FORM 10-K

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


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

     For the fiscal year ended June 30, 2002

Commission file number: 0-20430
                        -------

                                AZCO MINING INC.
                                ----------------
             (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.)

7239 N El Mirage Road, Glendale, AZ                       85307
-----------------------------------------                 ------
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code: (623) 935-0774
                                                    --------------

Securities registered pursuant to Section 12(b) of the Act

Title of each class               Name of each exchange on which
                                  registered
Common Stock, $.002 par value     The Toronto Stock Exchange
Common Stock, $.002 par value     The American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  NONE
                                                             ----

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss.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}

Aggregate Market Value of Stock held by Non-Affiliates as of September17,  2002:
$22,779,709

The number of shares of the Company's  Common Stock  outstanding as of September
17, 2002 is 31,912,121.

Documents incorporated by reference: See Item 14.

<PAGE>

                                     PART I

                           FORWARD-LOOKING STATEMENTS

     Information included or incorporated by reference in this annual report may
contain  forward-looking  statements.  This  information  may involve  known and
unknown  risks,  uncertainties  and other  factors  which  may cause our  actual
results,  performance or achievements to be materially different from the future
results, performance or achievements expressed or implied by any forward-looking
statements.  Forward-looking statements,  which involve assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the  words  "may,"  "will,"  "should,"  "expect,"  "anticipate,"  "estimate,"
"believe,"  "intend"  or  "project"  or the  negative  of  these  words or other
variations on these words or comparable terminology.

     This  annual  report   contains   forward-looking   statements,   including
statements   regarding,   among  other  things,  (a)  our  projected  sales  and
profitability,  (b)  our  growth  strategies,  (c)  anticipated  trends  in  our
industry,  (d) our future financing plans, (e) our anticipated needs for working
capital, (f) unfavorable weather conditions, in particular, high water levels in
the Agua Fria river which could  temporarily  limit  access to the Black  Canyon
mica mine site,  (g) the lack of  commercial  acceptance  of our mica product or
by-products,   (h)  changes  in  environmental   laws,  (i)  problems  regarding
availability  of  materials  and  equipment,  (j)  failure  of the mica  project
equipment to process or operate in  accordance  with  specifications,  including
expected throughput, which could prevent the project from producing commercially
viable  output,  and (k) our lack of necessary  financial  resources to complete
development of the mica product and  by-products,  successfully  market our mica
product and fund our other capital  commitments.  These  statements may be found
under  "Management's   Discussion  and  Analysis  or  Plan  of  Operations"  and
"Business," as well as in this annual report generally. Actual events or results
may differ  materially from those discussed in  forward-looking  statements as a
result of various factors,  including,  without  limitation,  the risks outlined
under "Risk Factors" and matters described in this annual report  generally.  In
light of these  risks  and  uncertainties,  there can be no  assurance  that the
forward-looking  statements  contained in this annual report will in fact occur.
In addition to the information  expressly required to be included in this annual
report,  we will provide such further  material  information,  if any, as may be
necessary to make the required  statements,  in light of the circumstances under
which they are made, not misleading.

ITEM 1.  BUSINESS

     Azco Mining Inc. is a U.S. mining  company,  incorporated in August 1991 in
the state of Delaware,  with a general business  strategy to acquire and develop
mineral properties amenable to low cost production. Azco is currently focused on
producing high quality muscovite mica from its Black Canyon Mica project located
in Arizona.  Construction  has been  completed  on the mica project and sales of
cosmetic grade mica have begun.  Marketing  efforts are concentrated on the sale
of mica filled plastic pellets,  developed by Azco, to be used in the production
of  reinforced  plastics.  Feldspathic  sand,  produced as a by-product  of mica
production, is being sold into the local stucco and golf course sand markets.

     Azco also owns a 30% interest in the Piedras  Verdes copper mining  project
in Sonora,  Mexico.  This project was  originally a strategic  partnership  with
Phelps Dodge Corporation  ("Phelps Dodge"),  which subsequently sold their share
to Frontera Copper Corporation. If Azco does not fund its share of expenditures,
the 30% interest is subject to dilution under a shareholders agreement.

     Prior to the sale of the majority of its copper assets,  Azco was dedicated
to  the  development  and  production  of  low-cost  copper  utilizing   solvent
extraction-electrowinning   or  the  SX-EW  process.  Azco's  principal  mineral
property  was the  Sanchez  porphyry  copper  project  located  about  10  miles
northeast  of the  City of  Safford  in  southeastern  Arizona.  Azco  also  had
interests in two other porphyry copper properties, the Piedras Verdes and Suaqui
Verde properties located in Sonora State, Mexico. On July 27, 1995, the Board of
Directors  of Azco signed  definitive  agreements  with  Phelps  Dodge to sell a
substantial portion of Azco's copper assets.  Azco's  shareholders  approved the
sale of all of the Sanchez  Project and 70% of the  Piedras  Verdes  project for
gross consideration of $40 million.


<PAGE>

     A  predecessor  of Azco was  incorporated  in July  1988  under the laws of
Colorado to acquire the mining rights to the Sanchez Project, as well as certain
other mineral  properties.  On August 27, 1991, the  predecessor was merged into
Azco, a newly incorporated Delaware corporation.  In October 1991, Azco acquired
all of the shares of Filton  Enterprises  Limited, a Gibraltar  corporation,  in
return for the issuance of 3,650,000 common shares.  At that time,  Filton owned
rights in two mining  properties  located in Mexico:  the Suaqui  Verde  project
located  in  southeastern  Sonora  and the  Piedras  Verdes  project  located in
southern Sonora. Filton was dissolved in 1994 and its assets were distributed to
Azco.

     In July 1992,  Azco  merged with Azco Mining  Inc.,  a Wyoming  corporation
("Azco Wyoming"), with Azco being the survivor of the merger. At the time of the
completion  of  the  merger,  Azco  Wyoming  had  3,946,550  shares  issued  and
outstanding and Azco had 12,633,822  common shares issued and  outstanding.  One
common  share of Azco was issued in exchange  for each share of Azco  Wyoming in
connection  with the  merger.  Azco  Wyoming  was  formerly  a British  Columbia
corporation,  which was  incorporated  under the laws of the Province of British
Columbia in August 1981 under the name 241145 B.C. Ltd. 241145 B.C. Ltd. changed
its  name to  Canarex  Resources  Inc.  in June  1983,  to  International  Baron
Resources  Ltd.  in January  1988,  and  finally to Azco Mining Inc. in February
1992.  Azco Wyoming was continued under the laws of Wyoming in May 1992 prior to
merging with Azco.

     In March 1999, Azco completed the  acquisition of Arizona Mica  Properties,
Inc. ("Arizona Mica"), an Arizona corporation, which owned the rights to develop
43 unpatented lode-mining claims located in Yavapai County,  Arizona. It is from
these mining  claims that Azco  obtains all of its mica.  This  acquisition  was
accomplished   through  the  merger  of  Arizona   Mica  with  and  into  Azco's
wholly-owned  subsidiary,  Sanchez  Mining  Inc., a Delaware  corporation,  with
Sanchez being the surviving  corporation.  Sanchez subsequently changed its name
to Azco Mica,  Inc. In connection  with the merger,  Azco issued an aggregate of
4,500,000  shares  of its  common  stock in equal  amounts  to each of the three
shareholders of Arizona Mica: Lawrence G. Olson, John O. Rud and Floyd R. Bleak.

Recent Developments
-------------------

     In January 2002, Azco completed a financing lease  transaction that yielded
Azco net proceeds of $2,842,500. Under the terms of the transaction, Azco sold a
40% ownership in Azco's mica processing  facility located in Glendale,  Arizona.
Subsequently,  Azco leased the property back for an initial  period of 10 years,
with an option to  repurchase  the stake for 120% of the  original  sales  price
after the second year. The repurchase price of the property  increases by 10% of
the  original  sales  price each year the  option  remains  unexercised  up to a
maximum of 150% of the original sales price. The lessor maintains a mirror image
option to put the property back to the Company.  Payments for the first 6 months
under the lease agreement are $30,000,  for the second 6 months they increase to
$37,500  after which time they are $45,000 per month.  In  connection  with this
transaction,  the Company issued a warrant to purchase  2,550,000  shares of the
Company's  common stock at $0.50 per share.  The warrant vested January 2002 and
is exercisable through January 16, 2007.

     In June  2002,  we entered  into an Equity  Line of Credit  Agreement  with
Cornell  Capital  Partners  ("Cornell").  Pursuant  to the Equity Line of Credit
Agreement,  we may, at our discretion,  periodically sell to Cornell,  shares of
our common stock for a total purchase price of $5.0 million.  The  effectiveness
of the sale of shares  under the Equity  Line of Credit is  conditioned  upon us
registering  the shares to be sold with the Securities and Exchange  Commission.
Cornell  Capital  Partners  will  purchase the shares of common stock for a 7.5%
discount  to the lowest  closing  bid price of our  common  stock for the 5 days
immediately  following  the notice  date.  In  addition,  Cornell is entitled to
retain 5% of each  advance  under the  Equity  Line of Credit,  together  with a
one-time commitment fee of $240,000, payable in shares of Azco common stock.

     Azco is currently  selling products into the cosmetic grade mica market, as
well as the golf course and construction sand markets.

<PAGE>

Exploration And Development
---------------------------

     Azco  incurred  exploration  expenses  of  $116,895  during  fiscal 2002 in
connection with its funding requirements under the terms of its 30% share of the
Piedras Verdes project.

     Effective September 1, 2001, Randgold Resources  terminated the West Africa
Gold Joint Venture - Mali exploration  agreement with Azco.  Randgold previously
had the  right  to earn  75% of  Azco's  mineral  interests  in WAG  through  an
agreement where Randgold would spend a minimum $2 million establishing a minimum
one  million  ounce  gold  deposit.  Azco  has no plans  to  renew  the  mineral
concessions or the work  commitment  with the Malian  government.  During fiscal
2002, Azco incurred no exploration expense on the Mali project.

     Azco  continues to control the  Silverado  and the Alamos claims in Sonora,
Mexico. In an effort to limit financial exposure, Azco intends to try to attract
a joint venture partner to help further explore these claim blocks.  Exploration
expenses of $41,292  were  incurred  with  respect to the  Silverado  and Alamos
claims in fiscal 2002.

Products
--------

     Azco  currently  is  selling  cosmetic  grade  mica and  feldspathic  sand.
Feldspathic sand is a by-product of the mica concentrator, which is sold as golf
course  bunker sand,  and stucco  sand.  Mica filled  plastic  pellets have been
produced and are currently  being  marketed to the  manufacturers  of reinforced
plastics.  Azco  produces  mica  that is  being  sold  into or  marketed  to the
cosmetic, paint, plastic, coatings and pigments industries.

Marketing
---------

     Azco employs a full-time marketing director on a monthly contract basis. An
eastern United States plastic  distributor is on retainer for the development of
the mica reinforced  plastics market. A local engineer is under retainer for the
development  of the local and western  United  States mica market.  In addition,
Azco has a commissioned salesman arranging the sales of its sand products.

Customers
---------

     Azco  sells its  cosmetic  grade  mica to  Presperse,  Inc.  and KOBO,  who
distribute the product to various cosmetic manufacturers. Pioneer Sand purchases
our golf course bunker sand and Western  Stucco  currently  purchases our stucco
sand.

Competition
-----------

     Many companies are engaged in the  exploration  and  development of mineral
properties.  Azco  may  be  at a  disadvantage  with  respect  to  some  of  its
competitors because many of these companies have substantially greater technical
and financial resources than Azco.

     Engelhard  Corp. and Georgia  Industrial  Minerals are considered to Azco's
main  competitors  in the  production of wet ground mica.  Oglebay Norton Co. is
considered to be Azco's chief  competitor  for the  production of crushed silica
sand in the Phoenix, Arizona area.

Research And Development
------------------------

     Azco currently retains Transmit Technology Group, LLC, of Arlington, Texas,
on a monthly basis,  to provide  research and  development  support for its mica
filled plastic  products.  Azco's mica is being  evaluated and tested by several
potential  customers  in  the  cosmetics  and  plastics  industries  as  to  the
suitability  of our mica for their  products.  An equipment  vendor is providing
additional testing in the grinding of mica.

<PAGE>

Employees And Consultants
-------------------------

     As of June 30,  2002,  we had fifteen  full-time  employees  one  part-time
employee and two full-time  consultants.  None of our employees are covered by a
labor union contract or any collective bargaining agreement.

ITEM 2.  PROPERTIES

Black Canyon Mica Project
-------------------------

     Azco has staked 162 additional claims adjacent to its original property and
has  defined,  through  two drill  programs,  a  deposit  of  3,926,700  tons of
muscovite mica ore. In the fourth quarter of fiscal 2000, limited production was
initiated at Azco's  10,000-ton per year wet ground mica processing  facility in
Glendale,  Arizona.  Construction of the crushing and concentrating circuits, at
the mine-site near Black Canyon City, Arizona, was completed in June 2001.

     Through June 30, 2002,  Azco has incurred the  following  capital  costs in
relation to the mica project:

<TABLE>
<CAPTION>

<S>                                                                          <C>
Acquisition of mineral properties                                            $ 2,219,996
Mining and processing plant and equipment                                      7,122,679
Development costs                                                              1,104,966
Accumulated amortization                                                         (94,769)
                                                                          ---------------
Total                                                                       $ 10,352,872
                                                                          ---------------
</TABLE>

     During the year ended June 30, 2002,  the following  expenses were incurred
in relation to the mica project:

<TABLE>
<CAPTION>

<S>                                                                          <C>
Write-down of inventory costs                                                $1,340,207
Other production costs                                                           31,600
Reclamation                                                                         330
                                                                        ----------------
Total                                                                        $1,372,137
                                                                        ----------------
</TABLE>

Piedras Verdes Project
----------------------

     Cobre del Mayo S.A. de C.V. ("Cobre del Mayo") is a Mexican corporation set
up to develop the Piedras  Verdes  copper  project in Sonora,  Mexico  ("Piedras
Verdes  Project").  Azco owns 30% of Cobre del Mayo and, in March  2002,  Phelps
Dodge sold its 70%  operating  interest  in Cobre del Mayo to a  privately  held
Canadian company,  Frontera Copper Corporation  ("Frontera").  Frontera plans to
secure necessary financing for the Piedras Verdes Project and to advance it to a
bankable  feasibility  stage  as soon as  possible.  Under  the  Cobre  del Mayo
shareholders agreement, we are obligated to fund 30% of the development expenses
incurred in connection  with the Piedras  Verde  project.  The type,  amount and
timing of development  are determined at the sole  discretion of Frontera.  Azco
has informed Frontera that until it has secured a more stable financial position
it will be unable to fund its 30%  portion of  development  expenses.  Under the
terms of the Cobre del Mayo  shareholders  agreement,  Azco's ownership in Cobre
del Mayo will be diluted  proportionate  to the  contributions  Azco has made to
date.  Azco will have the opportunity to resume  contributions  at any time at a
rate equal to its  ownership  level at that time.  During the fiscal  year ended
June 30, 2002, Azco funded $116,895 of the development costs.

<PAGE>

     Prior to the sale of a 70%  interest  in Cobre del Mayo to Phelps  Dodge in
late 1995,  Azco drilled 242 reverse  circulation  holes totaling 26,815 meters.
During the period of Phelps Dodge involvement, December 1995 through March 2002,
an additional 217 holes were cored  totaling  47,869  meters.  In addition,  the
geologic mapping was expanded,  metallurgical  testing advanced and a geological
and ore deposit model prepared in addition to a positive pre-feasibility report.
The Cobre del Mayo  partners  believe  that  there  are  sufficient  exploration
results available on the project to advance it to the bankable feasibility stage
without additional drilling or testing.

     Azco estimates that the inferred mineralized material at the Piedras Verdes
property  contains 316 million tons grading .37% copper.  However,  there are no
proven or probable  reserves  confirmed at the Piedras  Verdes  property at this
time.

New Planet Property
-------------------

     In September  2000,  Azco entered into a lease purchase option with the New
Planet Copper  Mining  Company on 31 patented  mining  claims  located in La Paz
County,  Arizona.  Azco is currently paying $1,500 a month in rental fees and is
assessing the viability of developing  the property for its micaceous iron oxide
(specular hematite) potential.

Mali Gold Concession
--------------------

     Effective  September 1, 2001,  Randgold Resources  terminated the WAG Joint
Venture - Mali  exploration  agreement with Azco. Azco has no plans to renew the
mineral concessions or the work commitment with the Malian government.

Silverado And Alamos Claims
---------------------------

     Azco  continues to control the  Silverado  and the Alamos claims in Sonora,
Mexico. In an effort to limit financial exposure, Azco intends to try to attract
a joint venture partner to help further explore these claim blocks.  Exploration
expenses of $41,292  were  incurred  with  respect to the  Silverado  and Alamos
claims in fiscal 2002.


