
opportunities from our ground holdings adjacent to the Banner mill site in the
Lordsburg mining district and/or from surrounding mining districts, several of
which historically have yielded substantial production of base and precious
metals.

Ortiz Gold Project

**      
*Overview*

****    In
August 2004, Santa Fe acquired exclusive rights for exploration, development and
mining of gold and other minerals on 57,267 acres (approximately 90 square
miles) of the Ortiz Mine Grant in Santa Fe County, New Mexico. In November 2007, we relinquished 14,970 acres and
retained under lease 42,297 acres (66 square miles).

16

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****   In
December 2005, using historical estimations of mineralized material, we received
the results of an independent scoping study for the open pit mining of the
Carache and Lucas gold deposits. The study assessed various processing options
for development and provided estimations of capital and operating costs for each
option. The report concluded that the financial results indicated a favorable
gold project employing high pressure grinding rolls with gravity recovery and
contract mining. The report also stated that considerable upside existed in
estimations of mineralized material in both contained ounces and grade. We
currently have not established proven or probable reserves on the Ortiz gold
property.

****     We
plan to proceed with studies necessary to advance the Ortiz project. This work
will include an assessment of the historical mineralized material calculated
from previous drilling, metallurgical testing and design of conceptual open pits
for the Carache and Lucas deposits. This work will form the basis for further
evaluation of mining and processing options and a preliminary economic
assessment. We also intend to begin an assessment of permitting and
environmental issues, which would be important for any mining development.

**      
*Location and Access*

****    The Ortiz Mine Grant, over which we hold a lease on the mineral estate
underlying 42,297 acres (66 square miles) of segregated surface estate, is
located 30 miles by road northeast of Albuquerque, in Townships 12, 13 and 14
North, Ranges 7 and 8 East, N.M.P.M., Santa Fe County, New Mexico. The villages
of Golden, Madrid and Cerrillos, with a combined population of less than 1,000
people, lie in and adjacent to the Grant. Paved New Mexico Highway 14 traverses
the western portion of the Grant. The main line of the Santa Fe Railway crosses
the northeast corner of the Grant. A network of unimproved ranch roads provides
access to the various land holdings. High-voltage electric power lines cross the
southern part of the Grant.

****    Terrain
in the Grant is hilly to mountainous, with elevations ranging from 6,000 feet in
the valleys to nearly 9,000 feet in the Ortiz Mountains. Annual participation
averages 12 inches. Vegetation is sparse but varied as is typical of the high
deserts of the Southwest.

****    The
Grant is largely undeveloped and population is sparse. The land is utilized
mainly for cattle grazing. Other activities include limited subdivision
development in the northern part of the Grant, and mine reclamation work at the
former Gold Field Ortiz (Cunningham Hill) mine site.

Figure X.2

Claim Boundary Map



17

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**      
*Mineral Title*

****  On
August 1, 2004, we entered into an option and lease agreement with Ortiz Mines,
Inc. (Ortiz Mines), a New Mexico corporation, whereby we acquired exclusive
rights for exploration, development and mining of gold, silver, copper and other
minerals on 57,267 acres (approximately 90 square miles) of the Ortiz Mine Grant
in Santa Fe County, New Mexico. In November 2007, we relinquished 14,970 acres
and retained under lease 42,297 acres (66 square miles). We paid an initial sum
of $20,000 for a six-month option, and on February 1, 2005, paid the additional
sum of $30,000 in order to exercise the option and enter into the lease and also
to satisfy the obligation of the first years lease payment. Since February 1,
2006, we have paid annual lease payments, the last payment of $130,000 in
January 2012 satisfying the lease payment through January 31, 2013.

**** On
May 1, 2010, we agreed with Ortiz Mines, Inc., to amend the terms of the lease.
Under the amended terms, the lease provides for an extension of the initial term
from seven to ten years (17 years in certain circumstances), continuing
year-to-year thereafter for so long as we are producing gold or other leased
minerals in commercial quantities and otherwise are performing our obligations
under the lease. Among other terms, the amended lease provides for annual lease
payments of $130,000; a sliding-scale production royalty varying from 3% to 5%
depending on the price of gold; the requirement that we comply with governmental
permitting and other regulations; and other terms common in mining leases of
this type. The Ortiz gold project is subject to a property identification
agreement between us and our President and Chief Executive Officer. SeeItem 13.  Certain Relationships and Related Transactions.

****     On
August 31, 2011, the Company filed a Complaint in the United States District
Court for the District of New Mexico against Ortiz Mines, Inc., in connection
with Ortiz Mines purported termination of the Companys exclusive leasehold
rights to explore, develop and mine gold, silver, copper and other minerals on
the Ortiz Mine Grant in Santa Fe County, New Mexico. On May 22, 2012, the
parties settled the litigation between them. The settlement agreement confirmed
the continuation of Santa Fes exclusive leasehold rights. In connection with
the settlement, we agreed, subject to certain qualifications, to expend at least
$500,000 by November 22, 2012, and a total of $1,000,000 by May 22, 2013, on
work programs in support of project development.

**      
*History of Mining and Exploration*

****    Prospecting
and mining of gold and silver in the Ortiz area dates to the arrival of the
first European (Spanish) settlers in 1598. Significant gold production from
Ortiz placers dates to 1821. By 1832 several veins and low-grade gold deposits
had been discovered. In 1833 the Ortiz Land Grant, an area about 10.7 miles
square centered on the Ortiz gold vein, was registered and possession given by
the First Alcade of the City of Santa Fe. By the early 1840s, mining at the
small underground Ortiz Mine had ceased. In the late 1800s and early 1900s,
sporadic attempts at commercial mining of lode and placer gold deposits were
unsuccessful due to lack of water and/or low grades. Total pre-1980 mine
production has been estimated as about 100,000 ounces of gold.

****   The
entire Grant was validated by the United States in 1860 under the terms of the
Treaty of Guadalupe Hidalgo. The owners received fee simple title to the surface
and minerals and the area became known as the Ortiz Mine Grant. Subsequently the
Grant changed hands and the surface was sold subject to reservation of the
mineral estate. In 1959 the mineral-interest owners and associates formed Ortiz
Mines, Inc. for the purpose of promoting and marketing the mineral estate.

****     In
1973, Consolidated Gold Fields leased the eastern portion of the Grant from
Ortiz Mines, Inc. and developed and mined the Cunningham Hill deposit (Ortiz
Mine). In the period 1980-1986, Gold Fields produced approximately 250,000
ounces of gold from an open-pit, heap-leach operation.

****     From
1972 through the early 1990s, several companies operating under lease with
Ortiz Mines, Inc. carried out exploration and pre-development activities in the
western portion of the Grant. These companies included Conoco, Inc., LAC
Minerals (USA), Inc. and the LAC-Pegasus Joint Venture. Expenditures by these
groups are estimated to have exceeded $40 million. Drilling resulted in the
identification of gold mineralization in several deposits.

18

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****     The
LAC-Pegasus Joint Venture carried out the majority of the work in the western
portion of the Grant, from 1989-1992. The Joint Venture focused on gold
mineralization in two deposits in the southwestern part of the Grant, namely the
Carache Canyon (Carache) and Lucas Canyon (Lucas) deposits. These two
deposits were the subject of 386,000 feet of core and reverse-circulation
drilling, metallurgical testing and pre-feasibility studies carried out by the
LAC-Pegasus Joint Venture and by consulting firms and contractors engaged by the
Joint Venture.

**** Independent
Mining Consultants, Inc. (IMC), an independent geological engineering firm,
was engaged by the LAC-Pegasus Joint Venture to audit estimations of the
quantities and grades of in-place mineralized material at the Carache and Lucas
deposits and to prepare conceptual open pit mine plans. IMC used indicator
kriging as the estimation method. In 1992, IMC estimated the Carache gold
deposit to contain mineralized material of 11.0 million tons grading 0.058
ounces of gold per ton. IMC estimated the Lucas gold deposit to contain
mineralized material of 12.7 million tons grading 0.033 ounces of gold per
ton.

