#  

# **SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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** **

**FORM 40-F**

 

| **o****REGISTRATION  STATEMENT PURSUANT TO SECTION 12 OF THE**                                                                                                                                         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **SECURITIES  EXCHANGE ACT OF 1934**                                                                                                                                                                   |
| ** **                                                                                                                                                                                             |
| **x****ANNUAL REPORT  PURSUANT TO SECTION 13(a) OR 15(d) OF THE**                                                                                                                                      |
| **SECURITIES  EXCHANGE ACT OF 1934**                                                                                                                                                                   |
| ** **                                                                                                                                                                                             |
| **For the fiscal year ended June 30, 2007****                   ****Commission File Number  000-52299** |

 

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**Northern Peru Copper Corp.**

(Exact name of Registrant as specified in itscharter)

 

| **British Columbia**              | ** ** | **1000**                     | ** ** | **Not Applicable**  |
|-----------------------------------|------------|------------------------------|------------|---------------------|
| (Province or other Jurisdiction   |       | (Primary Standard Industrial |       | (I.R.S. Employer    |
| of Incorporation or Organization) |       | Classification Code Number)  |       | Identification No.) |

 

**1550 – 625 Howe Street**

**Vancouver, British Columbia**

**V6C 2T6**

**(604) 687-0407**

(Address and telephone number of Registrants’ principalexecutive offices)

 

**CT  Corporation System**

**111 Eighth Avenue, 13th Floor**

**New York, NY 10011**

**(212) 894-8940**

(Name, address (including zip code) and telephonenumber

(including area code) of agent for service in theUnited States)

 

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Securitiesregistered or to be registered pursuant to Section 12(b) of the Act.

 

**None**

 

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act.

 

**Common Shares, No Par Value**

 

Securitiesfor which there is a reporting obligation pursuant to Section 15(d) of the Act.

 

**None**

 

Forannual reports, indicate by check mark the information filed with this Form:

 
| x Annual information form |   | x Audited annual financial statements |
|---------------------------|--------|---------------------------------------|

 

Indicate the number ofoutstanding shares of each of the issuer’s classes of capital or common stockas of the close of the period covered by this annual report.

 

**The Registrant had 29,314,442 Common Shares**

**outstanding as at June 30, 2007**

 

Indicate by check mark whether the Registrant by filing the informationcontained in this Form is also thereby furnishing the information to theCommission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934(the “Exchange Act”). If “Yes” is marked, indicate the filing number assignedto the registrant in connection with such Rule.

 
| Yes              82- |   | No x |
|----------------------------------------------------------------------------------|--------|------|

 

 

Indicateby check mark whether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Exchange Act during the preceding 12 months(or for such shorter period that the Registrant was required to file suchreports) and (2) has been subject to such filing requirements for the past 90days.

 
| Yes x |   | No                |
|-------|--------|------------------------------------------------------------------------------------|

 

 

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**DOCUMENTS FILED UNDER COVER OF THIS FORM**

 
| Document No. 1: |   | Annual Information Form  for the year ended June 30,2007, dated September 28, 2007.                                                                                                                                                                                                        |
|-----------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                                                                                                                                                                       |
| Document No. 2: |   | Audited Consolidated  Financial Statements for the financial year ended June 30, 2007 prepared in  accordance with Canadian generally accepted accounting principles, and  reconciled to United States generally accepted accounting principles  in accordance with Item 17 of  Form 20-F. |
|            |   |                                                                                                                                                                                                                                                                                       |
| Document No. 3: |   | Management’s Discussion  and Analysis of Financial Condition and Results of Operations for the year  ended June 30, 2007.                                                                                                                                                             |

 

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**Document No. 1**

 

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**NORTHERN PERU COPPERCORP.**

 

**ANNUAL INFORMATIONFORM**

 

**For the year ended**

 

**June 30, 2007**

 

***Suite1550 - 625 Howe Street***

***Vancouver,British Columbia***

***V6C2T6***

 

**Dated: September 27,2007**

 