ITEM 3.  LEGAL PROCEEDINGS

     In July 2002,  Azco  entered  into a settlement  agreement  regarding  fees
payable under terminated  management  agreements with two of its former officers
and directors, Mr. Alan P. Lindsay and Mr. Anthony R. Harvey. Azco agreed to pay
each former director the sum of $350,000. The amount is to be paid in an initial
payment of $20,000 each, due upon the signing of the  Agreement,  and in monthly
payments of $10,000 thereafter,  with the entire balance due within 24 months of
the date this  Agreement  is signed.  In  addition,  Azco  agreed to pay $24,898
representing one half of the legal fees incurred by the former directors.  Under
the terms of the  agreement,  Azco is  required  to provide  Messrs.  Harvey and
Lindsay each with 150,000  shares of common  stock in Azco Mining,  Inc.,  which
shares shall be unrestricted as allowed pursuant to Rule S-8 of the Rules of the
Securities and Exchange Commission.

     On January 22, 1999,  the trustee in bankruptcy  proceedings  against Eagle
River International  Limited, a former WAG - Mali joint venture partner of Azco,
served a petition,  in the Quebec Superior Court, District of Hull, upon Azco in
order  to  recuperate  assets  from  Azco.  The  trustee  alleges  that  Azco is
accountable to the trustee for certain stock in its subsidiary and other alleged
assets which, represent  hypothetical values that may aggregate,  if one accepts
the trustee's claims of private stock values,  up to $3,400,000.  Azco considers
the  trustee's  claims to be  without  merit  and has  engaged  counsel  that is
disputing the matter  vigorously on behalf of Azco. To the knowledge of Azco, it
is also the  largest  creditor  of Eagle  (Azco  has made a claim in  excess  of
$4,000,000)  and,  therefore,  it is Azco's opinion that  ultimately the trustee
will be primarily  accountable  to Azco for any assets  recovered,  whether from
Azco or any other party.

<PAGE>

     On June 25, 2002 Azco received a demand for  arbitration  filed by iCapital
Corporation  seeking  $144,000  in relief due to failure to pay under a June 26,
2001 Financial Consulting Agreement.  It is the position of Azco and its counsel
that the contract is void and it is unlikely that iCapital will prevail on their
claim.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                     PART II


ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock is traded on the Toronto Stock  Exchange in Canada and the
American  Stock  Exchange  in the United  States  under the symbol  "AZC." As of
September 3, 2002, there were 31,912,121 common shares outstanding.

     The following  table  summarizes  the high and low closing sales prices per
share of the common  stock for the periods  indicated as reported on the Toronto
Stock Exchange and the American Stock Exchange:

<TABLE>
<CAPTION>
Quarter ended                                         American Stock Exchange                Toronto Stock Exchange
                                                             (U.S. $)                             (Canadian $)
2000                                                   HIGH              LOW               HIGH                  LOW
------------------------------------------------ ----------------- ---------------- -------------------- --------------------
<S>                                                    <C>              <C>              <C>                  <C>
09/30/00                                                     1.19             0.81                 1.70                 1.20
12/31/00                                                     1.06             0.31                 1.70                 0.45
------------------------------------------------ ----------------- ---------------- -------------------- --------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------ ----------------- ---------------- -------------------- --------------------
2001                                                   HIGH              LOW               HIGH                  LOW
------------------------------------------------ ----------------- ---------------- -------------------- --------------------
<S>                                                    <C>              <C>               <C>                    <C>
03/31/01                                                    $0.94            $0.38                $1.30                $0.55
06/30/01                                                     0.74             0.46                 1.19                 0.71
09/30/01                                                     0.76             0.43                 1.15                 0.55
12/31/01                                                     0.69             0.49                 1.08                 0.73
------------------------------------------------ ----------------- ---------------- -------------------- --------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------ ----------------- ---------------- -------------------- --------------------
2002                                                   HIGH              LOW               HIGH                  LOW
------------------------------------------------ ----------------- ---------------- -------------------- --------------------
<S>                                                    <C>              <C>                  <C>                  <C>
03/31/02                                                    $1.20            $0.53                $1.96                $0.94
06/30/02                                                     1.13             0.82                 1.84                 1.08

</TABLE>

Holders Of Common Equity
------------------------

     As of September 17, 2002, Azco had 918 recordholders of common stock.

Dividends
---------

     Azco's Board of Directors has not declared any dividend on its common stock
since Azco's  inception and does not intend to pay out any cash dividends on its
common stock in the foreseeable future.

Recent Sales Of Unregistered Securities
---------------------------------------

     In July 2002,  Azco  entered  into a settlement  agreement  regarding  fees
payable under terminated  management  agreements with two of its former officers
and directors Mr. Alan P. Lindsay and Mr. Anthony R. Harvey.  Azco agreed to pay
each former director the sum of $350,000. The amount is to be paid in an initial
payment of $20,000 each, due upon the signing of the  Agreement,  and in monthly
payments of $10,000 thereafter,  with the entire balance due within 24 months of
the date this  Agreement  is signed.  In  addition,  Azco  agreed to pay $24,898
representing one half of the legal fees incurred by the former directors.  Under
the terms of the  agreement,  Azco is  required  to provide  Messrs.  Harvey and
Lindsay each with 150,000 shares of unrestricted common stock.

<PAGE>

     In July 2002,  Pacifica Financial Group was issued 430,000 shares of Azco's
common stock as compensation  for consulting  services  provided to azco.  These
shares  were  valued at $0.95 per share,  or a total of  $408,500 on the date of
issuance.

     In June 2002, we entered into the Equity Line of Credit  Agreement where we
may, at our discretion,  periodically issue and sell to Cornell Capital Partners
shares of our common stock for a total purchase price of $5 million.  The amount
of each  advance is  subject  to a maximum  advance  amount of  $500,000  with a
minimum  of a seven  trading  days  period  between  advances.  Cornell  Capital
Partners  will  purchase the shares of common  stock for a 7.5%  discount to the
lowest  closing  bid  price  of our  common  stock  for  the 5 days  immediately
following the notice date. In addition,  Cornell Capital Partners is entitled to
retain 5% of each  advance  under the  Equity  Line of Credit,  together  with a
one-time  commitment  fee of  $240,000,  payable in shares of common  stock.  We
issued 237,624 shares of our common stock to Cornell Capital Partners, LP with a
market value of $240,000 as the commitment fee. Cornell Capital Partners intends
to sell any  shares  purchased  under  the  Equity  Line of  Credit  at the then
prevailing market price. Additionally, Westrock Advisors, Inc. was paid a fee of
9,901 shares of Azco's common stock, which was equal to $10,000 at a closing bid
of $1.01 on June 19, 2002 for acting as the placement agent.

     In April 2002, Floyd Bleak was issued 390,000 shares of Azco's common stock
as  compensation  for the  300,000  shares of common  stock  Mr.  Bleak  paid to
iCapital Corp. for its consulting  services to Azco. These shares were valued at
$0.65 per share, or a total of $253,500,  on the date the agreement was approved
by the Azco board.

     In April  2002,  Gary R. Blume was issued  25,000  shares of Azco's  common
stock as payment  for legal  services.  These  shares  were  valued at $0.57 per
share, or a total of $14,250, on the date the contract was entered into.

     In April 2002,  Mr.  Bleak  purchased  375,000  shares of Azco at $0.40 per
share in a private offering under Regulation D.

     In January  2002,  Patty J. Ryan  exercised  warrants  that were  issued on
August 27,  2001.  The  warrants  were issued to Ms. Ryan in  connection  with a
$200,000 notes payable.  This loan agreement was between Azco and Ms. Ryan for a
term of up to one year at 12% interest.  The warrant provided for 250,000 shares
of common stock at a price of $0.40 per share.

     In January 2002, Azco completed a financing lease  transaction that yielded
net proceeds of $2,842,500. Under the terms of the transaction,  Azco sold a 40%
ownership  in  the  mica  processing  facility  located  in  Glendale,  Arizona.
Subsequently,  Azco leased the property back for an initial  period of 10 years,
with an option to  repurchase  the stake for 120% of the  original  sales  price
after the second year. The repurchase price of the property  increases by 10% of
the  original  sales  price each year the  option  remains  unexercised  up to a
maximum of 150% of the original sales price. The lessor maintains a mirror image
option  to put the  property  back to the  Company.  Payments  for the first six
months under the lease  agreement  are  $30,000,  for the second six months they
increase to $37,500  after which time they are $45,000 per month.  In connection
with this  transaction,  Azco issued a warrant to purchase  2,550,000  shares of
Azco's common stock at $.50 per share.  This warrant  vested in January 2002 and
is exercisable through January 16, 2007.

     In December 2001, Azco received a one-year $100,000 loan,  bearing interest
at  12%  per  annum,  from  a  sophisticated  investor  and  shareholder,   Luis
Barrenchea.  In  connection  with this loan,  Azco  issued a warrant to purchase
125,000 shares of Azco's common stock at $.40 per share.  This warrant vested in
February 2002 and is excercisable through December 3, 2002.

<PAGE>

     In October 2001, Azco received a one-year  $100,000 loan,  bearing interest
at 12% per annum,  from Mr.  Berrenachea.  In  connection  with this loan,  Azco
issued a warrant to purchase  125,000  shares of Azco's common stock at $.40 per
share. This warrant vested in December 2001 and is excercisable  through October
19, 2002.

     In  September  2001,  Azco  received a one-year  $200,000  loan,  currently
bearing interest at 12% per annum, from Mr. Barrenchea.  In connection with this
loan, Azco issued a warrant to purchase 125,000 shares of Azco's common stock at
$.40 per share. This warrant vested in November 2001 and is excercisable through
September  4,  2002.  Azco is  currently  in  negotiations  with Mr.  Barrenchea
regarding  an  extension  of this loan.  Azco has offered to extend the exercise
date of the warrant an additional year, in exchange for a one-year  extension of
the loan.

     In March 2001,  Lawrence G. Olson the  President,  CEO and  Chairman of the
Board,  jointly with his wife,  made an unsecured  loan to Azco in the amount of
$800,000 at an interest  rate equal to the prime rate of interest as reported by
Imperial Bank plus one percentage point. Mr. Olson received, in conjunction with
the loan, a warrant to purchase  300,000  shares of common  stock for $0.69.  In
October 2001, Azco  restructured its $800,000 loan agreement with Mr. Olson. Mr.
Olson agreed to extend the note payable an additional  year to March 15, 2003 in
consideration for 700,000 warrants to purchase common stock at an exercise price
of $0.40.  The warrants  vested in December 2001 and expire on October 12, 2003.
In  addition,  effective  October  1, 2001,  the  interest  rate  payable on the
$800,000  Olson loan was adjusted  from prime plus 1% to 12%  annually.  In June
2002, the loan was extended an additional  year and Azco entered into a security
agreement  with Mr. Olson,  whereby  Azco's assets secured the loan. The loan is
currently due on March 14, 2004.

     With respect to the sale of unregistered  securities  referenced above, all
transactions  were exempt  from  registration  pursuant  to Section  4(2) of the
Securities Act of 1933 (the "1933 Act"), and Regulation D promulgated  under the
1933 Act. In each instance,  the purchaser had access to sufficient  information
regarding Azco so as to make an informed investment decision. More specifically,
Azco had a reasonable  basis to believe that each  purchaser was an  "accredited
investor"  as  defined in  Regulation  D of the 1933 Act and  otherwise  had the
requisite sophistication to make an investment in Azco's securities.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated  financial data for each of the five years during
the period  ended June 30 are derived  from our audited  consolidated  financial
statements.  The data  presented  below should be read in  conjunction  with our
consolidated   financial   statements  and  related  notes,  and  with  Item  7.
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."


<PAGE>

<TABLE>
<CAPTION>
                                                               Years Ended June 30,
                                   2002              2001               2000              1999             1998
Statement of Operations Data:
<S>                               <C>                 <C>                <C>               <C>             <C>
Sales                             $   64,880          $   17,600         $      --         $      --       $      --
Net loss from operations         (4,476,861)         (3,436,202)       (4,491,676)       (5,449,583)     (4,091,951)
Net loss                         (4,247,586)         (3,365,376)       (3,899,486)       (4,528,006)     (3,044,112)
Loss per share
                                      (0.14)              (0.11)            (0.13)            (0.17)          (0.12)
Weighted avg. number of
  common shares                   30,295,261          29,964,636        29,846,839        26,787,226      25,646,449
</TABLE>

<TABLE>
<CAPTION>

Balance Sheet Data:            June 30, 2001       June 30, 2001     June 30, 2000     June 30, 1999      June 30, 1998
<S>                            <C>                 <C>               <C>               <C>                <C>
Capital assets                  $ 10,641,020        $ 10,538,089      $  8,181,582      $  2,219,997       $      --
Total assets                      12,991,072          11,904,545        13,872,311        17,353,717      19,486,669
Total debt (including
  materials)                       2,659,523             866,023                --                --              --
Total liabilities                  4,881,185           1,747,142           566,028           387,984         299,061
Total stockholders' equity         8,109,887          10,157,403        13,306,283        16,965,733      19,187,608
</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS

Results Of Operations
---------------------

     Year Ended June 30, 2002 Compared To Year Ended June 30, 2001

     Sales
     -----

     Sales  increased  in fiscal 2002 to $64,880 from $17,600 in fiscal 2001 due
to the continuing acceptance of our cosmetic grade mica. Specifically, our sales
volume in 2001 was 8,800 lbs. as compared  to 31,600  lbs. in fiscal  2002.  The
sales consist of cosmetic grade mica produced from its Black Canyon Mica project
located in Arizona. Since June 30, 2002, Azco is also selling feldspathic sand a
by-product of mica production, which is sold into the local golf course sand and
stucco  markets.  Azco's  customers  consist of  Presperse,  Inc and KOBO,  with
respect to mica and Pioneer Sand and Western  Stucco with respect to feldspathic
sand.

     Expenses
     --------

     Production costs decreased by $104,705 due to lower than expected demand of
the Company's mica product.

     Exploration  costs  decreased  by $250,921  as the result of the  Company's
decision to not fund its current portion of expenses associated with the Piedras
Verdes Copper Project.

     Salaries  expense  decreased  in fiscal 2002 to $341,608  from  $430,111 in
fiscal 2001. This decrease was due to the  non-renewal of management  agreements
with two former executives in October 2002.

     General and  administrative  expense increased in fiscal 2002 to $1,329,508
from  $588,632 in fiscal  2001.  This  increase was due to $180,000 in financing
lease payments in the fiscal 2002 that did not exist in fiscal 2001, as well as,
investor  relations  expense  relating to  contract  services of $495,903 in the
current  fiscal period  compared to $71,644 in fiscal 2001,  accounting  fees of
$118,180 in the current  fiscal  period  compared to $38,583 for fiscal 2001 and
stock exchange fees of $108,023 in the current fiscal period compared to $51,673
for fiscal  2001.  Investor  relations  expense  includes  $336,043  of non-cash
expense  related to the issuance of 820,000 shares of stock and 50,000  warrants
to purchase stock in exchange for services rendered.  The increase in accounting
fees is due to services  rendered  in  connection  with the  various  financings
throughout the year.

<PAGE>

     Expenses of $1,030,900  related to the  settlement  reached with two of the
Company's  former  executives  were  recorded  in the fiscal year ended June 30,
2002.

     Financing  expenses in the fiscal  year ended  June30,  2002 were  $315,591
compared to $72,139 in the previous  year.  The increase was due to recording of
the  transaction  fees due  under  the  Cornell  Capital  equity  line of credit
agreement,  whereby the Company  agreed to issue $250,000 of its common stock as
fees.

     Other Income and Expenses
     -------------------------

     Other income and expenses in fiscal 2002 was  $(588,778) as compared to net
other income of $70,826 in 2001. The principal factor was increased interest due
to  interest  payments  of $139,639  due on new notes  payable  and  $457,745 of
non-cash amortization expenses on debt discounts on the financing arrangements.

     The  Company's  income tax benefit for fiscal 2002  consisted of a $998,053
benefit associated with the carryback of net operating losses resulting from the
March 2002 enactment of the Job Creation and Workers Assistance act of 2002.

     Net Loss
     --------

     Azco had a net loss of  $4,247,586 in fiscal 2002 compared to a net loss of
$3,365,376 in 2001. The increase in net loss for the year ended June 30, 2002 is
the result of increased  general and  administrative  expenses of $740,876,  the
recording  of a  $1,030,900  settlement  with former  executives  and  increased
interest expense of $546,943. These increases are offset by a decrease in fiscal
2002 production costs of $104,705,  decreased exploration expense of $250,921, a
capital asset  write-down  of $349,744 in fiscal 2001 and a $998,053  income tax
benefit recorded in fiscal 2002.

     Year Ended June 30, 2001 Compared To Year Ended June 30, 2000

     Sales
     -----

     All material  income  received  during fiscal 2001 and 2000 was a result of
interest  earned on  available  cash  resources  with the  exception  of $17,600
received in fiscal 2001 for the sale of mica products.