****     Under
SEC Guideline 7, proven and probable reserves have not been established on the
Ortiz deposits. All of the mineralization described above is referred to as
mineralized material. Mineralized material constitutes a mineralized body that
has been delineated by one or more of a number of methods, including drilling,
underground work, surface trenching and other types of sampling to establish
continuity and support an estimate of tonnage and average grade of the selected
metal. Mineralized material does not include tonnages or grades estimated using
geologic inference. A deposit of mineralized material does not qualify as a
reserve until a comprehensive evaluation based upon unit costs, grade,
recoveries and other factors concludes economic and legal feasibility.

****     In
1989, the LAC-Pegasus Joint Venture started a decline adit into the Carache
deposit for the purpose of bulk sampling and to provide drilling access for
shallow and deep exploration targets. However, after advancing 1719 feet the
decline was halted due to a temporary water inflow coupled with regulatory
issues. In the face of a declining gold price, mining development of the Carache
or Lucas deposits did not proceed, and the project ultimately was cancelled and
the lease returned to Ortiz Mines, Inc. Subsequently, no additional exploration
was carried out and the property remained dormant until we leased it in August
2004.

**      
*Geology and Mineralization*

****    The
Ortiz Mine Grant is underlain by mid-Tertiary monzonite and latite porphyry
stocks, plugs, dikes and sills that have intruded Paleozoic to early-Tertiary
sedimentary rocks. The intrusive rocks are part of the Ortiz Porphyry Belt,
which comprises from north to south, the Cerrillos Hills, the Ortiz Mountains,
the San Pedro Mountains, and South Mountain. Structurally, the Grant straddles
the Tijeras-Canoncito fault system, a northeast trending zone of fault-bounded
horsts and grabens. This fault zone is a segment of a deep-seated crustal break
that has been active intermittently since Precambrian time and has provided a
zone of weakness for the emplacement of granitic magmas and associated
mineralization. Late-stage volcanism resulted in the formation of breccia pipes
and zones of intense fracturing that provided access for hydrothermal fluids
carrying gold, silver, tungsten, molybdenum and base metals.

****  The
Ortiz Porphyry Belt exhibits a number of styles of mineralization that occur in
a variety of geologic settings:

| |  | Gold-tungsten mineralization in a breccia pipe at
      Cunningham Hill adjacent to a volcanic vent, the Ortiz diatreme.                                                                                
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gold mineralization associated with a collapse breccia at
      Carache Canyon.                                                                                                                         
| |  | Copper and gold disseminated in stockworks and fractures
      in monzonite at the Cunningham Gulch (gold) and Cerrillos (copper-gold)
      deposits (bulk tonnage low-grade porphyry-type deposits).
| |  | Copper  gold skarns in calcareous rocks at Lucas Canyon
      and San Pedro.                                                                                                                           
| |  | Lead  zinc  silver veins at the Cash Entry and other
      old mines north of Cerrillos.                                                                                                              
| |  | Lead  zinc  silver pipe-like mantos in limestone at the
      Carnahan mine, San Pedro area.                                                                                                          
| |  | Molybdenite in stockworks and fractures in the San
      Lazarus monzonite stock, San Pedro area.                                                                                                       
| |  | Placer gold deposits on Cunningham Mesa, on the northern
      pediment of the San Pedro Mountains, and in most of the arroyos draining
      the Ortiz and San Pedro Mountains.                        

19

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****     At
the Carache gold deposit, relatively coarse-grained free gold is contained in
open space fractures developed in four gently dipping andesite porphyry sills
and a sandstone unit around the collapsed margins of a breccia pipe. At the
Lucas gold-copper deposit, mineralization occurs in garnet skarn developed in a
limestone unit, the outcropping portion of which forms a dip slope at the
surface.

*Scoping Study of the Carache and Lucas Gold Deposits*

****     
In October 2005, we commissioned Mineral Advisory Group, LLC (MAG) of Tucson,
Arizona, an independent geological engineering firm, to carry out an engineering
review and scoping study of the Carache and Lucas gold deposits, utilizing as a
technical base the information generated by the LAC-Pegasus Joint Venture in
1989-1991. MAGs study, which was completed in December 2005, assessed various
processing options for development and provided estimations of capital and
operating costs for each option.

****     The
MAG report was prepared in accordance with different standards than those
prescribed by rules of the SEC. The SEC only permits the disclosure of proven or
probable reserves, which in turn, require the preparation of a feasibility study
demonstrating the economic feasibility of mining and processing the mineralized
material. We have not received a feasibility study with regard to our Ortiz
property. We currently have not established proven or probable reserves on the
Ortiz property.

****     The
processing options MAG analyzed included heap leaching, ball milling/gravity
concentration, and high pressure grinding rolls/gravity concentration (HPGR
option). The optimum processing route was identified as the HPGR option. The
HPGR option was estimated to be able to achieve gold recovery employing simple
gravity concentration while minimizing capital and operating costs. As compared
to heap leaching (the processing route previously advanced by the LAC-Pegasus
Joint Venture), the HPGR option also potentially would have advantages with
respect to environmental disturbance and permitting in that the area of surface
disturbance would be smaller, chemicals would not be required in processing and
there would be less water usage.

****     MAGs
report concluded, The financial conclusions drawn from this study indicate a
very favorable project employing High Pressure Grinding Rolls with gravity
recovery and contract mining. The report also stated that upside exists in
estimations of mineralized material in both contained ounces of gold and grade,
as had been concluded previously by the LAC-Pegasus Joint Venture.

****     Under
SEC Guideline 7, proven and probable reserves have not been established on the
Ortiz deposits. All of the mineralization described above is referred to as
mineralized material.

*Permitting*

Mining and processing operations
at the Ortiz gold property would require permits from the state and federal
governments and also would be subject to county regulations. We have not applied
for or obtained such permits, which require the completion of additional
technical, environmental and other work. We may be unable to obtain such permits
in a timely manner, on reasonable terms, or at all. If we cannot obtain or
maintain the necessary permits, or if there is a delay in receiving such
permits, any timetable and business plan for development and mining of the Ortiz
gold property could be adversely affected.

*Work Program*

****     Over
the next 12 months, we plan to conduct additional studies necessary to advance
the Ortiz project. The work planned includes carrying out a NI43-101 report and
preliminary economic assessment of the Carache and Lucas gold deposits. The
study will include bringing current the historical resources from previous
drilling, additional metallurgical testing, and redesign of open pits. We plan
also to proceed with surface access agreements and to begin baseline
environmental surveys. Results from these studies will form the basis for
further evaluation of development options. We expect this work to form a sound
basis upon which to formulate plans and budgets for advancement of the Carache
and Lucas gold deposits.

****     We
also plan to continue evaluation of the large 66 square mile area under lease
for its exploration potential for new discoveries of gold and copper deposits.
In this regard, we will continue to utilize the large quantity of existing
geological, geochemical, geophysical and drilling data.

20

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****   We
have budgeted $1,000,000 for the work to be carried out over the next 12 months
which is included in our 12 month and 36 month capital requirements listed in
ITEM 7.

Black Canyon Mica Project

**      
*Overview*

****     Santa
Fe acquired the Black Canyon mica project in 1999 and spent $15 million in
establishing mining and processing facilities at the mine site north of Phoenix,
Arizona, and at a separate processing plant in Glendale, Arizona. In 2002, we
commissioned the processing facilities at the mine site and in Glendale,
operated for several months on a test basis and achieved limited production and
commercial sales. However, design capacity of the processing facilities was not
achieved due to undercapitalization. In November 2002, after unsuccessful
attempts to raise the additional capital necessary to expand plant capacity in
order to reach design capacity and to provide working capital, we suspended
crushing and concentrating activities at the Black Canyon mica mine. After the
suspension of operations, limited production, marketing and sales continued
through 2005 at the Glendale mica processing facility using inventoried mica.
Subsequently, we removed the processing equipment from the Glendale plant and
Black Canyon mine and placed it into storage.