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**TABLE OFCONTENTS**

** **
| **PRELIMINARY NOTES**                                           | ** ** |
|-----------------------------------------------------------------|------------|
| ** **                                                      | ** ** |
| **GLOSSARY OF  MINING TERMS**                                   | ** ** |
| ** **                                                      | ** ** |
| **CORPORATE  STRUCTURE**                                        | ** ** |
| ** **                                                      | ** ** |
| NAME, ADDRESS AND INCORPORATION                                 |       |
| INTERCORPORATE RELATIONSHIPS                                    |       |
|                                                            |       |
| **GENERAL  DEVELOPMENT OF THE BUSINESS**                        | ** ** |
| ** **                                                      | ** ** |
| HISTORY                                                         |       |
| *Reorganization*                                                | * *   |
| *Post-Reorganization*                                           | * *   |
| *Financings*                                                    | * *   |
| SIGNIFICANT ACQUISITIONS                                        |       |
| EXPLORATION OF STRATEGIC  ALTERNATIVES                          |       |
|                                                            |       |
| **DESCRIPTION OF  BUSINESS**                                    | ** ** |
| ** **                                                      | ** ** |
| GENERAL                                                         |       |
| COMPETITIVE CONDITIONS                                          |       |
| EMPLOYEES                                                       |       |
| OTHER ASSETS                                                    |       |
| PROPERTIES OF THE COMPANY                                       |       |
| Galeno Property                                                 |       |
| Pashpap Property                                                |       |
|                                                            |       |
| **RISK  FACTORS**                                               | ** ** |
| ** **                                                      | ** ** |
| **DIVIDENDS**                                                   | ** ** |
| ** **                                                      | ** ** |
| **DESCRIPTION OF  CAPITAL STRUCTURE**                           | ** ** |
| ** **                                                      | ** ** |
| COMMON SHARES                                                   |       |
|                                                            |       |
| **MARKET  FOR SECURITIES**                                      | ** ** |
| ** **                                                      | ** ** |
| MARKET                                                          |       |
| TRADING PRICE AND  VOLUME                                       |       |
|                                                            |       |
| **DIRECTORS  AND OFFICERS**                                     | ** ** |
| ** **                                                      | ** ** |
| NAME,  OCCUPATION AND SECURITY HOLDING                          |       |
| CEASE TRADE  ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS       |       |
| CONFLICTS OF INTEREST                                           |       |
|                                                            |       |
| **LEGAL  PROCEEDINGS**                                          | ** ** |
| ** **                                                      | ** ** |
| **INTEREST OF  MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS** | ** ** |
| ** **                                                      | ** ** |
| **TRANSFER AGENTS  AND REGISTRARS**                             | ** ** |
| ** **                                                      | ** ** |
| **MATERIAL  CONTRACTS**                                         | ** ** |
| ** **                                                      | ** ** |
| **INTERESTS  OF EXPERTS**                                       | ** ** |
| ** **                                                      | ** ** |
| **AUDIT  COMMITTEE AND EXTERNAL AUDITOR SERVICES**              | ** ** |
| ** **                                                      | ** ** |
| AUDIT COMMITTEE                                                 |       |
|                                                            |       |
| **ADDITIONAL INFORMATION**                                      | ** ** |

 

i

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# **PRELIMINARY NOTES**

#  

**Date of Information inthis AIF**

 

This annual information form (“AIF”), datedSeptember 27, 2007, contains information available to Northern Peru CopperCorp. (the “Company”) as of September 18, 2007 (unless otherwise indicated).

 

**Documents Incorporation byReference**

 

Certain parts of the Management ProxyCircular of Regalito Copper Corp. (formerly Lumina Copper Corp.) (“Regalito”)dated April 1, 2005 (the “Regalito Circular”) are incorporated by reference andform part of this AIF. The Regalito Circular has been filed under Regalito’sprofile on the SEDAR website at www.sedar.com.

 

**Financial Statements**

 

This AIF should be read in conjunction withthe Company’s consolidated financial statements and management’s discussion andanalysis (“MD&A”) for the year ended June 30, 2007. The financialstatements and MD&A are available at www.northernperu.com and under theCompany’s profile on the SEDAR website at www.sedar.com.

 

**Currency**

 

Unless otherwise specified, in this AIF allreferences to “dollars” or to “$” are to Canadian dollars and all references to“US dollars” or to US$” are to United States dollars. On September 18, 2007,the rate of exchange based on the noon rate quoted by the Bank of Canada was$1.00 = US$0.9769.