     Expenses
     --------

     Salaries  expense  decreased in fiscal 2001 to $430,111 from  $1,009,682 in
fiscal 2000.  This decrease was due to a reduction in executives  resulting from
the  non-renewal  of  management  agreements  with  former  executives  and  the
expensing of $201,900 due to the granting of stock options to  non-employees  in
fiscal 2000.

     General and  administrative  expense  decreased  in fiscal 2001 to $588,632
from  $1,027,582  in fiscal  2000.  This  decrease was due to the closure of the
executive office in Vancouver, Canada and reduced investor relations activity

     Other Income and Expenses
     -------------------------

     Other  income in fiscal  2001 was  $70,826 as compared to $592,190 in 2000.
Income in the  current  period was  reduced  in large part due to a decrease  in
interest  income of  $209,959  (net of  expenses)  and the  non-recurrence  of a
$277,500 sale of assets in fiscal 2000.

<PAGE>

     Net Loss
     --------

     Azco had a net loss of  $3,365,376 in fiscal 2001 compared to a net loss of
$3,899,486  in 2000.  The  decrease in net loss for fiscal 2001 is the result of
decrease in salaries and general and administrative  expense of $1,018,524.  The
decrease  was offset by a decrease in the 2001  fiscal  year in other  income of
$521,364.

Liquidity And Capital Resources
-------------------------------

     As of June 30, 2002, we had  cash-on-hand  of $884,647.  We anticipate that
our current  cash-on-hand  will fund our current  operations  for  approximately
three months.

     Azco believes that it will need additional  financing to fund its operating
and capital  requirements  over the next twelve months assuming that the Company
continues  to  advance it  marketing  and sales  efforts.  In  particular,  Azco
anticipates  the need for at least $2.9 million of additional  financing  during
the next 12 months, in order to fund the following expected uses:

<TABLE>
<CAPTION>
<S>                                                        <C>
Mica project operating losses                                $ 500,000
Mica project capital expenditures                              350,000
Corporate overhead and related expenses                      1,400,000
Exploration and development                                    650,000
                                                               -------
Total funds needed                                          $2,900,000

</TABLE>

     If Azco's  mica and sand  project  does not achieve  commercial  production
levels or if Azco is unable to  successfully  market the mica and sand  products
during the next 12 months,  Azco will need increased  additional funding to meet
its operating expenses.

     Our primary need for cash is to fund our ongoing operations until such time
that the sale of  minerals  generates  enough  revenue  to fund  operations.  In
addition,   our  need  for  cash  includes  satisfying  current  liabilities  of
$1,573,229  as of June 30,  2002,  consisting  of  accounts  payable and accrued
liabilities of $1,129,557 and notes payable of $443,672.

     In January 2002,  Patty J. Ryan  exercised her warrant to purchase  250,000
shares of common stock at a price of $0.40 per share.  The warrant was issued in
connection with the August 27, 2002,  one-year,  $200,000 note payable  yielding
12% interest.  In lieu of payment for the exercise price,  the outstanding  note
payable was reduced by $100,000. The $100,000 balance of the note was retired in
August 2002.

     In  September  2001,  Azco  received a one-year  $200,000  loan,  currently
bearing interest at 12% per annum, from Mr. Barrenchea.  In connection with this
loan, Azco issued a warrant to purchase 125,000 shares of Azco's common stock at
$.40 per share. This warrant vested in November 2001 and is excercisable through
September  4,  2002.  Azco is  currently  in  negotiations  with Mr.  Barrenchea
regarding  the  extension of this loan.  Azco has offered to extend the exercise
date of the warrant an additional year, in exchange a one-year  extension of the
loan.

     In October 2001, Azco received a one-year  $100,000 loan,  bearing interest
at 12% per annum, from Mr. Barrenchea. In connection with this loan, Azco issued
a warrant to purchase  125,000  shares of Azco's common stock at $.40 per share.
This warrant  vested in December 2001 and is  excercisable  through  October 19,
2002.

     In December 2001, Azco received a one-year $100,000 loan,  bearing interest
at  12%  per  annum,  from  a  sophisticated  investor  and  shareholder,   Luis
Barrenchea.  In  connection  with this loan,  Azco  issued a warrant to purchase
125,000 shares of Azco's common stock at $.40 per share.  This warrant vested in
February 2002 and is excercisable through December 3, 2002.

<PAGE>

     A summary of the  maturity  dates of the notes  payable due within the next
twelve months and the amounts (excluding debt discounts) are set forth below:

<TABLE>
<CAPTION>
Due Dates                         Amount
---------                         ------
<S>                               <C>
August 27, 2002                   $100,000
September 4, 2002                  200,000
October 19, 2002                   100,000
December 3, 2002                   100,000
                                  --------
Total                             $500,000

</TABLE>

     In  addition,  Azco is obligated  under the  financing  lease  completed in
January 2002 for which monthly payments for the first six-month period July 2002
to December 2002 are $37,500 and thereafter are $45,000 per month.

     Azco leases some heavy equipment.  Certain  equipment leases are classified
as capital  leases and,  accordingly,  the equipment and related  obligation are
recorded on its balance sheet.  Azco is committed to lease its former  executive
office in Vancouver,  British Columbia, through April 2004 for a monthly payment
of $5,250.  This  location  currently  has a tenant  under a sub-lease  contract
whereby Azco is receiving $3,140 per month.

     In conjunction with the departure of two former executives in October 2000,
Azco  entered  into a  severance  agreement  whereby  Azco is  required  to make
up-front  payments  of  $20,000  and 24 monthly  payments  of  $10,000,  to each
director,  through June 2004, with the remaining  balance of $90,000 due in July
2004.  Under the terms of the  agreement,  Azco  additionally,  is  required  to
provide  Messrs.  Harvey and Lindsay  each with 150,000  shares of  unrestricted
common stock in Azco Mining, Inc.

     The following table is provided to detail our  contractual  obligations and
lease commitments:

<TABLE>
<CAPTION>
                                                               Payments due in        Payments due in         Payments due
                                      Payments due through     1-3 years              4-5 years               after
                                      June 30, 2003            2003-2005              2006-2007               2007
                                      -------------            ---------              ---------               ----
<S>                                   <C>                      <C>                    <C>                     <C>
Equipment leases                         $   98,358                 84,727                      -                     -
Office lease                                 61,680                 51,400                      -                     -
Settlement payments                         280,000                420,000                      -                     -
Notes payable                               610,000                872,000                      -                     -
Financing lease                             495,000              1,080,000              1,080,000             6,930,000

Total contractual obligations            $1,545,038              2,508,127              1,080,000             6,930,000

</TABLE>

     Cobre del Mayo S.A. de C.V. is a Mexican  corporation set up to develop the
Piedras  Verdes  copper  project in Sonora,  Mexico.  Azco owns 30% of Cobre del
Mayo.  The 70% owner is a  Canadian  privately  held  company,  Frontera  Copper
Corporation. Frontera plans to secure necessary financing for the Piedras Verdes
Project and to advance it to a bankable  feasibility  stage as soon as possible.
Under the Cobre del Mayo shareholders agreement, we are obligated to fund 30% of
the development  expenses incurred in connection with the Piedras Verde project.
The type, amount and timing of development are determined at the sole discretion
of Frontera.  Azco has informed Frontera that until it has secured a more stable
financial  position  it will be unable to fund its 30%  portion  of  development
expenses.  Under the terms of the Cobre del Mayo shareholders agreement,  Azco's
ownership  in  Cobre  del  Mayo  S.A.  will  be  diluted  proportionate  to  the
contributions  Azco has made to that  date.  Azco will have the  opportunity  to
resume  contributions at any time at a rate equal to its ownership level at that
time.

<PAGE>

     In June  2002,  we entered  into an Equity  Line of Credit  Agreement  with
Cornell Capital Partners.  Pursuant to the Equity Line of Credit  Agreement,  we
may,  at our  discretion,  periodically  sell to Cornell  Capital  shares of our
common stock for a total purchase price of $5.0 million.  The  effectiveness  of
the sale of shares  under the  Equity  Line of  Credit  is  conditioned  upon us
registering the shares to be sold with the Securities and Exchange Commission.

     Other than the Equity Line of Credit,  we do not have any  commitments  for
funding.  No assurances can be given that the Equity Line of Credit will provide
sufficient  funding to finance our ongoing  operations or our long-term business
plan.  Among other  reasons,  this is due to the limit,  imposed by the American
Stock  Exchange,  whereby a maximum of 6,000,000  shares may be issued under the
Equity Line of Credit.  Further,  no assurance can be given that we will be able
to obtain other  commitments for financing on favorable terms or at all. Current
economic  and  market  conditions  have  made it  difficult  to  raise  required
finances.

     If we are unable to access the Equity Line of Credit or obtain  alternative
financing arrangements,  Azco (i) may be unable to fund our required development
expense of the Piedras  Verdes  project,  resulting in  substantial  dilution of
Azco's  interest,  (ii) may be forced to delay or terminate the  development and
marketing of Azco's mica and sand by-products,  thereby hindering or eliminating
Azco's  expected  primary  source of future  revenue,  (iii) may be  required to
eliminate  substantially  all business  activities to conserve cash, or (iv) may
need to seek protection under the U.S. bankruptcy laws.

Critical accounting policies and estimates
------------------------------------------

     Azco believes the following significant assumptions and estimates influence
its more critical  practices and accounting  policies used in the preparation of
its consolidated financial statements.

     Azco has initially estimated its ore reserves at the Black Canyon Mica Mine
based on its exploration  program completed in 1999.  Uncertainties are inherent
in  certain  of  the  Company's  critical   accounting  policies  and  estimated
quantities  of  reserves,  including  many  factors  beyond  the  control of the
Company. Ore reserve estimates are currently based upon engineering  evaluations
of  assay  values  from 41  drill  holes  and  samples  of  outcropping  surface
structures.  Azco uses its ore reserve  estimate in calculating the depreciation
of production assets and their long-term recovery. The Company's estimate of ore
reserves  together with its assumed  sales volumes and realized  prices for mica
products  are  significant   factors  used  in  performing   annual   impairment
assessments of its long-lived assets. Changes in ore reserve estimates and other
assumptions  regarding  pricing  and volume  could  materially  influence  these
assessments.  Should  the  quantity  of  sales of mica and  other  products  not
materialize,  significant  impairments  of the Company's  long-lived  assets may
result.

     Environmental  liabilities are based on bonding  requirements placed on the
Black  Canyon  Mica  Mine  by the  State  of  Arizona  and  the  Bureau  of Land
Management.  Currently a total bond of $190,400 is in place with these agencies.
Azco records the liability  when incurred and books the  reclamation  expense as
the ore reserve is processed.

     In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement  Obligations." The Statement addresses
financial   accounting  and  reporting  for  obligations   associated  with  the
retirement of tangible  long-lived  assets and the associated  asset  retirement
costs.  The  Statement  is  effective  as  of  the  beginning  of  fiscal  2003.
Specifically,  the Statement requires that retirement  obligations be recognized
when they are incurred and displayed as liabilities with the initial measurement
being at the present  value of  estimated  third party costs.  In addition,  the
asset  retirement cost will be capitalized as part of the asset's carrying value
and  subsequently  allocated to expense over the assets useful life. At June 30,
2002,  the  Company had  recorded a net asset of  approximately  $187,000  and a
corresponding  liability  of $190,400  associated  with its estimate of ultimate
reclamation  costs  associated  with the  Black  Canyon  site.  The  Company  is
currently in the process of determining the impact of the  pronouncement  on its
financial  position  discounting  and its  estimate  of  third  party  costs  of
reclamation.

<PAGE>

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or Disposal of  Long-Lived  Assets".  SFAS No. 144 replaces  certain
previously  issued accounting  guidance,  develops a single accounting model for
long-lived  assets other than  goodwill and  indefinite-lived  intangibles,  and
broadens the framework  previously  established  for assets to be disposed of by
sale (whether previously held or newly acquired). This Statement is effective as
of the  beginning of fiscal 2003.  The  pronouncement  is not expected to have a
material impact on the Company's financial  position,  results of operations and
cash flows.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No.  4,  44,  and 64,  Amendments  of  FASB  Statement  No.  13,  and  Technical
Corrections".  This  Statement  rescinds  SFAS No. 4,  SFAS No.  64 and  further
clarifies debt extinguishments,  which classify as extraordinary.  Additionally,
SFAS No.  145  amends  SFAS No. 13 in order to clarify  the  accounting  for the
treatment of lease  modifications.  Provisions of this Statement relating to the
rescission  SFAS No. 4 are effective for fiscal year 2003 and provisions of this
Statement  relating to the SFAS No. 13 are effective for transactions  occurring
after May 15, 2002. The  pronouncement is not expected to have a material impact
on its financial position, results of operations of cash flows.

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
Associated  with Exit or Disposal  Activities".  SFAS No. 146 replaces  Emerging
Task  Force  Issue  No.  94-3,  "Liability   Recognition  for  Certain  Employee
Termination  Benefits  and Other Costs to Exit and Activity  (including  Certain
Costs  Incurred in a  Restructuring)".  The  primary  difference  from  existing
guidance  is that SFAS No. 146  requires  the  recognition  of exit cost at fair
value  when a  liability  is  incurred,  versus  at the  date of the  exit  plan
approval.  This  Statement is effective for exit and disposal  activities of the
Company  that are  initiated  after  December  31,  2002.  The  Company  has not
historically had significant exit or disposal activities.

Going Concern
-------------

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming that Azco will, as noted above, continue to operate as a going concern.
Azco has  suffered  recurring  losses  from  operations  and Azco  will  require
substantial additional funds to continue and develop operations.

     These matters raise substantial doubt about Azco's ability to continue as a
going concern. The accompanying  consolidated  financial statements in this Form
10-K do not  include  the  adjustments  that  would be  necessary,  and could be
significant,  including a provision of impairment for plant and equipment should
Azco be unable to continue as a going concern.


ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCUSSION ABOUT MARKET RISK

     Azco's  financial   instruments  include  cash  and  cash  equivalents  and
long-term debt. Azco considers all financial instruments which are highly liquid
and  have  original  maturities  of  three  months  or less to be cash  and cash
equivalents  which are  readily  convertible  into  cash.  Azco's  cash and cash
equivalents  are not subject to significant  interest rate risk due to the short
maturities of these instruments. The total outstanding long-term debt (including
capital  leases) of Azco as of June 30, 2002 was  $2,659,523.  Azco's  long-term
debt is not subject to interest rate risk because all of Azco's  long-term  debt
has fixed rates of interest.  Azco does not enter into contracts for speculative
or investment purposes.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


<TABLE>
<CAPTION>
                                                                                                            Page
The following financial statements required to be included in Item 8 are listed
below:
<S>                                                                                                         <C>

     Report of Independent Accountants                                                                      F - 2

     Consolidated Balance Sheets as of June 30, 2002 and 2001                                               F - 3

     Consolidated Statements of Operations for the fiscal years
       ended June 30, 2002, 2001 and 2000                                                                   F - 4

     Consolidated Statements of Stockholders' Equity for the fiscal years
       ended June 30, 2002, 2001 and 2000                                                                   F - 5

     Consolidated Statements of Cash Flows for the fiscal years
       ended June 30, 2002, 2001 and 2000                                                                   F - 6

     Notes to Consolidated Financial Statements                                                             F - 7

The following financial statement schedule of the Registrant is included in Item
14(a) (2):

     Schedule II - Valuation and Qualifying Accounts for the fiscal years
       ended June 30, 2002, 2001 and 2000                                                                   F - 25

</TABLE>

Schedules  other than the one  listed  above  have been  omitted  since they are
either not  required or not  applicable,  or since the required  information  is
shown in the consolidated financial statements or related notes thereto.

                                      F-1

<PAGE>

                        Report of Independent Accountants

To the Board of Directors and
Stockholders of Azco Mining Inc.

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material  respects,  the financial position of Azco
Mining Inc.  and its  subsidiary  at June 30, 2002 and 2001,  and the results of
their  operations and their cash flows for each of the three years in the period
ended June 30, 2002 in conformity with accounting  principles generally accepted
in the United  States of America.  In addition,  in our opinion,  the  financial
statement  schedule listed in the  accompanying  index presents  fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and the financial  statement  schedule are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  and  the  financial  statement  schedule  based  on our  audits.  We
conducted our audits of these  statements in accordance with auditing  standards
generally  accepted in the United States of America,  which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

The  consolidated  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
consolidated financial statements, the Company has suffered recurring losses and
negative cash flows from  operations  which raises  substantial  doubt about its
ability to continue as a going concern. The consolidated financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.




September 3, 2002


                    Additional Comments for Canadian Readers

Canadian  reporting  standards do not consider it  appropriate to refer to going
concern  issues  where  the  matter  is  adequately  disclosed  in the  notes to
financial  statements,  such  as  described  in  Note  1 to  these  consolidated
financial statements. This report has been prepared in accordance with reporting
standards  in the United  States of America  which  requires a reference  in the
Report of  Independent  Accountant,  when  there is  substantial  doubt as to an
entity's ability to continue as a going concern.