****     While
it operated on a test basis in 2002, the project achieved limited production and
commercial sales. The operation was successful in achieving two important
objectives. First, it demonstrated the facilities were capable of producing the
planned range of products. Second, it validated the high quality and market
acceptability of the two main product lines, namely high-end wet-ground mica,
targeted for high value applications in the plastics and cosmetic industries;
and feldspathic sand, targeted for the Phoenix construction and recreational
markets.

****     In
2003-2005, Santa Fe sold, from inventory, limited quantities of its engineered
mica-filled plastic pellets and mica powders to a number of companies, including
Dupont Canada and Revlon. The commercial orders to Dupont followed a program of
testing and product development conducted jointly with Dupont. Dupont used Santa
Fe Golds plastic pellets in its own formulations to produce plastic end
products that it supplied to the automotive industry. Santa Fe Gold also
supplied its high quality mica powder to the cosmetic industry through
distributors, with Revlon as one of the important customers.

****In 2003, we sold our entire inventory of feldspathic sand to customers
in the Phoenix area.

****     Santa
Fe is seeking a joint venture partner to contribute new funding in the amount of
$10.0 million to reinstall the mica processing equipment at a new location, to
upgrade and expand the mining facilities in order to reach planned capacity and
to provide working capital. These expansions are required in order to achieve
the higher throughput necessary for sustained economic operation.

**      
*Location and Access*

****     The
Black Canyon mine is located 30 miles north of Phoenix, Arizona, and 3.5 miles
west-southwest of Black Canyon City. It can be reached via U.S. Interstate 17,
which connects Phoenix with Flagstaff, and by a connecting dirt road for the
last eight miles. The Glendale processing plant was located in an industrial
area on the west side of Phoenix, Arizona, 47 miles to the south of the mine
site.

Figure X.3

Claim Boundary Map



21

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*Mineral Title*

****     Our
property holdings at and around the Black Canyon mine consist of 67 federal
unpatented mining claims in Yavapai County, Arizona and 9 federal unpatented
mill site claims in Maricopa County, Arizona, which in total cover approximately
1,385 acres. The claims are located on public land and held pursuant to the
General Mining Law of 1872. We fully own the mining rights and believe the
claims are in good standing in accordance with the mining laws of the United
States.

****     In
order to maintain our claims in good standing, we must pay annual assessment
fees to the Bureau of Land Management and record the payment of rental fees with
Yavapai and Maricopa Counties. Annual assessment and recording costs total
approximately $11,000. We have paid the required fees for the 2012 and 2013
assessment years (September 1, 2011 through August 31, 2013).

*Mining and Processing Facilities*

****     The
Black Canyon project formerly consisted of two integrated operating facilities.
The mine site west-southwest of Black Canyon City contains the mineralized
material. The crusher, the concentrator and the feldspathic sand plant were
located at the mine site. These facilities depended on diesel generators for
power. Our plans called for mining to be carried out by conventional open pit
methods. The mineralized material would be trucked from the pit and delivered to
a nearby stockpile located adjacent to the crusher and concentrator. Mica flakes
would be separated from the pegmatite host rock in a process that involves
multi-stage crushing and screening to -3/16 size. Mica would be concentrated
from the crushed material utilizing air classifiers. The resulting concentrate,
containing 95% mica, would be trucked to the processing plant for further
processing.

****     In
the mica concentrating process at the mine site, the majority of the crushed
host rock, which otherwise would be discarded as waste, would be converted into
feldspathic sand for sale into the local Phoenix market. Processing of the
feldspathic sand would involve screening and magnetic separation to yield sand
fractions of various sizes. The sand products would be either bagged for
shipment or trucked in bulk to customers.

****     During
2002-2004, we processed mica concentrate at the 5-acre Glendale plant and office
site on the west side of Phoenix. The processing was designed to achieve the
desired product sizes and meet the quality requirements of the market place. The
plant was housed in an 18,000 square foot steel framed building, where equipment
was installed for wet grinding, dewatering, drying, and air classification and
bagging. The final products were placed into 50-pound bags or into 1000-pound
supersacks ready for shipment to customers.

**       *Permits*

****    In
1999, we obtained approval for the Black Canyon Plan of Operations from the
Bureau of Land Management and the State of Arizona. An Environmental Assessment,
Clean Water Act Permit and Air Quality Procedures were all approved. An Aquifer
Protection Permit was not required because processing operations at the mine
site did not propose the use of water. We have completed reclamation of the
mining site as required under the Plan of Operations. Any redevelopment of the
Black Canyon project would require repermitting.

**       *Geology and Mineralization*

****     The
mica deposits occur as pegmatite dikes cutting Precambrian schist and granite.
These dikes are steeply dipping tabular bodies, continuous along strike and with
depth. The main pegmatite dikes are hosted by the schist and have a
northeasterly trend parallel to the structural grain of the schist. Because the
light colored pegmatite dikes are more resistant to weathering than is the
enclosing schist, the dikes stand out at the surface as elongated light colored
ridges relatively easy to discern and to map geologically.

****     In
the area of the drilled mineralization, a concentration of pegmatite occurs as a
dike swarm and as massive irregular bodies of pegmatite. An associated major
structure, the Central Pit fault, appears to have created a zone of dilation
that provided open space for intrusion of the pegmatite. Drilling has identified
seven individual dikes that range from approximately 4 feet to over 20 feet in
thickness. At the surface, massive pegmatite crops out over a width exceeding 50
feet.

22

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****     The
minerals of potential economic value are all found associated with the pegmatite
dikes, and consist of muscovite mica, feldspar and silica. Muscovite mica, the
principal commodity, constitutes a major accessory mineral of the pegmatite
dikes and is ubiquitous in the pegmatite. Based on visual estimates of drill
core, the content of muscovite in the pegmatite ranges from 5% to 35%. The
muscovite is light to whitish green in color and occurs as discrete,
coarse-grained inclusions as well as fine-grained disseminations in the
pegmatite. Feldspar and silica, by-products of the proposed mining operation,
make up most of the remaining component minerals of the pegmatite on about a 1:1
ratio.

*Estimation of Mineralized Material*

****     In
1998 and 1999, we drilled 41 inclined core holes and collected 59 samples of
pegmatite exposed on the surface, at two central locations. The drill holes and
surface samples were spaced approximately 50 feet apart. The holes ranged from
200 to 600 feet in length, and drilling totaled 13,070 feet. The drilling
covered only a small portion of the zones of outcropping mica-bearing rocks
mapped on our mining claims.

****     Mintec
Inc., an independent geological engineering firm, analyzed our drilling and
sampling results, designed the mining plan and calculated an estimation of
mineralized material. In-place mineralized material for the pit design was
calculated as 2,399,500 tons of material grading 7.54% mica and 1,527,200 tons
of additional material grading 7.37% mica, for total mineralized material of
3,926,680 tons grading 7.48% mica, at a cutoff grade of 2.47% mica.
Approximately 60% of the mica contained in this mineralized material is expected
to be recoverable after losses due to mining and beneficiation.

*Mica*

****     Ourmineralized material contains high quality muscovite or white mica.
Mica is a mineral characterized by crystals that can be easily split into thin
elastic sheets and is valued for its unique combination of chemical, physical,
electrical, thermal and mechanical properties. Muscovite exhibits perfect
cleavage, flexibility and elasticity, infusibility, low thermal and electrical
conductivity, high dielectric strength, light weight, good insulating
characteristics, and is stable when exposed to moisture, light and high
temperatures. Because of these properties, muscovite has found widespread
application in plastics, automotive coatings, cosmetics, paints, catalysis and
composite formulations. We believe, once adequate financing is obtained, that
the project has the potential to produce 10,000 tons (20 million pounds)
annually of premium wet-ground mica. For the project to be successful, we would
need to penetrate existing markets and to establish our own markets in plastics,
cosmetics and ultra-micronized applications.

*Feldspathic Sand*

****     Our
feldspathic sand was produced as a by-product of mica concentration and was
screened and sized for sale into the Phoenix construction and recreational
markets. Products included golf course bunker sand and sand used in stucco,
mortar and other specialized construction applications. The project is designed
to produce 180,000 tons of feldspathic sand products annually. The demand for
manufactured sand in the Phoenix construction market has decreased significantly
in recent years because of the collapse in the housing market.

****     Sand
producers in California and Nevada supply sand to the Phoenix manufactured sand
market. Because the material has to be trucked long distances in order to reach
Phoenix, trucking costs are significant and constitute a substantial proportion
of the final selling price. The location of our Black Canyon mine only 30 miles
from Phoenix may provide a transportation cost advantage over competitors who
import sand into Arizona.

*Work Program*

****     Over
the next 12 months, we plan to seek a joint venture partner to contribute the
estimated $10.0 million in new funding necessary to advance the Black Canyon
mica project to full production. The new funding would be used to fund an
updated feasibility study, re-establish crushing and concentrating facilities at
the Black Canyon mine, install the mica processing equipment at a new location
and upgrade and expand the mining and processing facilities in order to reach
planned capacity and to provide working capital. These expansions are required
in order to achieve the higher throughput necessary for sustained economic
operation. As an alternative to arranging the $10.0 million of new funding
required for production, we are seeking to divest of the project.

23

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Planet Micaceous Iron Oxide (MIO) Project

*Overview*

****     In
2002, Santa Fe leased the Planet property for its potential to produce micaceous
iron oxide (MIO). In August 2008, we exercised our option to purchase the
property. The Planet property consists of thirty-one patented mining claims
totaling 523 acres located in western Arizona.

****     MIO
is an uncommon flake-like form of crystalline hematite (Fe2O3) valued for the
anti-corrosive properties it contributes to coatings formulated to protect
structural steelwork. MIO is an increasingly recognized eco-friendly base
pigment used in coating systems on many of the worlds largest bridges, oil
rigs, production platforms, transmission towers, pipelines, industrial plants
and superstructures.

****     Results
of work to date indicate the Planet property contains a MIO deposit, one of the
largest deposits of its kind in the world and unique to North America. The
deposit appears to have the characteristics necessary to produce MIO from open
pit mining at a relatively low production cost as compared to commercial
operations currently in production. Metallurgical work suggests that a high
quality MIO product may be able to be successfully produced. As is
characteristic of industrial mineral operations, marketing would play a critical
role in the success of any new MIO operation and is identified as an important
factor for successful development.

****    
We plan to continue pre-feasibility assessment of the Planet project.

*Location and Access*

****     The
Planet property is located in the northwest corner of La Paz County, west
central Arizona. It lies just south of the Bill Williams River twelve miles
above its junction with the Colorado River. The property is reached by road,
either via the Swansea gravel road, twenty-eight miles north from the town of
Bouse; or via the Osborne Well paved and gravel road, twenty-five miles east
from the town of Parker.

****     The
topography of the property is rugged, with hills 100 to 500 feet high cut by
numerous steep-sided canyons. Average elevation is 800 feet. The desert climate
is typical of western Arizona, hot and dry in summer but mild in winter.
Vegetation is sparse and confined mainly to the bottoms of the larger drainages.

****     The
project is well served by existing infrastructure for both construction and
operation. All-weather roads connect the Planet property to the town of Parker,
situated on the Colorado River with a population of about 4,000. Highways
connect Parker to two east-west interstate trucking routes, I-10 and I-40,
respectively 35 miles to the south and 60 miles to the north. Parker also is
served by the Arizona & California Railroad, which is part of the national
rail system.

****     Electric
power, water and other infrastructure are readily available at industrial sites
in Parker. Fabrication and construction services, and a wide range of commercial
and support services also are available in Parker and other nearby communities.
The labor force required for a plant operation could be sourced locally.

Figure X.4

Claim Boundary Map



24

---

**       *Mineral Title*

****    The
property consists of thirty-one patented mining claims totaling 523 acres,
comprising an area 3,600 feet wide by 8,000 feet long. We leased the property,
with an option to purchase, in September 2000 from the underlying owner, New
Planet Copper Mining Company, for its potential to produce MIO. In 2008, in
settlement of a dispute with the owner, we agreed to exercise our option to
purchase the property for the purchase price of $250,000. We paid an initial
purchase payment of $50,000 in 2008 and payments of principal and interest of
$63,094 each in 2009, 2010 and 2011. One payment of $63,094 remains to be paid
in 2012. There also is provision for a 5% royalty to be paid on any future
production.

*History of Mining and Exploration*

****     The
Planet deposit was worked for its copper value from 1863 until l884, and then
intermittently through the early 1900s. Several shafts were sunk and 8,000 feet
of underground workings were developed. High-grade copper ore was extracted and
shipped to Swansea, Wales, and to San Francisco. The last mining activity took
place between 1915 and 1918 when all remaining high-grade ore was mined and
shipped. In total, the property produced approximately 50,000 tons of ore
grading 10% copper.

****     Between
1942 and 1944, the U. S. Bureau of Mines investigated the quantity and quality
of mineralized material containing iron oxide at the Planet deposit. This work
was conducted as part of the wartime evaluation of potential domestic sources of
strategic minerals, including sources of iron ore for the steel industry. The
Bureau carried out geologic mapping and sampling, and conducted drilling
programs utilizing both churn and diamond drilling methods. The information that
resulted from this work was compiled and recorded in Report of Investigations
3982, Exploration of the New Planet Iron Deposit. We believe that the
information is reliable and of good quality. In 1945, it was used by the Bureau
to calculate the tonnage and grade of mineralized material containing iron oxide
at the Planet deposit.

*Work Completed*

****     Work
completed since acquisition of the project includes recovery and surveying of
the U. S. Bureau of Mines drill holes from 1942-1944; aerial photography and
production of orthophotographs and topographic base maps; compilation of a
comprehensive digital database and construction of a computerized block model
incorporating all geological, geochemical and assay data; estimations of tonnage
and grades of mineralized material containing iron oxide; design of conceptual
open pits; preliminary metallurgical testing of MIO material; studies of MIO
markets; and conduct of scoping studies to assess the projects potential for
production.

*Geology and Mineralization*

****     At
the Planet deposit, MIO deposits associated with a mid-Tertiary, flat-lying,
regional detachment fault are found in the Triassic Buckskin Formation. Rocks in
the upper plate above the fault are composed of schist, limestone, hydrothermal
carbonate and quartzite. Lower-plate rocks are gneisses. The upper and lower
plates are separated by fault breccias up to 60 feet thick. The main mineralized
bodies at the Planet deposit are found in the lower part of the upper plate,
adjacent to and above the detachment fault. They occur as tabular replacements
of hydrothermal carbonate, limestone and schist. The overall trend of the
mineralized bodies is north fifty-five degrees east, and the plunge is eight to
nine degrees to the southwest. Individual bodies dip ten to twenty degrees to
the northwest.

****    The
mineralized bodies form discontinuous lenses, irregular bodies and veins that
individually are as much as 700 feet long, 250 feet wide, and 50 feet thick.
Mineralized material consists dominantly of specularite and massive hematite
with some limonite, malachite, azurite, chrysocolla, and minor pyrite,
chalcopyrite, bornite, gold, and silver. Associated minerals include quartz and
calcite. The mineralized material is silicified and very hard at the surface and
to a depth of ten feet, but underground it is soft and powdery.

****     The
U. S. Bureau of Mines and Santa Fe each estimated the quantities and grades of
mineralized material containing iron oxide at the Planet deposit. In 1945, the
Bureau of Mines estimated the deposit contained 1.4 million tons averaging 60
percent iron (85.8% Fe2O3). The Bureau based this estimation on work it had
carried out during 1942-1944, including drilling of twelve churn holes
aggregating 3,742 feet, and ten diamond holes totaling 569 feet; and mapping,
surveying, and sampling of surface outcrops and underground workings.