September 3, 2002

                                      F-2

<PAGE>

                                Azco Mining Inc.
                          Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                               June 30,
                                                                        2002            2001
                                                                        ----            ----
<S>                                                                     <C>             <C>
                        Assets
Curent assets:
  Cash and cash equivalents                                             $   884,647     $    39,920
  Prepaids and other                                                        179,225          74,689
  Inventories (Note 5)                                                    1,095,780       1,061,447
                                                                          ---------       ---------
                                                                          2,159,652       1,176,056
Capital assets:
  Mineral properties, plant and equipment, net (Note 7)                  10,352,872      10,130,668
  Other capital assets, net (Note 8)                                        288,148         407,421
                                                                            -------         -------
                                                                         10,641,020      10,538,089
Restricted cash (Note 4)                                                    190,400         190,400
                                                                            -------         -------
              Total assets                                              $12,991,072     $11,904,545

                        Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable and accrued liabilities                              $   540,768     $   690,719
  Notes payable (Note 9)                                                    443,672               -
  Accrued settlement obligation(Note 14)                                    586,000               -
                                                                            -------         -------
                                                                          1,570,440         690,719

Accrued settlement obligation (Note 14)                                     444,900               -
Financing lease liability (Note 9)                                        1,975,650               -
Note payable to related party (Note 9)                                      615,068         715,280
Other liabilities (Note 10)                                                 275,127         341,143
                                                                            -------         -------
                                                                          3,310,745       1,056,423
                                                                          ---------       ---------
                Total liabilities                                         4,881,185       1,747,142
                                                                          ---------       ---------

Contingencies and commitments (Note 14)                                           -               -

Stockholders' equity:
  Common stock, $.002 par value, 100,000,000 shares
   authorized; 31,152,121 and 30,050,621 shares issued and
   outstanding at June 30, 2002 and 2001, respectively                       62,304          60,101
  Additional paid-in capital                                             30,951,523      28,753,656
  Accumulated deficit                                                   (22,903,940)    (18,656,354)
                                                                        ------------    ------------
                                                                          8,109,887      10,157,403
                                                                          ---------      ----------
                Total liabilities and stockholders' equity              $12,991,072     $11,904,545
                                                                        -----------     -----------
</TABLE>

                                      F-3

<PAGE>

                                Azco Mining Inc.
                     Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                                             For the years ended June 30,
                                                                        2002            2001            2000
                                                                        ----            ----            ----
<S>                                                                     <C>             <C>             <C>
Sales                                                                   $     64,880    $    17,600     $         -

Operating costs and expenses
Production costs                                                           1,371,807      1,476,512         424,287
General and administrative                                                 1,149,508        588,632       1,027,582
Salaries                                                                     341,608        430,111       1,009,682
Exploration                                                                  187,618        438,539         697,388
Depreciation and amortization                                                144,379         93,860         133,174
Capital asset write-downs                                                          -        349,744               -
Severence agreement(Note 14)                                               1,030,900              -               -
Financing expenses                                                           315,591         72,139               -
Start-up costs                                                                     -              -         947,511
Loss on investments                                                                -          3,894         250,000
Reclamation                                                                      330            371           2,052
                                                                                 ---            ---           -----
                                                                           4,541,741      3,453,802       4,491,676
                                                                           ---------      ---------       ---------
Operating loss                                                            (4,476,861)    (3,436,202)     (4,491,676)

Other income and expenses
Interest income                                                               12,945        124,626         314,690
Interest expense                                                            (781,723)       (54,780)              -
Other income                                                                       -            980         277,500
                                                                                   -            ---         -------
                                                                            (768,788)        70,826         592,190
                                                                            ---------        ------         -------
Loss before income taxes                                                  (5,245,639)    (3,365,376)     (3,899,486)
Income tax benefit                                                           998,053              -               -
                                                                             -------              -               -
Net loss                                                                $ (4,247,586)   $(3,365,376)    $(3,899,486)
--------                                                                -------------   ------------    ------------
Basic loss per common share                                             $      (0.14)   $     (0.11)    $     (0.13)
                                                                        -      ------   -     ------    -     ------
Diluted loss per common share                                           $      (0.14)   $     (0.11)    $     (0.13)
                                                                        -      ------   -     ------    -     ------
Weighted average number of common shares outstanding                       30,297,261     29,964,636      29,846,839
                                                                           ----------     ----------      ----------

</TABLE>

                                      F-4

<PAGE>

                                Azco Mining Inc.
                Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                     Coommon Shares             Additional
                                                Number of                       Paid-In         Accumulated
                                                Shares          Amount          Capital         Deficit         Total
                                                ------          ------          -------         -------         -----
<S>                                             <C>             <C>             <C>             <C>             <C>
Balance June 30, 1999                           29,832,121          59,664       28,297,561      (11,391,492)    16,965,733
Stock options exercised                             55,000             110           38,026                -         38,136
Stock option compensation                                -               -          201,900                -        201,900
Net loss                                                 -               -                -       (3,899,486)    (3,899,486)

Balance, June 30, 2000                          29,887,121          59,774       28,537,487      (15,290,978)    13,306,283
Stock options exercised                            163,500             327           96,564                -         96,891
Warrants (Notes 9 and 11)                                -               -          119,605                -        119,605
Net loss                                                 -               -                -       (3,365,376)    (3,365,376)

Balance, June 30, 2001                          30,050,621          60,101       28,753,656      (18,656,354)    10,157,403
Stock options exercised                             61,500             123           27,269                -         27,392
Warrants (Notes 9 and 11)                                -               -        1,654,928                -      1,654,928
Common shares issued (Note 11)                     790,000           1,580          416,170                -        417,750
Warrant exercised                                  250,000             500           99,500                -        100,000
Net loss                                                 -               -                -       (4,247,586)    (4,247,586)

Balance, June 30, 2002                          31,152,121      $   62,304      $30,951,523     $(22,903,940)   $ 8,109,887

</TABLE>

                                      F-5

<PAGE>

                                Azco Mining Inc.
                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                    For the years ended June 30,
                                                                2002            2001            2000
                                                                ----            ----            ----
<S>                                                             <C>             <C>             <C>
Cash flows fromp operating activities:
  Net loss                                                      $  (4,247,586)  $  (3,365,376)  $  (3,899,486)
  Items not affecting cash:
    Depreciation and amortization                                     144,379          93,860         133,174
    Stock option compensation and
      other non-cash expenses                                         611,243               -         201,900
    Gain on sale of mineral properties,
      plant and equipment                                                   -            (980)              -
    Loss on write-down/sale of invetsments                                  -           3,894         250,000
    Loss on write-down of mineral properties,
      plant and equipment                                                   -         349,744               -
    Amortization of debt discount                                     457,745          34,885               -
    Severance agreement                                             1,030,900               -               -
  Net change in operating assets and liabilities:
    Prepaids and other                                               (112,036)         49,388          (20,729)
    Inventories                                                       (34,333)        (60,669)      (1,000,778)
    Accounts payable and accrued liabilities                         (477,151)        232,981          178,044
                                                                     ---------        -------          -------
        Cash flows used in operations                              (2,626,839)     (2,662,273)      (4,157,875)
                                                                   -----------     -----------      -----------
Cash flows from investing activitis:
  Sale of Minera Cortez Resources Ltd. shares                               -          46,694                -
  Investment in Calgem, Inc.                                                -               -         (250,000)
  Purchase of capital assets                                                -               -         (298,974)
  Proceeds from sale of mineral properties,
    plant and equipment                                                     -             980                -
  Purchase of mineral properties, plant and equipment                (239,810)     (2,558,537)      (2,922,174)
  Restricted cash                                                           -               -         (190,400)
                                                                            -               -         ---------
        Cash flows used in investing activities                      (239,810)     (2,510,863)      (3,661,548)
                                                                     ---------     -----------      -----------
Cash flows from financing activities:
  Proceeds from issuance of financing lease                         3,000,000               -                -
  Proceeds from issuance of notes payable                             811,000         800,000                -
  Payments on notes payable                                          (211,000)              -                -
  Exercise of stock options                                            27,392          96,891           38,136
  Payments on capital lease obligations                               (66,016)         (8,721)               -
  Issuance of common stock                                            150,000               -                -
                                                                      -------               -                -
        Cash flows from financing activities                        3,711,376         888,170           38,136
                                                                    ---------         -------           ------
Increase(decrease) in cash and cash equivalents                       844,727      (4,284,966)      (7,781,287)
Cash and cash equivalents, beginning of year                           39,920       4,324,886       12,106,173
                                                                       ------       ---------       ----------
Cash and cash equivalents, end of year                          $     884,647   $      39,920   $    4,324,886
                                                                -     -------   -      ------   -    ---------
</TABLE>

                                      F-6

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

1.   Nature of Operations and Going Concern

     Azco  Mining  Inc.  (the  Company)  is a  mining  company  incorporated  in
     Delaware. Its general business strategy is to acquire,  explore and develop
     mineral properties. The Company's principal assets are the 100% owned Black
     Canyon Mica  Project  (the Mica  Project) in Arizona and an interest in the
     Piedras Verdes Copper Project in Sonora,  Mexico. The Company's interest in
     the Piedras  Verdes  Copper  Project  has been  diluted  from its  original
     ownership of 30% as a result of its  decision  not to make certain  funding
     requirements in the current year (Note 7).

     Initial  construction  has been  completed on the mica project and sales of
     cosmetic grade mica have begun.  Feldspathic sand, produced as a by-product
     of mica  production,  is being  sold into the local  golf  course  sand and
     stucco markets.

     Although  the  Company  has taken  steps,  consistent  with usual  industry
     standards,  to  verify  title  to  mineral  properties  in  which it has an
     interest,  these  procedures do not guarantee  the  Company's  title.  Such
     properties may be subject to prior agreements or transfers and title may be
     affected by undetected defects.

     The  accompanying  consolidated  financial  statements  have been  prepared
     assuming that the Company will continue to operate as a going concern.  The
     Company  has  suffered  recurring  losses  and  negative  cash  flows  from
     operations.  The Company requires additional funds to continue  operations,
     including  production and marketing of mica and sand products,  exploration
     commitments on mineral properties,  general and administrative expenses and
     to meet other  obligations  as they are due.  Management  of the Company is
     currently in negotiations for a $15 million financing in the form of equity
     and/or debt which would be used to expand and carry out certain upgrades to
     its processing  facilities  and to retire  existing high interest debt. The
     Company has also retained an investor  relations  firm to assist in seeking
     additional  financing and possible joint venture agreements.  However there
     is no assurance  that these efforts will be successful on terms  acceptable
     to the Company.  These matters raise  substantial doubt about the Company's
     ability  to  continue  as a going  concern.  These  consolidated  financial
     statements do not include the  adjustments to assets and  liabilities  that
     would be necessary,  and which could be significant,  should the Company be
     unable to continue as a going concern.

2.   Significant Accounting Policies

     Principles of Consolidation
     ---------------------------

     These consolidated financial statements include the accounts of the Company
     and its wholly-owned  subsidiary,  Azco Mica, Inc., a Delaware corporation.
     All significant intercompany balances and transactions have been eliminated
     in consolidation.

     Cash and Cash Equivalents
     -------------------------

     The Company considers all liquid  investments  purchased with a maturity of
     three months or less to be cash equivalents.  Cash and cash equivalents are
     stated at cost which approximates market value.

                                      F-7

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

2.   Significant Accounting Policies (Continued)

     Inventories
     -----------

     Inventories  are  recorded at the lower of cost and net  realizable  value.
     Cost is  determined  on a weighted  average basis and includes all costs in
     bringing  the  inventory  to  its  present  location  and  condition.   Net
     realizable value is the estimated price at which inventories can be sold in
     the normal course of business after allowing for the cost of completion and
     sale.

     As of June 30, 2002 and 2001, the Company's cost of its  inventories was in
     excess of the net realizable value.  Write-downs of $1,340,207,  $1,817,456
     and  $424,287  during  fiscal  years,  2002,  2001 and 2000,  respectively,
     reflected the necessary adjustments to the carrying value.

     Capital Assets
     --------------

     Land,  buildings,  plant,  equipment,  and  vehicles  are  carried at cost.
     Replacements,  maintenance  and  repairs  that do not improve or extend the
     life of the respective assets are expensed as incurred.  Major renewals and
     improvements are capitalized.  Upon retirement,  sale or other disposition,
     the cost and accumulated  amortization  are eliminated and the gain or loss
     is included in operations.

     The Company  expenses  prospecting and exploration  costs as incurred,  but
     capitalizes  costs  directly  attributable  to the  acquisition  of mineral
     properties,  pending  determination  as to  their  commercial  feasibility.
     Exploration  costs  include  those  related to the  Piedras  Verdes  Copper
     Project  (Note 7).  Mine  development  costs that are  expected  to benefit
     future production are capitalized and amortized on the  units-of-production
     method over proven and probable reserves.

     Mineral properties  (including  capitalized  development costs),  plant and
     equipment are amortized on the  units-of-production  basis using proven and
     probable reserves. Office buildings, furniture, equipment, and vehicles are
     depreciated  over their  estimated  useful  lives (3 - 15 years)  using the
     straight-line method.

     The Company  evaluates its long-term  assets for impairment  when events or
     changes in economic  circumstances  indicate  the  carrying  amount of such
     assets may not be  recoverable.  The Company uses an estimate of the future
     undiscounted net cash flows of the related asset or asset grouping over the
     remaining life to measure  whether the assets are  recoverable  and measure
     any  impairment  by  reference  to fair  value.  Fair  value  is  generally
     estimated using the Company's expectation of discounted net cash flows.

     Recoverability  of the  investment  in the Mica  project is assessed  using
     estimates   of  proven  and  probable  ore   reserves,   estimated   prices
     (considering  historical  and current  prices,  price  trends,  and related
     factors),  operating  capital,  and  reclamation  costs on an  undiscounted
     basis.  Where  capitalized  costs are not  recoverable,  reductions  in the
     carrying  value would be recorded  to the extent the  remaining  investment
     exceeds  the  estimate  of  fair  value.  Changes  in  the  geological  and
     engineering  interpretations  of ore bodies,  product  prices and operating
     costs may change the Company's estimate of proven and probable reserves. It
     is reasonably  possible that the Company's  estimate of proven and probable
     reserves  may change in the future  resulting  in  additional  charges  for
     depreciation, amortization and reclamation in future reporting periods.

     Reclamation Costs
     -----------------

     Estimated costs of decommissioning and reclamation  associated with mineral
     properties,   plant  and  equipment,   pursuant  to  regulatory  and  other
     requirements,  are  expensed  over the life of the  mine  through  periodic
     charges to earnings using the units-of-production method.

                                      F-8

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

2.   Significant Accounting Policies (Continued)

     Revenue Recognition
     -------------------

     The  Company  recognizes  the sale of  product  when an  agreement  of sale
     exists,  product  delivery  has  occurred,  title  has  transferred  to the
     customer and  collectibility is reasonably  assured.  The price received is
     based upon terms of the contract.

     Income Taxes
     ------------

     Deferred  income taxes are  recognized for the tax  consequences  in future
     years of differences  between the tax basis of assets and  liabilities  and
     their financial  reporting amounts  ("temporary  differences") at each year
     end based on enacted tax laws and statutory rates  applicable to the period
     in which the temporary  differences  are expected to affect taxable income.
     Valuation  allowances are established,  when necessary,  to reduce deferred
     tax assets to the  amount  expected  to be  realized.  Income  tax  expense
     includes both taxes payable for the period and the change during the period
     in deferred tax assets and liabilities.

     Stock-Based Compensation
     ------------------------

     The Company has elected to account for stock-based  compensation  using the
     intrinsic value method. Accordingly, compensation cost for stock options is
     measured as the excess,  if any, of the market price of the Company's stock
     at the date of grant over the amount an  employee  must pay to acquire  the
     stock.  Note 11  contains  the pro forma  effects  on  reported  results of
     operations if the Company had chosen to recognize  compensation  cost based
     on the fair value of options  granted  pursuant to  Statement  of Financial
     Accounting Standards (SFAS) No. 123.

     Estimates
     ---------

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and liabilities  and disclosure of contingent  assets and
     liabilities  at the  date of the  financial  statements  and  the  reported
     amounts of revenues  and expenses  during the  reporting  period.  The most
     significant area requiring the use of management  estimates and assumptions
     relate  to  mineral  reserves  that are the  basis  for  future  cash  flow
     estimates and units-of-production amortization depreciation. Actual results
     could  differ  from  those  estimates   under   different   assumptions  or
     conditions.

     Presentation
     ------------

     Certain reclassifications have been made to prior years' amounts to conform
     with current year presentation.

3.   Concentrations of Credit Risk

     Financial  instruments that potentially  subject the Company to significant
     concentrations  of  credit  risk  consist  principally  of  cash  and  cash
     equivalents. As of June 30, 2002, the Company had cash and cash equivalents
     on deposit with a major financial  institution  that were in excess of FDIC
     insured limits.  Historically,  the Company has not experienced any loss of
     its cash and cash equivalents due to such concentration of credit risk.