25

---

****     Our
new, more detailed estimations employed computerized analytical methods and
construction of a block model. We estimated that a total of 1.4 million tons of
mineralized material grading 44.4% iron would be contained in three conceptually
designed open pits. In carrying out our study, we compiled a comprehensive
digital database incorporating relevant information from all sources. The
database relied heavily on the information available from the Bureau of Mines,
including geologic and assay data from drill holes, and results of surface and
underground channel sampling. The database contained new survey information that
tied the locations of drill holes and underground workings to accurate
topographic maps generated from aerial photographs.

****     The
SEC only permits the disclosure of proven or probable reserves, which in turn,
require the preparation of a feasibility study demonstrating the economic
feasibility of mining and processing the mineralized material. We have not
received a feasibility study with regard to our Planet property. We currently
have not established proven or probable reserves on the Planet property.

**      
*Conceptual Mining and Processing Plan*

****    As
presently conceived, the Planet mining and processing operation would involve
open-pit mining of MIO mineralized material, primary crushing of the material at
the mine site, and trucking of the crushed material twenty-five miles to a
processing plant to be located at an industrial site near Parker. At the plant
site, metallurgical processing would be straightforward, and based on results
from preliminarily metallurgical testing, would include grinding,
classification, selective flotation or other method of separating the MIO, and
filtration and drying to yield recovery of MIO and red iron oxide, a secondary
product. A stockpile of mineralized material sufficient for plant operation
would be maintained at the plant site. Because only small tonnages of material
would need to be mined during the early years of operation, we believe mining
and related activities would be carried out most efficiently on a periodic,
campaign basis utilizing outside contractors. The project is well situated with
respect to development infrastructure and transportation networks. MIO
mineralized material is non-toxic and we see no significant environmental issues
that would hinder development.

**      
*Micaceous Iron Oxide*

****     MIO
is an uncommon flake-like form of crystalline hematite (Fe2O3) valued for the
anti-corrosive properties it contributes to coatings formulated to protect
structural steelwork. MIO improves UV stability, adhesion, surface tolerance and
abrasion resistance, and significantly increases coating life. It also has the
advantage of being non-toxic to the environment. In Europe and Asia, MIO is the
most important barrier pigment used to protect structural steelwork from
corrosion. For many years it has been employed with outstanding success on
bridges, oilrigs, transmission towers, pipelines, storage tanks, industrial
plants and structural steelwork of all descriptions. The Eiffel Tower and Sydney
Harbor Bridge are two examples.

****     Based
on limited available market data, world production of MIO is estimated to be
20,000-30,000 tons (40-60 million lbs) annually, of which Europe and Asia
consume over eighty percent. Prices are quoted in the range $0.40 -$.60 per
pound for top quality material. Commercial deposits of high quality MIO are
geologically rare. One supplier from underground mines in Austria has dominated
the world market for many years; however, production from that source has been
declining. Elsewhere around the world, production comes from only a handful of
suppliers, operating on a small scale and, we believe, at high production costs.

****   The
United States uses only a relatively small amount of MIO pigment as compared to
other regions of the world. Lack of a domestic source of MIO has forced U. S.
paint manufacturers to depend on imports and has restricted market expansion for
MIO. The Planet project, if developed, would establish a domestic source of MIO
pigment.

****     Historically,
domestic paint manufactures have used zinc, rather than MIO, in anti-corrosion
coatings of structural steelwork. However, underlying economic and environmental
factors could result in a shift in usage to MIO. Increases in zinc prices, we
believe, could create a competitive price advantage for MIO. In addition, MIO is
non-toxic to the environment, another advantage that can be expected to grow in
future importance.

26

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Lordsburg Exploration Project

****     In
June 2010 we commenced an exploration program on our extensive ground holdings
in the Lordsburg (Virginia) Mining District, where we control approximately
1,500 acres of prospective ground, the majority of which is comprised of
patented mining claims that we own, and the remainder patented and unpatented
mining claims that we lease. To date we have completed an aerial mapping survey
covering 30 square miles, carried out data compilation, conducted detailed
geologic mapping and sampling, and conducted a geophysical survey. This work has
been successful in identifying promising exploration targets, which we plan to
drill. Recorded historic production from the Lordsburg Mining District, at
todays metal prices, has exceeded $1.0 billion in copper, gold and silver. The
majority of this historic production came from mines on ground that we now
control. We are conducting the Lordsburg exploration program pursuant to our
long term strategy of finding sources of ore to augment ore from the Summit
silver-gold mine, in order to fully utilize the excess capacity of the Banner
mill.

Glossary

|Alluvium         | Unconsolidated gravel, sand, silt and clay deposited by
      streams.                                                                                                
|---------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 |                                                                                                                                                                       
|Andesite         | A common fine-grained continental lava containing sodium
      feldspar, no quartz and associated with mountain-making processes.                                     
|                 |                                                                                                                                                                       
|Argentite        | Silver sulfide mineral, a common source of silver.                                                                                                                    
|                 |                                                                                                                                                                       
|Argillization    | Alteration of feldspars to form clay minerals, especially
      in wall rocks adjacent to mineral veins.                                                              
|                 |                                                                                                                                                                       
|Azurite          | Blue hydrous copper carbonate mineral formed in oxide
      zone of copper deposit.                                                                                   
|                 |                                                                                                                                                                       
|Barite           | Barium sulfate mineral, the main source of barium.                                                                                                                    
|                 |                                                                                                                                                                       
|Bornite          | Copper-iron sulfide mineral, an important source of
      copper.                                                                                                     
|                 |                                                                                                                                                                       
|Breccia          | Rock composed of broken rock fragments, found in
      sedimentary or volcanic environments.                                                                          
|                 |                                                                                                                                                                       
|Calcite          | Calcium carbonate mineral, the main constituent of
      limestone and marble.                                                                                        
|                 |                                                                                                                                                                       
|Chalcopyrite     | Copper-iron sulfide mineral, an important source of
      copper.                                                                                                     
|                 |                                                                                                                                                                       
|Diatreme         | Volcanic pipe containing milled breccia that was formed
      by explosive gaseous venting and upward transport of material.                                          
|                 |                                                                                                                                                                       
|Dike             | Tabular discordant intrusive rock.                                                                                                                                    
|                 |                                                                                                                                                                       
|Dip              | Acute vertical angle that a rock surface makes with a
      horizontal plane. Direction of dip is always perpendicular to strike.                                     
|                 |                                                                                                                                                                       
|Electrum         | Alloy of silver and gold.                                                                                                                                             
|                 |                                                                                                                                                                       
|Epithermal       | Refers to hydrothermal mineral deposit formed within a
      few thousand feet of surface at relatively low temperature and pressure,
      commonly a vein.          
|                 |                                                                                                                                                                       
|Fault            | A break in the rocks along which movement has occurred.                                                                                                               
|                 |                                                                                                                                                                       
|Feldspar         | Common alumino-silicate mineral containing sodium,
      potassium and/or calcium, formed in igneous environment and constituting
      over 60% of the Earths crust.
|                 |                                                                                                                                                                       
|Feldspathic sand | Sand containing feldspar and quartz.                                                                                                                                  
|                 |                                                                                                                                                                       
|Flotation        | Metallurgical process that begins concentration of
      economic minerals from gangue.                                                                               
|                 |                                                                                                                                                                       
|Fluorite         | Calcium fluoride mineral, also called fluorspar.                                                                                                                      
|                 |                                                                                                                                                                       
|Galena           | Lead sulfide mineral, the main source of lead.                                                                                                                        
|                 |                                                                                                                                                                       
|Gangue           | Valueless material accompanying economic minerals in a
      mineral deposit.                                                                                         