                                      F-9

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

4.   Restricted Cash

     As part of the  reclamation  deposit  required  for the Black  Canyon  Mica
     property, the Company has restricted cash of $190,400, comprising:

     -    $50,000 held on deposit for the Arizona State  Treasurer in a one-year
          automatically renewable short-term investment; and

     -    $140,400 held as collateral against an irrevocable letter of credit of
          the same amount to the U.S. Bureau of Land Management which expires on
          October 25, 2002.

         Both of the amounts will be held until all terms and conditions of the
         reclamation agreement have been fulfilled or a satisfactory replacement
         bond has been accepted.

5.   Inventories

     Inventories  at June 30  consists  of the  following  stated  at their  net
     realizable value:


<TABLE>
<CAPTION>
                                                        2002            2001
                                                        ----            ----
<S>                                                     <C>             <C>
Broken ore                                              $  725,202      $   814,107
Work-in-process                                            277,378          187,540
Finished goods                                              93,200           59,800
                                                        $1,095,780      $ 1,061,447
</TABLE>

6.   Investments

     On June 18, 1998, the Company  entered into an agreement with Minera Cortez
     Resources  Ltd.  (Cortez),  a public  company  which trades on the Canadian
     Venture  Stock  Exchange,  whereby the Company was granted a right of first
     refusal  for a period of five years to acquire  all or any of the  property
     interest that Cortez  decides to either joint venture,  option,  or dispose
     of. In consideration,  the Company  subscribed for 200,000 common shares of
     Cortez at Cdn.  $0.25 per share.  The Company  was also  granted a right of
     first  refusal  for the same period to provide up to 100% of any private or
     public equity or debt financing that Cortez proposes to obtain,  on similar
     terms as any third party is willing to provide.  In the year ended June 30,
     1999, the Company purchased an additional  100,000 shares at Cdn. $0.25 per
     share, bringing the carrying value of the shares to $50,588.

     During June 2001, the Company sold its 300,000 share interest in Cortez for
     Cdn.  $0.25 per share.  The sale resulted in a $3,894 loss  primarily  from
     movement in the foreign currency exchange.

                                      F-10

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

6.   Investments (Continued)

     Effective  on August 9, 1999,  the Company  entered into an  "Agreement  in
     Principle"  (AIP)  with each of Thomas  Ford and  Calgem,  Inc.,  a company
     wholly-owned by Mr. Ford (collectively,  Calgem),  pursuant to which Calgem
     therein  granted the  Company an option to  purchase  all of the issued and
     outstanding  shares  and/or  business  assets of  Calgem,  a  company  that
     auctions coloured gemstones on television. In accordance with the terms and
     conditions  of the  AIP,  the  Company  had  advanced,  by way of a loan to
     Calgem, an aggregate of $250,000.  A senior fixed and floating claim on all
     of the  assets of  Calgem  was to be  pledged  as  collateral  for the loan
     together with interest accruing thereon at a rate of 10% per annum. The AIP
     has expired  and the Company  wrote off the loan during the year ended June
     30, 2000, as it had not been  successful  in  contacting  Calgem to discuss
     either repayment terms or the establishment of the security for the loan.

7.   Mineral Properties, Plant and Equipment

     Mineral  properties,  plant and equipment  consist of the following at June
     30:
<TABLE>
<CAPTION>
                                                        2002            2001
                                                        ----            ----
<S>                                                     <C>             <C>
Mineral Properties                                      $  2,219,996    $  2,219,996
Mining and processing plant and equipment                  7,122,679       6,882,869
Development costs                                          1,104,966       1,104,966
Accumulated amortization                                     (94,769)        (77,163)
                                                        $ 10,352,872    $ 10,130,668
</TABLE>

     Black Canyon Mica Project
     -------------------------

     On March 9, 1999,  the  Company  acquired  Arizona  Mica  Properties,  Inc.
     (AMPI),  owner of the Black Canyon Mica Project, a mineral property of mica
     ore and a pilot  processing plant located near Phoenix,  Arizona.  AMPI was
     merged with a wholly-owned subsidiary and renamed Azco Mica, Inc.

     The  acquisition  has been  accounted  for by the purchase  method with the
     excess of  purchase  price  over fair  value  being  allocated  to  mineral
     properties.  The Company issued to the principals of AMPI 4,500,000  shares
     of common stock (subject to certain trading and voting trust  restrictions)
     with a value of $2,289,388,  in exchange for all the outstanding  shares of
     AMPI.

     Piedras Verdes Copper Project
     -----------------------------

     The Piedras Verdes Project is located in southern  Sonora,  Mexico.  During
     the year ended June 30,  1996,  the Company sold 70% of its interest in the
     Piedras Verdes Project to Phelps Dodge Corporation (Phelps Dodge).

                                      F-11

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

7.   Mineral Properties, Plant and Equipment (Continued)

     Under the terms of the sales  agreement  with Phelps Dodge,  all assets and
     commitments  related to this project were transferred to a separate company
     incorporated as Cobre del Mayo, S.A. de C.V. (Cobre).  In March 2002 Phelps
     Dodge sold its 70% operating interest in Cobre to a Canadian privately held
     company,   Frontera  Copper   Corporation   (Frontera).   Under  the  Cobre
     shareholders  agreement,  The  Company  is  obligated  to  fund  30% of the
     development  expenses  incurred  in  connection  with  the  Piedras  Verdes
     project.  The type,  amount and timing of development are determined at the
     sole discretion of Frontera.  Azco has informed  Frontera that until it has
     secured a more stable financial  position it will be unable to fund its 30%
     portion of development expenses.  The Company's failure to fund its current
     year requirement does not result in any additional  obligations.  Under the
     terms of the Cobre shareholders  agreement,  Azco's ownership in Cobre will
     be diluted  proportionate to the contributions  Azco has made to date. Azco
     will have the  opportunity  to resume  contributions  at any time at a rate
     equal to its  ownership  level at that time.  During the fiscal  year ended
     June 30, 2002, Azco funded  $116,895 (2001 - $192,300;  2000 - $428,373) of
     such  development  costs.  The funding was less than the required 30% which
     will result in a dilution to the Company's ownership percentage. As of June
     30, 2002,  the Company has advanced an aggregate of $4,603,079  towards the
     project.  The  Company  expenses  all  costs  related  to the  project  and
     classifies  them  as  Exploration  within  the  Consolidated  Statement  of
     Operations.

     On March 4, 1997, Cobre entered into a mining  exploration and exploitation
     agreement with Compania Minera Serrana,  S.A. de C.V., the mineral property
     lessor.  Under the  terms of this new  agreement,  Cobre has the  following
     commitments to be funded 70% by Frontera and 30% by the Company:

     a.   $10,000 per month from the execution of the agreement until production
          begins;

     b.   three  payments of $299,035  due on the date of  execution  and on the
          first and second anniversaries of the date of execution (paid);

     c.   royalties equal to 3% of the net value of mineral production; and

     d.   advance   royalties  of   $1,000,000   on  the  third   through  fifth
          anniversaries  of the date of execution,  and  $1,500,000 on the sixth
          through eleventh  anniversaries if commercial production is not met by
          those  anniversary  dates,  provided the average copper price is above
          $0.90 per pound for eight of the  previous  12 months,  otherwise  the
          advanced royalty is reduced by 75%.

     In the year ended June 30, 2002,  Cobre made advanced  royalty  payments of
     $250,000.  These amounts are not recoverable if Cobre does not proceed with
     the project.

     Frontera plans to secure necessary financing for the Piedras Verdes Project
     and to advance it to a bankable feasibility stage in the near future.

                                      F-12

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

7.   Mineral Properties, Plant and Equipment (Continued)

     Mali Concessions
     ----------------

     On March 31, 1999,  the Company  announced that it had entered into a joint
     venture with Randgold  Resources Ltd.  (Randgold) whereby Randgold acquired
     the right to earn up to 75% of the  Company's  interest in certain  mineral
     concessions in Mali, West Africa.  To earn this interest,  Randgold agreed,
     over the next 36 months,  to conduct  exploration  of the  concessions at a
     minimum cost of $2,000,000, with the aim of establishing whether there is a
     viable economic gold resource, as defined in the agreement, of at least one
     million ounces.  Thereafter Randgold was to prepare a Bankable  Feasibility
     Study on any such resource  within a further 12 months.  In September 2001,
     Randgold  terminated the  agreement.  The Company has no plans to renew the
     concessions  or  work  commitment  with  the  Mali  government  and  is not
     obligated for any further costs or expenses related to this project.

8.   Other Capital Assets

     Other capital assets consists of the following at June 30:
<TABLE>
<CAPTION>
                                                                    2002
                                                                Accumulated
                                                Cost            Depreciation            Net
                                                ----            ------------            ---
<S>                                             <C>             <C>                     <C>
Land and office buildings                       $   152,997     $    28,003             $    124,994
Furniture and equipment                             381,383         220,821                  160,562
Vehicles                                             81,146          78,554                    2,592
                                                     ------          ------                    -----
                                                $   615,526     $   327,378             $    288,148
                                                -   -------     -   -------             -    -------
</TABLE>

<TABLE>
<CAPTION>
                                                                    2001
                                                                Accumulated
                                                Cost            Depreciation            Net
                                                ----            ------------            ---
<S>                                             <C>             <C>                     <C>
Land and office buildings                       $   152,997     $    17,815             $   135,182
Furniture and equipment                             381,383         130,775                 250,608
Vehicles                                             81,146          59,515                  21,631
                                                     ------          ------                  ------
                                                $   615,526     $   208,105             $   407,421
                                                -   -------     -   -------             -   -------

</TABLE>

9.   Notes Payable and Other Financing

     In January 2002, Azco completed a financing lease  transaction  resulted in
     net proceeds of $2,842,500. Under the terms of the transaction, the Company
     sold a 40 percent  ownership  in the  Company's  mica  processing  facility
     located in Glendale, Arizona.  Subsequently,  Azco leased the property back
     for an initial  period of 10 years,  with an option to repurchase the stake
     for 120 percent of the  original  sales price  after the second  year.  The
     repurchase  price of the  property  increases by 10 percent of the original
     sales price each year the option remains unexercised up to a maximum of 150
     percent of the original sales price.  Payments for the first 6 months under
     the financing agreement are $30,000,  for the second 6 months they increase
     to $37,500 after which time they are $45,000 per month.

                                      F-13

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

9.   Notes Payable and Other Financing (Continued)

     In  connection  with this  transaction,  the  Company  issued a warrant  to
     purchase  2,550,000 shares of the Company's common stock at $.50 per share.
     This warrant vested in January 2002 and is exercisable  through January 16,
     2007.  The fair value of the warrant of  $1,093,808  was  determined by the
     Company using the  Black-Scholes  valuation model and has been reflected as
     additional paid-in capital and a discount to the related note.

     From December 2001 through  January 17, 2002, the Company's Chief Executive
     Officer provided unsecured  short-term financing in the amount of $243,500.
     These funds were  provided  at a rate of 6.5%,  until  alternate  financing
     could be secured.  These notes and all  associated  interest  and fees were
     paid in full, subsequent to the closing of the financing lease agreement in
     January 2002 whereby Azco secured alternate financing.

     In December 2001, the Company  received a one-year  $100,000 loan,  bearing
     interest at 12% per annum,  from a  shareholder.  In  connection  with this
     loan,  the  Company  issued a warrant  to  purchase  125,000  shares of the
     Company's  common stock at $.40 per share.  This warrant vested in February
     2002 and is exercisable  through  December 2002. The relative fair value of
     the  warrant at the time of  issuance  was  $29,895  and was  reflected  as
     additional paid-in capital and a discount to the related note.

     In October 2001, the Company  received a one-year  $100,000  loan,  bearing
     interest at 12% per annum,  from the same  shareholder.  In connection with
     this loan, the Company  issued a warrant to purchase  125,000 shares of the
     Company's  common stock at $.40 per share.  This warrant vested in December
     2001 and is exercisable  through  October 19, 2002. The relative fair value
     of the warrant at the time of issuance  was  $33,841 and was  reflected  as
     additional paid-in capital and a discount to the related note.

     In September 2001, the Company received a one-year  $200,000 loan,  bearing
     interest at 12% per annum,  from the same  shareholder.  In connection with
     this loan, the Company  issued a warrant to purchase  250,000 shares of the
     Company's  common stock at $.40 per share.  This warrant vested in December
     2001 and is contractually  exercisable through September 2002. The relative
     fair  value of the  warrant at the time of  issuance  was  $75,415  and was
     reflected as additional paid-in capital and a discount to the related note.
     The Company and the  shareholders  are currently in  negotiations to extend
     the maturity date of the note and attached warrant.

     In August 2001,  the Company  received a one-year  $200,000  loan,  bearing
     interest at 12% per annum,  from a  shareholder.  In  connection  with this
     loan,  the  Company  issued a warrant  to  purchase  250,000  shares of the
     Company's  common stock at $.40 per share.  The relative  fair value of the
     warrant at the time of issuance was $75,402 and was reflected as additional
     paid-in  capital  and a discount  to the  related  note.  This  warrant was
     exercised in January 2002. In lieu of payment for the exercise  price,  the
     outstanding note payable was reduced by $100,000.

                                      F-14

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

9.   Notes Payable and Other Financing (Continued)

     In March 2001, the Company  received an unsecured loan of $800,000 from its
     Chief Executive Officer.  The note bore an interest rate equal to the prime
     rate  plus  one  percentage  point,  and  was due on  March  14,  2002.  In
     connection with this loan, the Company issued a warrant to purchase 300,000
     shares of its common stock at $0.70 per share.  The relative  fair value of
     the warrant at the time of issuance  was  $119,605.  In October  2001,  the
     Company restructured this note payable. The note was extended an additional
     year to March 15, 2003 in  consideration  for 700,000  warrants to purchase
     the Company's  stock at an exercise price of $0.40.  The warrants vested in
     December  2001 and expire on October 12, 2003.  The relative  fair value of
     the warrant at the time of  issuance  was  $330,273  and was  reflected  as
     additional paid-in capital and a discount to the related note. In addition,
     effective  October  1,  2001,  the  interest  rate  payable on the note was
     adjusted  from prime plus 1% to 12%  annually.  In June 2002,  the note was
     again extended through March 2004 in return for a security  interest in all
     of Azco's accounts receivable, inventory, equipment and real property.

     The notes payable, financing lease liability and related warrants have been
     reflected in the accompanying  balance sheet at their relative fair values.
     The discount  associated  with the notes payable and the financing lease is
     being  amortized  over  the term of the  respective  instrument  using  the
     effective interest method.

     Notes  payable  and  other  financing  at June 30,  2002  consisted  of the
     following:

<TABLE>
<CAPTION>
                                                                        Unamortized
                                                        Principal       Discount
                                                        ---------       --------
<S>                                                     <C>             <C>
12% note, due August 2002                               $   100,000     $     14,244
12% note, due September 2002                                200,000           16,366
12% note, due October 2002                                  100,000           11,711
12% note, due December 2002                                 100,000           14,007

Current portion                                             500,000           56,328
12% note, due March 2004                                    800,000          184,832

Total                                                   $ 1,300,000     $    241,260

Financing lease, due January 2012                       $ 4,500,000     $  2,524,350

</TABLE>

10.  Other Liabilities

     Other liabilities consist of the following at June 30:

<TABLE>
<CAPTION>
                                                        2002            2001
                                                        ----            ----
<S>                                                     <C>             <C>
Reclamation provision                                   $   190,400     $   190,400
Capital leases                                               84,727         150,743
                                                        $   275,127     $   341,143
</TABLE>

                                      F-15

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

10.  Other Liabilities (Continued)

     The Company has provided for  decommissioning  and reclamation of the Black
     Canyon mine site at the cost estimate  established  with the Federal Bureau
     of Land Management.  The corresponding deferred expense included in mineral
     property,  plant and equipment is being amortized to operating results on a
     unit-of-production basis.

     Capital leases represents the long-term portion of capital leases (see Note
     14).

11.  Stockholders' Equity

     In June 2002, the Company  entered into an agreement with an external party
     whereby the Company will receive certain investor relations  services.  The
     Company agreed to issue 430,000 shares of its common stock as consideration
     for a retainer.  The Company recognized expenses of $67,000 for the portion
     of services  obtained during fiscal 2002. As of June 30, 2002, these shares
     had not yet been issued.

     In June 2002, the Company  entered into an agreement with an external party
     whereby the Company will receive certain investor  relation  services.  The
     Company  issued a warrant for the  purchase of 50,000  shares of its common
     stock at an exercise price of $2.50 as  consideration  for a retainer.  The
     warrant was valued at $16,204 using the Black-Scholes valuation model.

     In April 2002,  the Company issued 375,000 shares of its common stock to an
     existing shareholder at a price of $0.40 per share.