27

---

|Garnet                       | Silicate mineral formed at high temperature and found in
      metamorphic rock and in skarn near the contact zone of igneous intrusive
      rocks.                                                                                                                                                                                     
|---------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |                                                                                                                                                                                                                                                                                                                                          
|Gneiss                       | Metamorphic rock exhibiting compositional banding formed
      at depth in a high temperature and pressure environment.                                                                                                                                                                                                                  
|                             |                                                                                                                                                                                                                                                                                                                                          
|Granite                      | Common coarse-grained igneous rock composed of light
      colored minerals including quartz and feldspar.                                                                                                                                                                                                                               
|                             |                                                                                                                                                                                                                                                                                                                                          
|Heap leaching                | A process used for the recovery of precious metals and
      copper from low-grade ores. Crushed material is laid on an impervious pad
      and uniformly leached by the percolation of the leach liquor trickling
      through the beds by gravity to ponds. The metals are recovered by
      conventional methods from the solution.
|                             |                                                                                                                                                                                                                                                                                                                                          
|Hematite                     | Iron (ferrous) oxide mineral.                                                                                                                                                                                                                                                                                                            
|                             |                                                                                                                                                                                                                                                                                                                                          
|Hydrothermal                 | Relating to or produced by extremely hot water.                                                                                                                                                                                                                                                                                          
|                             |                                                                                                                                                                                                                                                                                                                                          
|Igneous                      | Refers to a rock or mineral that solidified from magma,
      i.e., molten material.                                                                                                                                                                                                                                                     
|                             |                                                                                                                                                                                                                                                                                                                                          
|Lava                         | Rock formed as a result of cooling and solidification of
      magma (molten rock) poured out on the earths surface.                                                                                                                                                                                                                    
|                             |                                                                                                                                                                                                                                                                                                                                          
|Malachite                    | Green hydrous copper carbonate mineral formed in the
      oxide zone of copper deposit.                                                                                                                                                                                                                                                 
|                             |                                                                                                                                                                                                                                                                                                                                          
|Manto                        | Tabular or pipe-like mineral deposit formed by selective
      replacement commonly of limestone beds by mineralizing solutions
      introduced along faults.                                                                                                                                                                           
|                             |                                                                                                                                                                                                                                                                                                                                          
|Metamorphic                  | Refers to rock changed in texture and composition by high
      temperature and/or pressure deep beneath the surface.                                                                                                                                                                                                                    
|                             |                                                                                                                                                                                                                                                                                                                                          
|Mica                         | Group of phyllosilicate minerals, common variety
      muscovite, with perfect basal (micaceous) cleavage yielding tough, elastic
      flakes and sheets; colorless, white, yellow, green, brown, or black;
      common in igneous, metamorphic, and sedimentary rocks.                                                                
|                             |                                                                                                                                                                                                                                                                                                                                          
|Micaceous Iron Oxide (MIO) | Platy variety of specularite used in coatings to protect
      structural steelwork from corrosion.                                                                                                                                                                                                                                      
|                             |                                                                                                                                                                                                                                                                                                                                          
|Mineralized                  | Material added by hydrothermal solutions, principally in
      the form of mineral deposits. Often refers to the presence of a mineral of
      economic interest in the rock.                                                                                                                                                           
|                             |                                                                                                                                                                                                                                                                                                                                          
|Molybdenite                  | Molydenum sulfide mineral, the main source of molybdenum                                                                                                                                                                                                                                                                                 
|                             |                                                                                                                                                                                                                                                                                                                                          
|Monzonite                    | Coarse-grained igneous rock containing quartz and
      composed of approximately equal amounts of sodium and potassium feldspars.                                                                                                                                                                                                       
|                             |                                                                                                                                                                                                                                                                                                                                          
|Net Smelter Return           | An interest in a mining property held by the vendor on
      the net revenues generated from the sale of metal produced from the mine.                                                                                                                                                                                                   
|                             |                                                                                                                                                                                                                                                                                                                                          
|Ore                          | Mineral of economic value that can be extracted
      profitably and legally.                                                                                                                                                                                                                                                            
|                             |                                                                                                                                                                                                                                                                                                                                          
|Oxidation                    | The conversion of sulfide minerals to oxide minerals
      through weathering at or near the earths surface.                                                                                                                                                                                                                            
|                             |                                                                                                                                                                                                                                                                                                                                          
|Paleozoic                    | The era of geologic time when fish, insects, amphibians,
      reptiles, and land plants first appeared, about 600 million to 230 million
      years ago.                                                                                                                                                                               
|                             |                                                                                                                                                                                                                                                                                                                                          
|Pegmatite                    | Very coarse-grained igneous rock containing quartz,
      feldspar and mica, usually found as irregular dikes, lenses or veins, esp.
      at the margins of granites.                                                                                                                                                                   
|                             |                                                                                                                                                                                                                                                                                                                                          
|Placer                       | Deposit of sand or gravel containing concentrations of
      valuable minerals, typically gold.                                                                                                                                                                                                                                          
|                             |                                                                                                                                                                                                                                                                                                                                          
|Plunge                       | The vertical angle between a horizontal plane and the
      line of maximum elongation of a linear geologic feature.                                                                                                                                                                                                                     

28

---

|Porphyry       | Igneous rock exhibiting a characteristic texture
      reflecting relatively large feldspar phenocrysts in a fine-grained
      groundmass.                                                               
|-------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                           
|Precambrian    | All geologic time before the beginning of the Paleozoic.
      It encompasses about 90% of geologic time (4600-590 million years ago).                                                                   
|               |                                                                                                                                                                                                           
|Pyrite         | Iron sulfide mineral.                                                                                                                                                                                     
|               |                                                                                                                                                                                                           
|Quaternary     | A period of geologic time from about 2 million years ago
      until the present.                                                                                                                         
|               |                                                                                                                                                                                                           
|Schist         | Metamorphic rock exhibiting strong cleavage due to
      alignment of fibrous or platy minerals.                                                                                                          
|               |                                                                                                                                                                                                           
|Sericitization | Replacement of rock by sericitic muscovite due to
      hydrothermal activity.                                                                                                                            
|               |                                                                                                                                                                                                           
|Silicification | Introduction of or replacement by silica.                                                                                                                                                                 
|               |                                                                                                                                                                                                           
|Skarn          | Characteristic high-temperature calc-silicate mineral
      assemblage formed in calcareous rocks near the contact zone of igneous
      intrusion.                                                       
|               |                                                                                                                                                                                                           
|Sphalerite     | Zinc sulfide mineral, the main source of zinc.                                                                                                                                                            
|               |                                                                                                                                                                                                           
|Specularite    | Crystalline form of hematite.                                                                                                                                                                             
|               |                                                                                                                                                                                                           
|Stratigraphy   | The study of rock strata, especially of their
      distribution, deposition, and age.                                                                                                                    
|               |                                                                                                                                                                                                           
|Strike         | Direction of line formed by intersection of a rock
      surface with a horizontal plane. Strike is always perpendicular to
      direction of dip.                                                       
|               |                                                                                                                                                                                                           
|Sulfide        | A mineral compound containing sulfur but no oxygen.                                                                                                                                                       
|               |                                                                                                                                                                                                           
|Tailings       | Waste product from ground ore.                                                                                                                                                                            
|               |                                                                                                                                                                                                           
|Tertiary       | The first period of the Cenozoic era during which mammals
      became dominant and modern plants evolved, 65 million to 1.6 million years
      ago.                                                     
|               |                                                                                                                                                                                                           
|Vein           | A mineral filling of a fault or other fracture in a host
      rock, in tabular or sheetlike form, commonly with associated replacement
      of the host rock; a mineral deposit of this form and origin.
|               |                                                                                                                                                                                                           
|Volcanism      | Volcanic activity, including the eruption of lava and
      rock fragments and gas explosions.                                                                                                            
|               |                                                                                                                                                                                                           
|Quartz         | A silicate mineral composed of silicon and oxygen.                                                                                                                                                        
|               |                                                                                                                                                                                                           
|Quartzite      | Metamorphic rock composed of quartz.                                                                                                                                                                      

29

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PART III

ITEM 11.        EXECUTIVE
AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

****   The
individuals who served as our principal executive officer and principal
financial officer during the year ended June 30, 2012, as well as the other
individuals included in the Summary Compensation Table below, are referred to as
named executive officers throughout this Compensation Discussion and Analysis.