     In April 2002, the Company entered into an agreement with an external party
     whereby the Company would receive certain investor relation services valued
     at $253,500. As consideration for the services rendered, the Company issued
     390,000 shares of its common stock.

     In November  2001,  the Company  entered into an agreement with an external
     party whereby the Company would receive  certain legal  services  valued at
     $14,250.   The  Company  issued  25,000  shares  of  its  common  stock  as
     consideration for services obtained.

     The Company has a stock  option  plan (the Plan)  dated July 24,  1989,  as
     amended, for the granting of options to purchase common stock. The board of
     directors  may  grant  options  to key  personnel  and  others  as it deems
     appropriate provided the number of options does not exceed 6,798,263. There
     are no vesting  requirements  under the Plan.  The options are  exercisable
     over a maximum term of five years.


                                      F-16

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

11.  Stockholders' Equity (Continued)

     Stock option and warrant  activity for the years ended June 30, 2002,  2001
     and 2000 was as follows:

<TABLE>
<CAPTION>
                                                        Stock Options               Stock Warrants
                                                                Weighted                        Weighted
                                                                Average                         Average
                                                                Exercise                        Exercise
                                                Shares          Price           Shares          Price
                                                ------          -----           ------          -----
<S>                                             <C>             <C>             <C>             <C>
Balance-oustanding June 30, 1999                 3,514,500      $  1.32                 -       $       -
Granted                                            390,000         1.46                 -                -
Canceled                                          (200,000)        0.63                 -                -
Expired                                           (100,000)        3.00                 -                -
Exercised                                          (55,000)        1.02                 -                -

Balance-outstanding June 30, 2000               3,549,500          1.28                 -                -
Granted                                           250,000          1.15           300,000             0.70
Canceled                                         (360,000)         1.22                 -                -
Expired                                          (460,500)         1.18                 -                -
Exercised                                        (163,500)         0.91                 -                -

Balance-outstanding June 30, 2001               2,815,500          1.13           300,000             0.70
Granted                                           190,000          0.67         4,050,000             0.49
Canceled                                          (80,000)         1.05                 -                -
Expired                                          (600,000)         1.02                 -                -
Exercised                                         (61,500)         0.46          (250,000)            0.40

Balance-outstanding June 30, 2002               2,264,000          0.67         4,100,000             0.51

</TABLE>

     Pro forma  information  regarding  net  income  and  earnings  per share is
     required by SFAS No.  123,  and has been  determined  as if the Company had
     accounted  for its stock  option  plan  under the fair value  based  method
     prescribed  by SFAS No. 123. The fair value of options was estimated at the
     date of  grant  using a  Black-Scholes  options  valuation  model  with the
     following weighted-average  assumptions for fiscal 2002: risk-free interest
     rate of 3.58%, no dividend,  volatility factor of the expected market price
     of the Company's common stock of 90%, and an expected life of three years.

     The  Black-Scholes  options  valuation  model  was  developed  for  use  in
     estimating the fair value of traded options that have no vesting or trading
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models  require the input of highly  subjective  assumptions  including the
     expected stock price volatility.  Changes in the subjective assumptions can
     materially affect the fair value estimate.

                                      F-17

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

11.  Stockholders' Equity (Continued)

     For the purposes of pro forma disclosure,  the weighted-average  fair value
     of the  options of $77,133  (2001 -  $116,012;  2000 - $34,870) is expensed
     when the  options  are  granted as the  Company's  stock  options are fully
     vested when granted.  The Company's pro forma  information for fiscal 2002,
     2001 and 2000 is as follows:

<TABLE>
<CAPTION>
                                                2002            2001            2000
                                                ----            ----            ----
<S>                                             <C>             <C>             <C>
Net loss:
  As reported                                   $ (4,247,586)   $ (3,365,376)   $ (3,899,486)
  Pro forma                                       (4,324,719)     (3,481,388)     (3,934,356)

Loss per share:
  As reported                                          (0.14)          (0.11)          (0.13)
  Pro forma                                            (0.14)          (0.12)          (0.13)

</TABLE>

     At June 30, 2002 and 2001,  2,746,763 and 2,256,763 shares of common stock,
     respectively, were reserved for future grants of options. Additionally, the
     Company has reserved  687,525  shares of common  stock for  issuance  under
     various other commitments.

     Of the 2,264,000  stock  options  outstanding  at June 30, 2002,  1,100,000
     stock  options were issued to  directors,  employees or key advisors of the
     Company.

     Stock options exercisable at June 30, 2002 include the following:

<TABLE>
<CAPTION>

                                                                                        Weighted
                                                                Weighted                Average
                                                Number of       Average                 Remaining
                                                Shares          Exercise Price          Life
                                                ------          --------------          ----
<S>                                             <C>                  <C>                <C>
Cdn $0.70 to Cdn $1.05                          1,740,000       Cdn. $0.96              20 months
U.S. $0.58 to U.S. $1.20                          524,000       U.S. $0.79              43 months

</TABLE>

                                      F-18

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

12.  Income Taxes

     The income tax benefit  differs  from the amount  computed by applying  the
     U.S. federal income tax rate to net income before income taxes, as shown:

<TABLE>
<CAPTION>
                                                2002            2001            2000
                                                ----            ----            ----
<S>                                             <C>             <C>             <C>
Tax benefit at the federal statutory
  rate                                          $  1,783,517    $  1,144,228    $  1,325,825
State tax                                            262,282         168,269         194,974
Utilization of net operating loss                    998,053               -               -
Increase in valuation allowance                   (2,103,992)     (1,354,345)     (1,471,093)
Deferred tax asset recognized                              -               -         (77,700)
Other                                                 58,193          41,848          27,994
                                                      ------          ------          ------
Tax benefit                                     $    998,053    $          -    $          -

</TABLE>

     The components of the deferred tax asset and deferred tax liability at June
     30, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                2002            2001
                                                ----            ----
<S>                                             <C>             <C>
Deferred tax asset:
  Federal net operating loss
    carry forwards                              $  4,294,134    $  3,226,553
  State net operating loss
    carry forwards                                 1,025,459         725,672
  Foreign mineral properties                       1,917,960       2,064,037
  Inventories                                              -         878,490
  Executive severance                                392,340               -
  Other                                              102,708               -
  Valuation allowance                             (6,838,746)     (5,732,807)
                                                  -----------     -----------
Net deferred tax asset                               893,855       1,161,945
Deferred tax liability:
  Mineral properties, plant and
    equipment                                       (893,855)     (1,161,945)
                                                $          -    $          -
</TABLE>

     At June 30, 2002,  the Company had net  operating  loss  carryforwards  for
     Arizona  income tax purposes of  approximately  $20.4 million (2001 - $14.5
     million).  On June 30, 2002, $1.5 million of losses expired.  The remaining
     losses expire in the amount of $5.0 million on June 30, 2003,  $2.3 million
     on June 30, 2004,  $4.9 million on June 30, 2005,  $4.3 million on June 30,
     2006, and $3.9 million on June 30, 2007.

     At June 30,  2002,  the Company had net  operating  loss  carryfowards  for
     federal  income tax purposes of  approximately  $12.6  million (2001 - $9.5
     million). These losses expire between June 30, 2019 and June 30, 2021.


                                      F-19

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

12.  Income Taxes (Continued)

     Due to the passage of 2002 Tax Payer Relief and Economic Stimulation Act in
     early 2002,  the Company was able to carryback the 2001 net operating  loss
     to the taxable  year ended June 30, 1996,  resulting in a current,  federal
     income tax refund of $998,053.

13.  Earnings (Loss) Per Share

     Basic earnings (loss) per share (EPS) excludes  dilution and is computed by
     dividing  net  income  (loss)  by the  weighted  average  number  of shares
     outstanding.  Diluted EPS reflects  potential  dilution that would occur if
     securities  or other  contracts  to issue  common  stock were  exercised or
     converted into common stock. The following is the reconciliation of EPS for
     the year ended June 30:

<TABLE>
<CAPTION>
                                                2002            2001            2000
                                                ----            ----            ----
<S>                                             <C>             <C>             <C>
Loss applicable to basic and diluted
  loss per share                                $ (4,247,586)   $ (3,365,376)   $ (3,899,486)
Weighted average number of common
  shares assuming no dilution                     30,297,261      29,964,636      29,846,839
Weighted average number of common
   shares assuming full dilution                  30,297,261      29,964,636      29,846,839
Basic loss per common share                     $      (0.14)   $      (0.11)   $      (0.13)
Diluted loss per common share                   $      (0.14)   $      (0.11)   $      (0.13)

</TABLE>

     The impact of  outstanding  stock  options and warrants  (2002-  6,364,000;
     2001- 3,115,500;  2000- 3,549,500) has not been included in the computation
     of diluted loss per common share as it would be anti-dilutive.

14.  Contingencies and Commitments

     Eagle River International Ltd. litigation
     -----------------------------------------

     On January 22, 1999,  the trustee  (Petitioner)  in bankruptcy  proceedings
     against Eagle River International Ltd. (Eagle River) served a petition,  in
     the Quebec Superior Court,  District of Hull,  Canada,  upon the Company in
     order to  recuperate  certain  subsidiary  stock and other  assets from the
     Company.  The  jurisdiction  of the  courts of  Quebec  is being  currently
     contested  before the Supreme Court of Canada.  It is the  understanding of
     the Company and its  Canadian  legal  counsel that the  Petitioner  alleges
     that,  through  the  Company's  involvement  with  Eagle  River in the Mali
     Project,  the  Company  is  guilty  of  contractual  breaches  in excess of
     $4,300,000.  In  management's  opinion,  based on information to date, this
     claim is unfounded.

                                      F-20

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

14.  Contingencies and Commitments (Continued)

     Termination of Management Agreements
     ------------------------------------

     In October  2000,  the Company  notified Mr. Alan  Lindsay and Mr.  Anthony
     Harvey  of its  intention  to not renew  the  contracts  with each of their
     personal management companies pursuant to which Mr. Lindsay was employed by
     the Company as Chief  Executive  Officer and  President  and Mr. Harvey was
     employed by the Company as Executive Vice  President and  Secretary.  These
     contracts  were  scheduled to expire in February  2001.  Mr. Lindsay ceased
     serving as an officer on October 25, 2000 and resigned as a director of the
     Company on November 27, 2000.  Mr. Harvey  ceased  serving as an officer on
     October 25, 2000, and as a director of the Company on May 16, 2001. Messrs.
     Lindsay and Harvey each demanded  payment of  termination  fees of $297,675
     each,  pursuant to their personal  management  company  contracts.  In July
     2002, Azco entered into a settlement with Messrs.  Lindsay and Harvey. Azco
     agreed to pay each former director the sum of $350,000. The amount is to be
     paid in an initial  payment of $20,000  each,  due upon the  signing of the
     agreement,  and in monthly payments of $10,000 thereafter,  with the entire
     balance due within 24 months of the date of this  agreement  is signed.  In
     addition,  Azco  agreed to pay $24,898  representing  one half of the legal
     fees incurred by the former  directors.  Under the terms of the  agreement,
     Azco is required to provide  Messrs.  Harvey and Lindsay  each with 150,000
     shares of unrestricted common stock. The aggregate amount of the settlement
     is $1,030,900.

     Employment Agreements
     ---------------------

     The  Company  has  entered  into  agreements  with  two  officers  and four
     directors.  The agreements  provide that if there is a change in 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  pursuant  to certain  limitations  of the  Internal
     Revenue Code. In addition,  the officers will continue to be covered by all
     of the  Company's  medical,  health,  life,  and dental plans for 24 months
     after such cessation of employment.  The directors agreements provide for a
     lump sum cash payment in an amount not to exceed $100,000 each in the event
     of change in control and resignation from the Board.

     Lease Commitments
     -----------------

     The Company is obligated under  long-term  operating and capital leases for
     its office space in Vancouver,  British Columbia and for mining  equipment.
     The aggregate annual commitments under the leases are as follows:

<TABLE>
<CAPTION>
                                                Capital         Operating
                                                -------         ---------
<S>                                             <C>             <C>
2003                                            $   68,818      $    91,220
2004                                                57,483           51,400
2005                                                17,574                -
2006                                                 9,670                -
Total minimum lease payments                       153,545      $   142,620
Current                                            (68,818)
Long-term                                       $   84,727

</TABLE>

     Rental expense for the Company's office space, net of sublease income,  for
     the years  ended June 30,  2002,  2001 and 2000 was  $38,438,  $34,892  and
     $78,697, respectively.

                                      F-21

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

15.  Related Party Transactions

     During the year ended June 30,  2001,  the Company  paid  $138,300  (2000 -
     $490,200) in management  fees to companies  controlled  during that time by
     officers  and/or  directors.  This  amount has been  included  as  salaries
     expense on the Consolidated Statements of Operations. See also Note 9 for a
     discussion of related party notes payable.

16.  Fair Value of Financial Instruments

     The carrying values of cash and cash equivalents, restricted cash, accounts
     payable and accrued  liabilities  approximated their related fair values as
     of June 30,  2002 and 2001 due to of the  relatively  short term  nature of
     these instruments.  The fair value of the Company's notes payable (carrying
     value - $1,058,740;  effective interest rate - 40.6%) are indeterminable as
     they were entered into with parties in less than arms length  transactions.
     The carrying value of the Company's  financing lease  approximates the fair
     value;  fair value being  determined  based on the present  value of future
     cash flows.

17.  Supplemental Cash Flow Information

     During the fiscal year ended June 30, 2002,  the Company had the  following
     non-cash transactions:

     -    Issuance  of  $100,000  of  common  stock as a form of  payment  on an
          outstanding  note  payable

     -    Accrual of  $267,750 of common  stock as  consideration  for  services
          rendered (Note 11)

     During the fiscal year ended June 30, 2002,  the Company  paid  interest on
     notes payable and financing lease of $316,478.

     During  the fiscal  year ended June 30,  2001,  the  Company  entered  into
     non-cash capital lease arrangements  totaling $241,574 and paid interest on
     the note payable of $12,101.

18.  New Pronouncements

     In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
     No. 143,  "Accounting  for Asset  Retirement  Obligations."  The  Statement
     addresses  financial  accounting and reporting for  obligations  associated
     with the retirement of tangible  long-lived assets and the associated asset
     retirement  costs. The Statement is effective as of the beginning of fiscal
     2003.  Specifically,  the Statement requires that retirement obligations be
     recognized  when they are incurred and  displayed as  liabilities  with the
     initial  measurement  being at the present  value of estimated  third party
     costs. In addition,  the asset  retirement cost will be capitalized as part
     of the asset's  carrying value and  subsequently  allocated to expense over
     the assets  useful life.  At June 30, 2002,  the Company had recorded a net
     asset of approximately  $187,000 and a corresponding  liability of $190,400
     associated with its estimate of ultimate  reclamation costs associated with
     the  Black  Canyon  site.  The  Company  is  currently  in the  process  of
     determining  the impact of the  pronouncement  on its  financial  position,
     results of  operations  and cash  flows.  Differences  from  those  amounts
     currently  reported  may  result  from the  impact of  discounting  and its
     estimate of third party costs of reclamation.

                                      F-22

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

18.  New Pronouncements (Continued)

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
     Impairment or Disposal of Long-Lived Assets." SFAS No. 144 replaces certain
     previously issued accounting  guidance,  develops a single accounting model
     for long-lived assets other than goodwill and indefinite-lived intangibles,
     and broadens the framework previously established for assets to be disposed
     of by sale (whether  previously held or newly acquired).  This Statement is
     effective  as of the  beginning of fiscal 2003.  The  pronouncement  is not
     expected to have a material  impact on the  Company's  financial  position,
     results of operations and cash flows.

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
     No. 4, 44, and 64,  Amendments  of FASB  Statement  No.  13, and  Technical
     Corrections".  This Statement  rescinds SFAS No. 4, SFAS No. 64 and further
     clarifies   debt   extinguishments   which   classify   as   extraordinary.
     Additionally,  SFAS No.  145  amends  SFAS No. 13 in order to  clarify  the
     accounting  for the  treatment of lease  modifications.  Provisions of this
     Statement  relating to the  rescission  SFAS No. 4 are effective for fiscal
     year 2003 and provisions of this Statement  relating to the SFAS No. 13 are
     effective for transactions  occurring after May 15, 2002. The pronouncement
     is not  expected  to have a  material  impact  on its  financial  position,
     results of operations or cash flows.

     In June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for  Costs
     Associated  with  Exit or  Disposal  Activities".  SFAS  No.  146  replaces
     Emerging  Task Force Issue No.  94-3,  "Liability  Recognition  for Certain
     Employee  Termination  Benefits  and  Other  Costs  to  Exit  and  Activity
     (including  Certain  Costs  Incurred  in  a  Restructuring)".  The  primary
     difference  from  existing  guidance  is that  SFAS No.  146  requires  the
     recognition cost at fair value when a liability is incurred,  versus at the
     date of the exit plan  approval.  This  Statement is effective for exit and
     disposal  activities of the Company that are initiated  after  December 31,
     2002. The Company has not  historically  had  significant  exit or disposal
     activities.