**       *Overview of Compensation Philosophy, Objectives and Policies*

****    
Our compensation philosophy, which is set by the Compensation Committee,
attempts to meet two main objectives when we designed our executive and employee
compensation. First, the program is intended to be fully competitive so that we
may attract, motivate and retain talented executives and key employees. Second,
the program is intended to create an alignment of interests between our
executives and key employees, on the one hand, and our shareholders, on the
other, such that a portion of each executives or key employees compensation
consists of equity awards. In this manner, if the price of our stock increases
over time, our executive officers, key employees and our shareholders will
benefit. The compensation program is designed to reward performance that
supports our principles of building shareholder value, and may also recognize
individual performance from time to time. The Compensation Committee is vested
with the authority to review and recommend the compensation program structure
and level of compensation for the executive officers, directors and key
employees of our Company.

****    
Our present compensation structure for the named executive officers generally
consists of salary and incentive compensation. The incentive component consists
of a short-term cash portion and a long-term equity portion. We believe the
present structure achieves our compensation objectives; however, the
Compensation Committee continues to consider additional ways to ensure
consistency and enhance our Companys compensation program and may add
additional components or policies in order to assist our Company in achieving
its compensation goals more effectively or efficiently. We believe that the
present compensation structure appropriately aligns the interests of the
executives and key employees with our shareholders by encouraging equity
ownership through awards of stock options and stock grants to executive officers
and key employees and to motivate our named executive officers and other key
employees to contribute to an increase in shareholder value. While equity
ownership is highly encouraged, we do not presently have a policy that requires
our named executive officers or directors to own shares of our stock.

****     Annually
the Compensation Committee reviews and recommends to the Board the level of
compensation for the named executive officers and key employees. Our CEO reports
to the Committee regarding the individual performance of the other named
executive officers. Additionally, the Committee considers recommendations from
the named executive officers regarding incentive compensation for key employees
who report to that executive officer.

*Elements and Mix of Compensation*

****     The
Compensation Committee does not utilize an exact calculation in determining the
breakdown of executive compensation among base pay, bonus pay and other forms of
compensation; rather, the Compensation Committee takes into consideration all
forms of compensation together. When making decisions about individual
compensation packages, our consideration of base salary ranges for the named
executive officers is primarily based upon negotiations with that officer,
taking into consideration work experience, individual and overall Company
performance, level of responsibility, impact on the business, tenure, potential
for advancement within the organization and the potential liability of being an
officer of a public corporation. Annual salaries for newly-hired executives are
determined at the time of hire taking into account the above factors other than
tenure. Changes in an executives base salary may also take into consideration
recent compensation, including bonuses and equity-based compensation.

30

---

****    Cash
bonuses are a form of short-term incentive compensation, which may be
recommended by the Compensation Committee at its discretion, based on individual
and overall Company performance. There is no specific bonus plan or policy in
place setting forth timing of awards or establishing specific performance
objectives. The Compensation Committee, at its discretion, determines and
recommends the amounts and timing of any bonus awards. If applicable, and at the
sole discretion of the Compensation Committee, a merit-based bonus may be
recommended based on criteria such as exceptional individual and overall Company
performance, assuming additional responsibility without an increase in base
compensation, or such other criteria which the Compensation Committee may
determine from time to time.

****     The
long-term equity compensation component of our compensation program is comprised
of equity awards and makes up a significant part of our named executive
officers compensation package. Under our 2007 Equity Incentive Plan, we are
authorized to issue qualified incentive stock options, non-qualified stock
options, to make grants of stock and award grants of restricted stock to the
officers, directors and key employees of our Company, including the named
executive officers. There is no specific policy or procedure in place setting
forth the timing or amount of awards, although the outstanding awards and future
compensation are reviewed at least annually. The Compensation Committee, at its
discretion, determines and recommends the amounts and timing of any equity
awards. The stock options are priced based on the closing market price of our
common stock on the grant date, which is the date the Board approves the award.

****     Additional
benefits provided to executive officers and key employees as part of their
compensation packages include health, life and disability insurance. To the
extent the named executive officers participate in these programs, they do so
generally on the same basis as our other employees. Our named executive officers
do not receive perquisites and we do not maintain any non-equity incentive
plans, other than our cash bonus incentives described previously, nor do we
maintain any deferred compensation plans.

****The compensation for our directors is structured similar to that of our
named executive officers. Specifically, our directors receive a combination of
cash and equity incentives in the form of stock grants or options to purchase
our common stock. The Compensation Committee reviews the form and amount of such
compensation periodically to ensure that it is competitive and meeting our
objectives discussed above.

*Consideration of Say-on-Pay Vote*

****     Rule
14a-21 under the Securities Exchange Act requires us to provide a separate
shareholder advisory vote in our proxy statements to approve the compensation of
our named executive officers, not less frequently than once every three years
(say-on-pay vote). To date, we have not submitted to our stockholders to vote
on a proposal to approve an advisory resolution regarding our compensation
program for our named executive officers. Consequently, our board has not
considered the outcome of our say-on-pay vote results when determining future
compensation policies and pay levels for our named executive officers. Our board
of directors has adopted a resolution setting the date for our Annual Meeting of
Stockholders to be held for July 30, 2013. At our annual meeting, we will be
asking our stockholders to vote on a proposal to approve an advisory resolution
regarding our compensation program for our named executive officers. We will
consider the outcome of our say-on-pay vote results when determining future
compensation policies and pay levels for our named executive officers.

*Specific Compensation Decisions*

****     Each
of our named executive officers receives an annual salary under the terms of
their respective employment agreements. In addition, each of our named executive
officers has received stock options as part of his current compensation package.

****     Effective
January 1, 2012, upon the recommendation of the Compensation Committee, the
Board approved an increase in the annual base salary of Pierce Carson, a named
executive officer, to $258,750. Prior to this increase in base salary, Dr.
Carson was receiving annual base salary of $248,798 pursuant to his employment
agreement effective as of October 7, 2003. The Board believed such increase was
warranted due to the performance of Dr. Carson in exceeding the Boards
expectations with time and effort spent securing additional strategic
opportunities for the Company in addition to his individual contributions in
furthering the Companys overall business objectives.

31

---

****   We
believe that the compensation packages for our named executive officers,
consisting of cash and equity incentive compensation, will meet the objectives
set forth above. The stock options are designed to reward the individuals and
the inherent value in the options will help motivate them to further the
interests of our shareholders. The Compensation Committee also has the ability
to award discretionary cash incentive compensation in the form of bonuses to the
named executive officers.

Summary Compensation Table

****   The
following table summarizes the compensation awarded to, earned by or paid during
the last three fiscal years to Named Executive Officers, including (a) our
principal executive officer; (b) each of our Companys two most highly
compensated executive officers, other than the principal executive officer, who
were serving as executive officers at the end of the financial year ended June
30, 2012, and whose total compensation exceeded $100,000 per year; and (c) up to
two additional individuals for whom disclosure would have been provided under
(b) but for the fact that the individual was not serving as an executive officer
of our Company at the end of the year ended June 30, 2012.