                                      F-23

<PAGE>

                                Azco Mining Inc.
                   Notes to Consolidated Financial Statements

19.  Quarterly Results (Unaudited)

     The following table sets forth certain quarterly  unaudited  operating data
     for fiscal 2002 and 2001. The unaudited quarterly  information includes all
     adjustments which management considers necessary for a fair presentation of
     the information shown.

<TABLE>
<CAPTION>
                                                June 30,        March 31,       December 31,    September 30,
                                                2002            2002            2001            2001
                                                ----            ----            ----            ----
<S>                                             <C>             <C>             <C>             <C>
Sales                                           $      8,800    $    31,280     $     24,800    $          -
Operating loss                                    (2,720,329)      (895,542)        (508,055)       (532,935)
Net loss                                          (2,819,163)      (178,020)        (696,841)       (553,562)
Net loss per share                                     (0.09)         (0.01)           (0.02)          (0.02)

</TABLE>

<TABLE>
<CAPTION>
                                                June 30,        March 31,       December 31,    September 30,
                                                2001            2001            2000            2000
                                                ----            ----            ----            ----
<S>                                             <C>             <C>             <C>             <C>
Sales                                           $          -    $    17,600     $          -    $          -
Operating loss                                    (1,027,684)      (613,016)        (832,447)       (963,055)
Net loss                                          (1,078,607)      (595,953)        (793,273)       (897,543)
Net loss per share                                     (0.05)         (0.02)           (0.03)          (0.03)

</TABLE>

                                      F-24

<PAGE>

                                Azco Mining Inc.
                Schedule II - Valuation and Qualifying Accounts
                For the years ended June 30, 2002, 2001 and 2000


<TABLE>
<CAPTION>

(a)                     (b)             (c)             (d)             (e)
                        Balance at                                      Balance at
                        Beginning                                       End
Descriptions            of Year         Additions       Deductions      of Year
------------            -------         ---------       ----------      -------
<S>                     <C>             <C>             <C>             <C>
Valuation allowance for
 deferred tax asset(1):
June 30, 2002           $  5,732,807    $  2,103,992    $  998,053      $  6,838,746
June 30, 2001              4,179,293       1,553,514             -         5,732,807
June 30, 2000              2,708,200       1,548,793        77,700         4,179,293

</TABLE>

     (1) For further  information,  refer to Note 12, Income Taxes, in the Notes
     to Consolidated Financial Statements included in Form 10-K.

                                      F-25


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

     Not applicable.

                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

     Azco's present directors and officers are as follows:

<TABLE>
<CAPTION>
Name and Address                               Age        Position                           Date Elected
----------------                               ---        --------                           ------------
<S>                                            <C>        <C>                                <C>
Lawrence G. Olson                              65         President, Chairman, Chief         1999
                                                          Executive Officer and Director
Paul A Hodges                                  75         Director                           1993
Stanley A. Ratzlaff                            67         Director                           2001
M. William Lightner Jr.                        68         Director                           2001
Ryan A. Modesto                                47         Vice President Finance,            1996
                                                          Corporate Secretary
Gary L. Simmerman                              52         Vice President Operations          1998

</TABLE>

     All of the  directors  and  officers  of Azco  have  held  their  principal
occupations  as set out above  during at least  the last five  years,  except as
described below:

Lawrence  G.  Olson,  aged 65,  became a director  of Azco on March 15,  1999 in
connection  with the  acquisition  of  Arizona  Mica.  Mr.  Olson  has owned and
operated his own business,  Olson Precast of Arizona Inc.,  since 1973. In 1998,
Olson  Precast of New Mexico,  Inc.,  a company  controlled  by Mr.  Olson,  was
liquidated under bankruptcy laws in proceedings in the U.S. Bankruptcy Court for
the District of New Mexico.  Mr. Olson received a B.S. in Civil Engineering from
the University of Southern California in 1959.

Paul A. Hodges, aged 75, a director,  has a degree of Engineer of Mines from the
Colorado School of Mines and is a Registered  Professional  Engineer in Arizona.
Mr.  Hodges  has  over 40  years  experience  in the  mining  industry  covering
exploration,  operations,  project  startup,  management  and  financing and has
worked for Anaconda,  Asarco, RTZ and St. Joe. Mr. Hodges was the Chief Engineer
worldwide  for open pit mining for RTZ and was the  President  of Anamax  Mining
Company at Twin Buttes. Most recently,  Mr. Hodges was the President of Compania
Minera El Indio. Mr. Hodges was a director of Lac Minerals  Limited,  a publicly
traded company  acquired by American Barrick in late 1994. Mr. Hodges joined the
Board of Azco in August 1993.

Stanley A.  Ratzlaff,  aged 67,  became a director of Azco on February 13, 2001.
Mr. Ratzlaff,  a Financial  Consultant and CPA, has a B.A., cum laude,  from San
Jose State  University.  He also  completed the Advanced  Management  Program at
Harvard  Business  School.  Mr. Ratzlaff worked from 1961 to 1969 for the public
accounting  firm of Ernst & Young.  Since that time,  Mr.  Ratzlaff has held the
following  positions:   Assistant  Controller  of  Atlantic  Richfield  Company,
Corporate  Controller  of  Standard  Oil  Company  (Ohio),  Vice  President  and
Controller of Occidental Petroleum Corporation and Vice President and Controller
of Pacific Enterprises. From 1994 to present, Mr. Ratzlaff has been a consulting
CFO for small companies.

<PAGE>

M. William  Lightner  Jr.,  aged 68, became a director of Azco on March 6, 2001.
Mr. Lightner,  a Financial Consultant and CPA, has a B.S. in Commerce from Grove
City College and a MBA from the  University of  Pennsylvania,  Wharton School of
Business.  Mr.  Lightner spent 31 years with the public  accounting  firm Arthur
Andersen & Co.,  retiring in 1989 as a Partner.  Mr. Lightner became involved in
leveraged  buy-outs  and held the  positions of Chairman of Mica  Resources  and
Financial Vice President of Merit Energy.  Most recently,  Mr. Lightner held the
positions of CFO and Executive Vice President at Consumer Packaging,  Inc. (1994
to 1999) and Anchor Glass Container Corp. (1997 to 2000

Ryan  Modesto,  aged 47,  Vice  President  Finance  since  October  26, 1998 and
Corporate  Secretary  since  October  25,  2000,  joined Azco in June of 1994 as
Controller  of the  Sanchez  Project.  Mr.  Modesto  served as Azco's  Corporate
Controller and Principal  Accounting  Officer from January of 1996 to October of
1998.  Mr.  Modesto  earned a B.S. in Accounting  from the University of Utah in
1977 and has 24 years of accounting and administrative  experience in the mining
industry.  For  the six  years  prior  to  joining  Azco,  Mr.  Modesto  was the
Controller for Corona Gold Inc.'s Santa Fe Mine located in Nevada.

Gary L.  Simmerman,  aged 52, joined Azco in September 1992 as Chief Engineer of
the Sanchez  Project,  and in October of 1998 was  appointed  Vice-President  of
Operations. Mr. Simmerman, a mining engineer from the University of Arizona, has
been  working  in the mining  industry  since  1974,  and has been  involved  in
exploration,  development  and production  operations in gold,  silver,  copper,
cobalt,  coal  and  uranium.  For the five  years  prior to  joining  Azco,  Mr.
Simmerman was Chief  Engineer for Santa Fe Pacific  Gold's Rabbit Creek Mine and
was  involved  in the  original  determinations  of the  ore  reserves  and  the
feasibility stage through startup, production and expansion to a 200,000-ton per
day operation.


Item 11. Executive Compensation

     The  following  table  summarizes  the  total  compensation  of  the  Chief
Executive Officer and the other most highly  compensated  executive  officers of
Azco earning in excess of $100,000 for the year ended June 30, 2002,  as well as
the total  compensation  paid to each such  individual for Azco's three previous
fiscal years:

<TABLE>
<CAPTION>
                           Summary Compensation Table
                                                  Annual Compensation             Long-Term Compensation
                                                                           Restricted                 LTIP
                                                            Other Annual   Stock       Options/SARs   payouts      All Other
Name and Title              Year   Salary        Bonus     Compensation    Awarded         (#)          ($)      Compensation
--------------              ----   ------        -----     ------------    -------         ---          ---      ------------
<S>                         <C>          <C>          <C>            <C>          <C>      <C>           <C>             <C>
Lawrence G. Olson           2002         $0           $0             $0           0        100,000       0               0
President, CEO,             2001         $0           $0      $4,500(1)           0              0       0               0
Chairman                    2000         $0           $0     $18,000(1)           0              0       0               0

Ryan A. Modesto             2002   $136,000           $0             $0           0         30,000       0               0
V.P. of Finance,            2001   $110,000           $0     $31,044(2)           0              0       0               0
Secretary                   2000   $116,664       $5,583             $0           0              0       0               0

Gary L. Simmerman           2002   $189,592           $0             $0           0              0       0               0
V.P. of Operations          2001   $160,416           $0             $0           0              0       0               0
                            2000   $158,824       $7,750             $0           0         50,000       0               0

</TABLE>

(1)  These amounts  represent  directors fees paid to Mr. Olson prior to October
     2000. Mr. Olson has received no salary or fees since he became  Chairman of
     the Board, President and CEO of the Company in October 2000.

(2)  Mr. Modesto was reimbursed  $31,044 in relocation costs in conjunction with
     the move of Azco's corporate office from Ferndale,  Washington to Glendale,
     Arizona.

<PAGE>

     The following table contains  information  regarding options granted in the
year ended June 30, 2002, by Azco's named executive officers.

<TABLE>
                        OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
                                          % of Total
                            Number of     Options
                            Securities    Granted to Exercise                              Potential Realized Value (US$) at Assumed
                            Underlying    Employees  or                                    Annual Rates of Stock Price Appreciation
                            Options       in Fiscal  Base Price   Expiration                       For Option Term
Name                        Granted (#)   Year       (US$/Share)  Date                       5%                   10%
----                        -----------   ----       -----------  ----                       --                   ---
<S>                         <C>           <C>        <C>          <C>                        <C>                  <C>
Lawrence G. Olson           100,000       77%        $0.67        February 12, 2007          $18,510              $40,904
Ryan A. Modesto              30,000       23%        $0.67        February 12, 2007          $ 5,553              $12,271

</TABLE>

The  options  represented  in the above table are  exercisable  from the date of
grant (February 12, 2002).

     The following table contains information regarding options exercised in the
year ended June 30, 2002,  and the number of shares of common  stock  underlying
options held as of June 30, 2002, by Azco's named executive officers.

<TABLE>
                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                            AND FY-END OPTIONS VALUES
<CAPTION>
                                                                                                Value of Unexercised
                                                         Number of Securities Underlying   In-The-Money Options at FY-End
                                                          Unexercised Options at FY-End                ($)(*)
                                Shares
                                Acquired on
Name                            Exercise     Value Realized    Exercisable     Unexercisable     Exercisable     Unexercisable
----                            --------     --------------    -----------     -------------     -----------     -------------
<S>                             <C>          <C>               <C>             <C>               <C>             <C>
Lawrence G. Olson                    --              --         200,000        0           69,380                0
Gary L. Simmerman                25,000         $22,500         290,000        0           78,284                0
Ryan A. Modesto                      --              --         200,000        0          107,752                0

</TABLE>

(*)  Based on the closing price of $1.02 of Azco's common stock as quoted on The
     American Stock Exchange on June 28, 2002.

Compensation Of Directors
-------------------------

     Azco pays to each of its outside, non-officer directors a fee of $1,500 per
month.  Azco also reimburses its directors for reasonable  expenses  incurred by
them in attending  meetings of the Board of Directors.  During fiscal year 2002,
non-officer  directors  received a total of $-0- in 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.  It is Azco's policy to grant
immediately  exercisable  options to directors  upon their  initial  election to
purchase 100,000 shares of Azco's common stock at an exercise price equal to the
fair market value of the stock.

Employment Contracts And Change In Control Arrangements
-------------------------------------------------------

     Management agreements were provided to Mr. Modesto on November 19, 1996 and
to Mr.  Simmerman on October 23, 1998. The management  agreements  provide for a
lump sum  distribution  in an amount  (taking into account all other  applicable
change in control  payments  by Azco) not to exceed  299% of the base  amount as
defined in IRC Section 280G (b) upon a change in control.  Such "base amount" is
generally equivalent to the applicable person's average annual compensation from
Azco  includable  in his gross income over the preceding  five years.  Change of
control is therein defined to include only the following:

     (i) the acquisition (whether direct or indirect) of shares in excess of 20%
of the outstanding shares of common stock by a person or group of persons, other
than through a public equity offering;

<PAGE>

     (ii) the  occurrence  of any  transaction  relating to Azco  required to be
described  pursuant  to  the  requirements  of  item  6(e)  of  Schedule  14A of
Regulation 14A of the SEC under the Securities and Exchange Act of 1934; or

     (iii) any  change in the  composition  of the  Board of  Directors  of Azco
resulting in a majority of the present  directors not  constituting  a majority;
provided, that in making such determination directors who were elected by, or on
the recommendation of, such present majority, shall be excluded.

     On August 15,  1994 and on  December  8,  1999,  Azco  provided  director's
agreements  to Messrs.  Hodges  and Olson.  The same  agreements  were  provided
Messrs.  Ratzlaff and Lightner on April 26, 2002. The director's  agreements are
effective in the event of a change in control of Azco. The director's agreements
provide for a lump sum  distribution  not to exceed  $100,000 to each of Messrs.
Hodges, Olson, Lightner and Ratzlaff upon a change in control. The terms "change
in control" has the same  definition as set forth above in  connection  with the
management agreements.

Stock Option Plan
-----------------

     Azco has a Stock  Option Plan (the Plan) dated July 24,  1989,  as amended,
for the granting of options to purchase common stock. The board of directors may
grant options to key personnel and others as it deems  appropriate  provided the
number of  options  does not  exceed  5,950,424.  On June 30,  2002  there  were
2,264,000 options outstanding under the Plan. There are no vesting  requirements
under the Plan. The options are exercisable over a maximum term of five years.

     The following  table  contains  information  regarding the Company's  stock
option plan as of June 30, 2002:

<TABLE>
<CAPTION>
                                    Number of securities                                     Number of securities
                                      to be issued upon        Weighted average exercise     remaining available for
                                         exercise of         price of outstanding options    future Issuance under equity
Plan Category                        outstanding options                  US$                compensation plan
-------------                        -------------------                  ---                -----------------
<S>                                       <C>                            <C>                           <C>
Equity compensation plan                  2,264,000                      $0.67                         1,898,924
approved by security holders

</TABLE>

Compensation Committee Interlocks And Insider Participation
-----------------------------------------------------------

     Effective May 16, 2001,  Mr.  Hodges,  Mr.  Ratzlaff and Mr.  Lightner were
appointed as Azco's Compensation Committee.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table  sets  forth,  as  of  September  17,  2002,  certain
information  regarding  beneficial ownership of Azco's common stock by: (i) each
person  known  by Azco to be the  beneficial  owner  of more  than 5% of  Azco's
outstanding  common stock; (ii) each director and  director-nominee;  (iii) each
named  executive  officer;  and (iv) all  executive  officers and directors as a
group.

<PAGE>

<TABLE>
<CAPTION>
                                                                                    Common Stock Beneficially Owned
Name and Address Of Beneficial Owner                Title of Class                  Number of Shares       Percent of Class(8)
------------------------------------                --------------                  ----------------       -------------------
<S>                                                 <C>                             <C>                    <C>
Lawrence G. Olson                                   Common Stock                      2,878,700(1)                     8.6%
3045 S. 35th Avenue
Phoenix, AZ 85009
Paul A. Hodges                                      Common Stock                        133,000(2)                        *
4536 N. Via Bellas Catalinas
Tucson, AZ  85718
Stanley A. Ratzlaff                                 Common Stock                        180,000(3)                        *
5025 Pathfinder Ave.
Oak Park, CA 91377
M. William Lightner Jr.                             Common Stock                        125,000(4)                        *
23871 Sanctuary Lakes Court
Bonita Springs, FL 34134
Ryan A. Modesto                                     Common Stock                        205,000(6)                        *
13557 Fairway Loop N
Goodyear, AZ 85338
Gary L. Simmerman                                   Common Stock                        315,000(5)                        *
1211 W. Crystal Palace Place
Oro Valley, AZ 85737
Officers and Directors As a Group (6 Persons)       Common Stock                      3,836,700(7)                    11.2%
Christian Mustad                                    Common Stock                         1,950,000                     6.1%
Rue de l'Industrie 6
CH - 1630 BULLE, Switzerland

</TABLE>

*        Indicates less than 1%.