Summary Compensation Table

Name and
      Principal Position
    Year
    Salary ($)
    Bonus ($)
    Stock
      Awards ($)
    Option
      Awards ($)
    Non- Equity
      Incentive Plan Compen- sation
      ($)
    Non-
      qualified Deferred Compen-
      sation Earnings ($)
    All Other
      Compen- sation ($)
    Total ($)W. Pierce Carson President &
      CEO
    2012 2011 2010
    253,774 239,229 227,837
    - - -
    - - 172,000(1)
    73,547(3) 55,129(2)62,543(1)
    - - -
    - - -
    - - -
    327,321 294,358 462,380


|(1) | On June 8, 2010, the board of directors granted Mr.
      Carson an award of 200,000 shares of restricted common stock and 200,000
      options under our 2007 EIP. The shares vest 50% after 12 months with the
      remaining 50% vesting after 24 months. The options have a vest date of
      December 31, 2010 and a term of five years. The exercise price of the
      options is $0.86 per share, the closing price of our common stock on the
      date of grant. The dollar value recognized for financial statement
      reporting purposes for both the grant of stock and options was calculated
      in accordance with FAS 123R.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(2) | On May 17, 2011, the board of directors granted Mr.
      Carson an award of 150,000 options under our 2007 EIP. The options have a
      vest date of December 31, 2011 and a term of five years. The exercise
      price of the options is $1.01 per share, the closing price of our common
      stock on the date of grant. The dollar value recognized for financial
      statement reporting purposes for the options was calculated in accordance
      with FAS 123R.                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(3) | On January 9, 2012, the board of directors granted Mr.
      Carson an award of 150,000 options under our 2007 EIP. The options have a
      vest date of June 30, 2012 and a term of five years. The exercise price of
      the options is $0.94 per share, the closing price of our common stock on
      the date of grant. The dollar value recognized for financial statement
      reporting purposes for the options was calculated in accordance with FAS
      123R.                                                                                                                                                                       

Outstanding Equity Awards as of June 30, 2012

****The following table summarizes the outstanding equity awards as of June
30, 2012, for each of our named executive officers:

32

---

Outstanding Equity Awards as of June 30, 2012

Option Awards
    Stock AwardsName
    Number
      of Securities Underlying UnexercisedOptions (#) Exercisable
    Number
      of Securities Underlying**Unexercised**Options (#)
      **Unexercisable**
    Equity
      Incentive Plan Awards: Number
      of Securities **Underlying**
      **Unexercised**UnearnedOptions
      (#)
    **Option**
      **Exercise** Price ($)
    Option
      Expiration Date
    Number
      of Shares or Units of Stock
      That Have Not Vested
      (#)
    Market Value
      of Shares or Units
      of Stock That Have
      Not Vested ($)
    Equity Incentive
      Plan Awards:Numberof
      UnearnedShares, Units or
      Other Rights That Have NotVested (#)
    Equity Incentive
      Plan Awards: **Market**
      **or Payout** Value of
      **Unearned** Shares, Units or
      Other Rights That **Have
      Not** Vested ($)W. Pierce Carson
    4,000,000 200,000 150,000 150,000
    N/A N/A N/A N/A
    N/A N/A N/A N/A
    0.11 0.86 1.01 0.94
    10/16/2013 6/08/2015 5/17/2016
      1/9/2017
    N/A
    N/A
    N/A
  N/A


Compensation of Directors

The following table summarizes the compensation of our
Companys directors for the fiscal year ended June 30, 2012:

Compensation of Directors

Name(1)
    Fees Earned or Paid
      in Cash ($)
    Stock Awards
      ($)
    Option Awards
      ($)(2)
    Non-Equity Incentive
      Plan Compen- sation ($)
    Non- qualified
      Deferred Compen- sation
      Earnings ($)
    All Other Compen-
      sation ($)
    Total ($)Lawrence G. Olson
    26,250
    -
    -
    -
    -
    -
    26,250John E. Frost
    35,000
    -
    37,233
    -
    -
    -
  72,233


(1)**** W. Pierce
Carson, a member of our board of directors, is a Named Executive Officer and did
not receive any compensation as a director that has not been disclosed in the
summary compensation table above.

(2) ****This
column represents the fair value of the options awarded in fiscal 2012 in
accordance with FAS 123R.

****     Effective
July 1, 2010, we adopted an increase in the annual non-employee independent
director fee to $25,000 per year and an increase in annual committee fees to
$4,000 per committee membership and $2,000 per committee chairmanship, to be
paid quarterly, plus $1,000for each full-day board meeting, and $500for each telephonic meeting, committee meeting or less than full day meeting
attended. In addition, upon first being appointed or elected to the board, each
independent director receives a grant of options to purchase 100,000 shares of
common stock which vest twelve months after the date of grant, and on January
1st of each year, each independent director receives a grant of options to
purchase 75,000shares of common stock which vest six months after the
date of grant. All options are granted at an exercise price equal to the fair
market value of the stock on the date of grant. All options granted to
non-employee independent directors, unless earlier terminated, or exercised,
expire five years after the grant date. All directors are reimbursed for
out-of-pocket expenses incurred in connection with attendance at board meetings
and committee meetings.

33

---

****     Effective
July 1, 2012, we adopted a decrease in the annual non-employee independent
director fee to $8,000 per year and a decrease in annual committee fees to
$1,000 per committee membership and $500 per committee chairmanship, to be paid
quarterly. All other compensation to non-employee independent directors remains
as described in the preceding paragraph.

****     During
fiscal years 2012, 2011 and 2010, non-officer directors received no consulting
fees separate and distinct from directors fees as a result of actual services
rendered above and beyond those typical of a non-officer director. Total
director fees were $61,250 for the year ended June 30, 2012.

Employment Agreements

****     In
October 2003, we entered into employment and change of control agreements with
our president and chief executive officer. The employment agreement describes
among other things the officers duties, compensation levels and benefits. The
agreement provides for annual salary of $180,000 adjusted by the CPI. The term
of the agreement is from October 16, 2003, through and including October 15,
2006, and then automatically extends through October 15, 2008, and thereafter
year to year unless terminated on 90 days prior notice. The change of control
agreement provides that if there is a change of control of the Company and the
officer leaves the employment of the Company, for whatever reason (other than
discharge for cause, death, or disability) within six months after such change
of control, the officer shall receive a lump sum cash payment of 299% of the
base amount as defined in IRC Section 280G (b) (3), subject to certain
limitations of the Internal Revenue Code. In addition, the officer will continue
to be covered by our medical, health, life and dental plans for 24 months after
such cessation of employment. In connection with the employment agreement, we
granted 4,000,000 options at an exercise price of $0.11 per share, the closing
price on the date of grant. The options vested as to 1,000,000 shares on October
16, 2003, and as to additional 1,000,000 share increments over successive
six-monthly periods.

****   
In May 2009, we entered into change of control agreements with two key
employees, our manager of legal affairs, who currently is our secretary and
assistant treasurer, and who also is the son of our president; and our
controller, who currently is our chief financial officer and treasurer. The
change of control agreements provide that if there is a change of control of the
Company and the individual leaves the employment of the Company, for reason
other than discharge for cause, death, or disability, within six months after
such change of control, the employee shall receive a lump sum cash payment of
100% of the base salary in effect at the time of change of control. In addition,
the employee will continue to be covered by our medical, health, life and dental
plans for 24 months after such cessation of employment.

34

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SIGNATURES

****     Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on May 28, 2013.

| | SANTA FE GOLD CORPORATION                                
| | ---------------------------------------------------------
| |                                                          
| | By:
      /s/ W.
      Pierce
      Carson               
| | Name:      W. Pierce
      Carson                        
| | Title:        President and
      Chief Executive Officer

****   Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the registrant in the capacities
indicated on May 28, 2013.

|SIGNATURE                    | TITLE                               
|---------------------------- | ------------------------------------
|                             |                                     
|                             |                                     
|/s/W. Pierce
      Carson    | Chairman of the Board, President and
|W. Pierce Carson             | Chief Executive Officer             
|                             | (Principal Executive Officer)       
|                             |                                     
|/s/Michael P.
      Martinez | Chief Financial Officer             
|Michael P. Martinez          | (Principal Accounting Officer)      
|                             |                                     
|/s/Ryan P.
      Carson      | Secretary and Assistant Treasurer   
|Ryan P. Carson               |                                     
|                             |                                     
|/s/John E.
      Frost       | Director                            
|John E. Frost                |                                     
|                             |                                     
|/s/Erich
      Hofer         | Director                            
|Erich Hofer                  |                                     

35

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