(1)  Includes  options to acquire (i) 100,000 shares at an exercise price of CDN
     $1.05 per share and (ii)  100,000  shares at an exercise  price of US $0.67
     per share, (iii) warrants to acquire 300,000 shares at an exercise price of
     US $0.69 per  share,  and (iv)  warrants  to acquire  700,000  shares at an
     exercise price of US $0.40.

(2)  Includes  option to acquire (i) 50,000  shares at an exercise  price of CDN
     $1.05 per share (ii) 50,000  shares at an  exercise  price of CDN $0.70 per
     share and (iii) 20,000 shares at an exercise price of US $0.67 per share.

(3)  Includes  options to acquire (i) 100,000  shares at an exercise price of US
     $0.90 per share and (ii) 20,000 shares at an exercise price of US $0.67 per
     share.

(4)  Includes of options to acquire (i) 100,000  shares at an exercise  price of
     US $0.69 per share and (ii) 20,000 shares at an exercise  price of US $0.67
     per share.

(5)  Consists  of options to acquire (i) 30,000  shares at an exercise  price of
     CDN $0.80 per share (ii) 210,000  shares at an exercise  price of CDN $1.05
     per share and (iii)  50,000  shares at an  exercise  price of CDN $0.95 per
     share.

(6)  Includes  options to acquire (i) 30,000 shares at an exercise  price of CDN
     $0.80 per share (ii) 20,000  shares at an  exercise  price of CDN $0.70 per
     share (iii) 120,000  shares at an exercise price of CDN $1.05 per share and
     (iv) 30,000 shares at an exercise price of US $0.67 per share.

(7)  Includes options to acquire an aggregate of 2,050,000 shares.

(8)  Applicable  percentage of ownership is based on 32,159,646 shares of common
     stock  outstanding  as of September  17,  2002,  together  with  securities
     exercisable  or  convertible  into shares of common stock within 60 days of
     September 17, 2002 for each stockholder. Beneficial ownership is determined
     in  accordance  with the rules of the  Commission  and  generally  includes
     voting or  investment  power with respect to  securities.  Shares of common
     stock  subject to  securities  exercisable  or  convertible  into shares of
     common stock that are currently  exercisable or exercisable  within 60 days
     of  September  17, 2002 are deemed to be  beneficially  owned by the person
     holding  such  options  for the  purpose of  computing  the  percentage  of
     ownership  of such  person,  but are not  treated  as  outstanding  for the
     purpose of computing the percentage ownership of any other person.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In July 2002,  Azco  entered  into a settlement  agreement  regarding  fees
payable under terminated  management  agreements with two of its former officers
and directors, Mr. Alan P. Lindsay and Mr. Anthony R. Harvey. Azco agreed to pay
each former director the sum of $350,000. The amount is to be paid in an initial
payment of $20,000 each, due upon the signing of the  Agreement,  and in monthly
payments of $10,000 thereafter,  with the entire balance due within 24 months of
the date this  Agreement  is signed.  In  addition,  Azco  agreed to pay $24,898
representing one half of the legal fees incurred by the former directors.  Under
the terms of the agreement,  Azco is required to provide Harvey and Lindsay each
with 150,000  shares of common  stock,  which shares  shall be  unrestricted  as
allowed  pursuant  to Rule  S-8 of the  Rules  of the  Securities  and  Exchange
Commission.

     During the quarter  ended  December 31, 2001 and through  January 17, 2002,
Lawrence  G.  Olson,  Azco's  Chairman,  CEO and  President  provided  unsecured
short-term financing amounting to a total of $243,500.  These funds were offered
on a  6.5%  short-term  basis,  until  alternate  financing  could  be  secured.
Subsequent  to the closing of the  financing  lease  agreement  in January  2002
whereby Azco secured  alternate  financing,  these notes along with all interest
and fees associated were repaid in full.

     In March 2001, Mr. Olson, Azco's Chairman, CEO and President,  jointly with
his  wife,  made an  unsecured  loan to Azco in the  amount  of  $800,000  at an
interest  rate equal to the prime rate of interest as reported by Imperial  Bank
plus one percentage  point.  In  conjunction  with the loan Mr. Olson received a
warrant to purchase 300,000 shares of common stock at an exercise price of $0.69
per share.  The warrant  vested in December 2001 and shall expire on October 12,
2003

     On October 12, 2001, Azco restructured its $800,000 loan agreement with Mr.
Olson.  Mr. Olson agreed to extend the note payable an additional  year to March
15, 2003 in  consideration  for a warrant to purchase  700,000  shares of common
stock at an exercise price of $0.40 per share.  The warrants  vested in December
2001 and shall expire on October 12, 2003.  In  addition,  effective  October 1,
2001,  the interest  rate payable on the loan was adjusted from prime plus 1% to
12% annually.

     In June 2002, the $800,000  Olson loan was extended an additional  year, in
consideration  for Azco  entering  into a  security  agreement  with Mr.  Olson,
whereby  certain of Azco's assets secured the loan. The loan is currently due in
March 14, 2004.

Compliance With Section 16(a) of The Securities Exchange Act of 1934
--------------------------------------------------------------------

     Based  solely on its review of the copies of such forms  received by it, or
written  representations  from certain  reporting  persons,  Azco believes that,
during the fiscal year ended June 30, 2002, all filing  requirements  applicable
to its officers,  directors and greater than ten percent  beneficial owners were
complied with.


<PAGE>

                                     PART IV

    ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K


     Financial  statements  have  been  included  under  Part I,  Item 8 of thie
report.  The following  exhibit  table  indicates  all  referenced  and attached
exhibits.

<TABLE>
<CAPTION>
Exhibit No.     Description                                                  Location
-----------     -----------                                                  --------
<S>             <C>                                                          <C>
2.1             Agreement and Plan of Merger of Arizona Mica Properties,     Incorporated by reference to Exhibit 1 to
                Inc. into Sanchez Mining, Inc., a wholly-owned subsidiary    Registrant's 8-K dated March 9, 1999, as
                of Registrant, dated as of March 9, 1999                     filed with the SEC on March 24, 1999

3.1             Registrant's Certificate of Incorporation dated August 8,    Incorporated by reference to Exhibit 3.1 to
                1991                                                         the Registrant's Registration Statement on
                                                                             Form S-4 (File No. 33-45162)

3.2             Articles of Amendment to the Certificate of Incorporation    Incorporated by reference to Exhibit 3.2 to
                dated December 5, 1991                                       the Registrant's Registration Statement on
                                                                             Form S-4 (File No. 33-45162)

3.3             Registrant's Amended By-laws                                 Incorporated by reference to Exhibit 3.3 to
                                                                             the Registrant's Registration Statement on
                                                                             Form S-4 (File No. 33-45162)

4.1             Specimen stock certificate                                   Incorporated by reference to Exhibit 1 to the
                                                                             Registrant's Registration Statement on Form
                                                                             8-A as filed with the SEC on July 21, 1992

4.2             Rights Agreement dated July 19, 1995 between the             Incorporated by reference to Exhibit 3.4 to
                Registrant and Montreal Trust Company of Canada              the Registrant's Annual Report on Form 10-K/A
                                                                             for the fiscal year ended June 30, 1995

10.1            Agreements for Piedras Verdes property                       Incorporated by reference to Exhibit 10.10 to
                                                                             the Registrant's Registration Statement on
                                                                             Form S-4 (File No. 33-45162)

10.2            Purchase Agreement dated July 27, 1995 between the           Incorporated by reference to Exhibit 10.20 to
                Registrant, Sanchez and Phelps Dodge                         the Registrant's Annual Report on Form 10-K/A
                                                                             for the fiscal year ended June 30, 1995

10.3            Memorandum of Agreement dated June 7, 1996, by and among     Incorporated by reference to Exhibit 10.10 to
                West Africa Gold & Exploration Ltd., Eagle River             the Registrant's Annual Report on Form 10-K
                International Limited, Lion Mining Finance Limited and the   for the fiscal year ended June 30, 1996 as
                Registrant                                                   filed with the SEC on September 30, 1996

10.4            Stock Option Plan                                            Incorporated by reference to Exhibit A to
                                                                             Registrant's DEF 14A as filed with the SEC on
                                                                             March 5, 1997

10.5            Memorandum of Agreement/Eagle River International Ltd.       Incorporated by reference to Exhibit 10.13 to
                                                                             Registrant's Annual Report on Form 10-K for
                                                                             the year ended June 30, 1997, as filed with
                                                                             the SEC on September 30, 1997

10.6            Management Agreements dated February 1, 1998 between the     Incorporated by reference to Exhibit 10.8 to
                Registrant, Alan Lindsay and Associates, Ltd. and ARH        the Registrant's Annual Report on Form 10-K
                Management Ltd.                                              for the fiscal year ended June 30, 1998 as
                                                                             filed with the SEC on September 30, 1998

10.7            Management Agreements dated August 15, 1994, by and          Incorporated by reference to Exhibit 10.15 to
                between the Registrant and both of Alan P. Lindsay,          the Registrant's Annual Report on Form 10-K
                Anthony R. Harvey; Management Agreement dated November 19,   for the fiscal year ended June 30, 1998 as
                1996, by and between the Registrant and Ryan A. Modesto      filed with the SEC on September 30, 1998

10.8            Director's Agreement dated August 15, 1994, by and between   Incorporated by reference to Exhibit 10.16 to
                the Registrant and Paul A.  Hodges                           the Registrant's Annual Report on Form 10-K
                                                                             for the fiscal year ended June 30, 1998 as
                                                                             filed with the SEC on September 30, 1998

10.9            Shareholders & Operator's Agreement dated December 19,       Incorporated by reference to Exhibit 10.17 to
                1995, by and among PD Cobre Del Mayo, Inc., the Registrant   the Registrant's Annual Report on Form 10-K
                and Cobre Del Mayo, SA de CV                                 for the fiscal year ended June 30, 1998 as
                                                                             filed with the SEC on September 30, 1998

10.10           Right of First Refusal Agreement dated June 18, 1998 by      Incorporated by reference to Exhibit 10.12 to
                and among the Registrant, Seville Mineral Developments SA    the Registrant's Annual Report on Form 10-K
                de CV and Minera Cortez Resources Ltd.                       for the fiscal year ended June 30, 1998 as
                                                                             filed with the SEC on September 30, 1998

10.11           Mineral Property Option Agreement dated July, 1998, by and   Incorporated by reference to Exhibit 10.13 to
                between the Registrant and Minera Cortez Resources Ltd.      the Registrant's Annual Report on Form 10-K
                                                                             for the fiscal year ended June 30, 1998 as
                                                                             filed with the SEC on September 30, 1998

10.12           Shareholders' Agreement by and among Registrant, Sanou       Incorporated by reference to Exhibit 10.5 to
                Mining Corporation, West African Gold & Exploration, S.A.    the Registrant's Annual Report on Form 10-K
                and Randgold Resources Ltd.                                  for the fiscal year ended June 30, 1999 as
                                                                             filed with the SEC on September 29, 1999

10.13           Mineral Property Option Agreement dated May 20, 1999, by     Incorporated by reference to Exhibit 10.16 to
                and between the Registrant and Minera Cortez Resources       the Registrant's Annual Report on Form 10-K
                Ltd.                                                         for the fiscal year ended June 30, 1999 as
                                                                             filed with the SEC on September 29, 1999

10.14           Agreement in Principal dated August 9, 1999 between the      Incorporated by reference to Exhibit 10.17 to
                Registrant, Thomas Ford and Calgem, Inc.                     the Registrant's Annual Report on Form 10-K
                                                                             for the fiscal year ended June 30, 1999 as
                                                                             filed with the SEC on September 29, 1999

10.15           Non-Revolving Credit Line Agreement dated March 14, 2001,    Incorporated by reference to Exhibit 10.16 to
                by and between the Registrant and Lawrence G. Olson          Registrant's 10-K as filed with the SEC on
                                                                             October 15, 2001

10.16           Settlement Agreement and Release by and among the            Incorporated by reference to Exhibit 99 to
                Registrant, Anthony Harvey, ARH Management, Ltd., Alan       the Registrant's 8-K as filed with the SEC on
                Lindsay and Alan Lindsay and Associates, Ltd.                July 25, 2002

10.17           $5,000,000 Equity Line of Credit Agreement, by and between   Provided herewith
                the Registrant and Cornell Capital Partners, LP dated June
                19, 2002

10.18           Registration Rights Agreement by and between the             Provided herewith
                Registrant and Cornell Capital Partners, LP dated June 19,
                2000

10.19           Escrow Agreement by and among the Registrant, Cornell        Provided herewith
                Capital Partners, LP, Wachovia, NA and Butler Gonzales
                LLP, dated June 19, 2002.

10.20           Placement Agent Agreement by and between the Registrant      Provided herewith
                and Westrock Advisors, Inc. dated June 19, 2002.

10.21           $150,000 Subscription Agreement between the Registrant and   Provided herewith
                Floyd R. Bleak dated August 13, 2001

10.22           300,000 share Stock Loan Agreement between the Registrant    Provided herewith
                and Floyd R. Bleak dated October 11, 2001

10.23           $200,000 Loan Agreement between the Registrant and Patty     Provided herewith
                J. Ryan dated August 27, 2001

10.24           $200,000 Loan agreement between the Registrant and Luis      Provided herewith
                Barrenchea dated September 4, 2002

10.25           Amendment to March 15, 2001 $800,000 Loan Agreement          Provided herewith
                between the Registrant and Lawrence G. Olson dated October
                12. 2002

10.26           $100,000 Loan agreement between the Registrant and Luis      Provided herewith
                Barrenchea dated October 19, 2002

10.27           $100,000 Loan agreement between the Registrant and Luis      Provided herewith
                Barrenchea dated December 4, 2002

10.28           $3,000,000 Purchase Agreement between the Registrant and     Provided herewith
                Muzz Investments, LLC dated January 17, 2002

10.29           Lease Agreement between the Registrant and Muzz              Provided herewith
                Investments, LLC dated January 17, 2002

10.30           Amendment No. 2 to Loan Agreement dated March 15, 2001 for   Provided herewith
                $800,000 between the Registrant and Lawrence G. Olson
                dated June 28, 2002

10.31           Director's Agreements dated April 26, 2002, by and between   Provided herewith
                the Registrant and Stanley A. Ratzlaff and M. William
                Lightner

21.1            Subsidiaries of the Registrant                               Incorporated by reference to Exhibit 21.1 to
                                                                             the Registrant's Annual Report on Form 10-K
                                                                             for the fiscal year ended June 30, 2001 as
                                                                             filed with the SEC on October 15, 2001

23.1            Consent of PricewaterhouseCoopers LLP                        Provided herewith

</TABLE>

                                   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.

                                              AZCO MINING INC.

                                              By:      /s/ Lawrence G. Olson
                                              Name:    Lawrence G. Olson
                                              Title:   President,
                                                       Chief Executive Officer
                                                       and Chairman of the Board

                                              By:      /s/ Ryan A. Modesto
                                              Name:    Ryan A. Modesto
                                              Title:   Vice-President,
                                                       Finance and Corporate
                                                       Secretary

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated have signed this report below.

<TABLE>
<CAPTION>
SIGNATURE                                     TITLE                                                    DATE
---------                                     -----                                                    ----
<S>                                           <C>                                                      <C>
/s/ Lawrence G. Olson
Lawrence G. Olson                             President, Chief Executive Officer and Chairman of the   September 23, 2002
                                              Board

/s/ Ryan A. Modesto
Ryan Modesto                                  Vice-President, Finance and Corporate Secretary          September 23, 2002


/s/ Paul A. Hodges
Paul A. Hodges                                Director                                                 September 23, 2002


/s/ Stanley A. Ratzlaff
Stanley A. Ratzlaff                           Director                                                 September 23, 2002


/s/ M. William Lightner
M. William Lightner                           Director                                                 September 23, 2002

</TABLE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Azco Mining Inc. (the "Company")
on Form 10-K for the period ended June 30, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"),  each of the undersigned,
in the capacities and on the dates indicated below, hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to his knowledge:

1.   The Report fully complies with the  requirements  of Section 13(a) or 15(d)
     of the Securities Exchange Act of 1934; and

2.   The information  contained in the Report fairly  presents,  in all material
     respects, the financial condition and results of operation of the Company.


/s/ Ryan Modesto
----------------
Ryan Modesto
September 23, 2002



                          FORM OF OFFICER'S CERTIFICATE
                             PURSUANT TO SECTION 302

     The  undersigned  Chief  Financial  Officer  of  Azco  Mining  Inc,  hereby
certifies that:

1.   he has reviewed the report;

2.   based on his knowledge, the report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary in order to make
     the  statements  made,  in  light of the  circumstances  under  which  such
     statements  were made, not misleading with respect to the period covered by
     the report;

3.   based on his  knowledge,  the  financial  statements,  and other  financial
     information included in the report, fairly present in all material respects
     the financial condition, results of operations and cash flows of the issuer
     as of, and for, the periods presented in the report;




/s/ Lawrence G. Olson
---------------------
Lawrence G. Olson, Chief Executive Officer


/s/ Ryan Modesto
----------------
Ryan Modesto, Vice President Finance