 

**Special Note RegardingForward-Looking Statements**

 

Statements contained in this AIF that arenot historical facts are forward-looking statements (within the meaning of theCanadian securities legislation and the U.S. Private Securities LitigationReform Act of 1995) that involve risks and uncertainties. Forward-looking statements include, but are notlimited to, statements with respect to the future price of metals; theestimation of mineral reserves and resources; the realization of mineralreserve estimates; the timing and amount of estimated future production, costsof production, and capital expenditures; costs and timing of the development ofnew deposits; success of exploration activities; permitting time lines;currency fluctuations; requirements for additional capital; governmentregulation of mining operations; environmental risks; unanticipated reclamationexpenses, title disputes or claims; limitations on insurance coverage; and thetiming and possible outcome of pending litigation. In certain cases,forward-looking statements can be identified by the use of words such as “plans”,“expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”,“forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”,or variations of such words and phrases or state that certain actions, eventsor results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “beachieved”. Forward-looking statements involve known and unknown risks,uncertainties and other factors which may cause the actual results, performanceor achievements of the Company to be materially different from any futureresults, performance or achievements expressed or implied by theforward-looking statements. Such risks and other factors include, among others;risks related to the integration of acquisitions; risks related to operations;risks related to joint venture operations; actual results of currentexploration activities; actual results of current reclamation activities;conclusions of economic evaluations; changes in project parameters as planscontinue to be refined; future prices of metals; possible variations in orereserves, grade or recovery rates; failure of plant, equipment or processes tooperate as anticipated; accidents, labour disputes and other risks of themining industry; delays in obtaining governmental approvals or financing or inthe completion of development or construction activities, as well as thosefactors discussed in the sections entitled “Risk Factors” in this AIF. Althoughthe Company has attempted to identify important factors that could affect theCompany and may cause actual actions, events or results to differ materiallyfrom those described in forward-looking statements, there may be other factorsthat cause actions, events or results not to be as anticipated, estimated orintended. There can be no assurance that forward-looking statements will proveto be accurate, as actual results and future events could differ materiallyfrom those anticipated in such statements. Accordingly, readers should notplace undue reliance on forward-looking statements. Theforward-looking statements in this AIF speak only as of September 18, 2007. The Company does notundertake any obligation to release publicly any revisions to theseforward-looking statements to reflect events or circumstances after September18, 2007 to reflect the occurrence of unanticipated events.

 

1

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Forward-looking statements and otherinformation contained herein concerning the mining industry and general expectationsconcerning the mining industry are based on estimates prepared by the Companyusing data from publicly available industry sources as well as from marketresearch and industry analysis and on assumptions based on data and knowledgeof this industry which the Company believes to be reasonable. However, thisdata is inherently imprecise, although generally indicative of relative marketpositions, market shares and performance characteristics. While the Company isnot aware of any misstatements regarding any industry data presented herein,the industries involve risks and uncertainties and are subject to change basedon various factors.

 

The terms “Mineral Reserve”, “MineralResource”, “Measured Mineral Resource”, “Indicated Mineral Resource” and “InferredMineral Resource” used in the Company’s disclosure are categories commonlyemployed in the Canadian mining industry and are defined in accordance withNational Instrument 43-101 – *Standards forDisclosure for Mineral Projects*(“NI 43-101”) under the guidelines utilizedby the Canadian Institute of Metallurgy and Petroleum in the “CIM Standards onMineral Resources and Reserves-Definitions and Guidelines” adopted on August20, 2000 and amended December 11, 2005 (the “CIM Guidelines”). MineralResources which are not Mineral Reserves do not have demonstrated economicviability.

 

All resource estimates in this AIF have been preparedin accordance with NI 43-101 under the CIM Guidelines. These standards differsignificantly from the requirements of the United States Securities andExchange Commission (the “SEC”), and resource information incorporated byreference herein may not be comparable to similar information concerning U.S.companies. 

This AIF uses the terms“Measured Resources”, “Indicated Resources” and “Inferred Resources”. UnitedStates investors are advised that, while such terms are recognized and requiredby Canadian securities laws, the SEC does not recognize them. Under UnitedStates standards, mineralization may not be classified as a “reserve” unlessthe determination has been made that the mineralization could be economicallyand legally produced or extracted at the time the reserve determination ismade. **United States investors are cautionednot to assume that all or any part of Measured Resources or Indicated Resourceswill ever be converted into reserves.** Further, “Inferred Resources”have a great amount of uncertainty as to their existence and as to whether theycan ever be mined legally or economically. It cannot be assumed that all or anypart of the “Inferred Resources” will ever be upgraded to a higher category.Therefore, **United States investors are alsocautioned not to assume that all or any part of the Inferred Resources exist,or that they can ever be mined legally or economically.**  Accordingly, information concerningdescriptions of mineralization and resources contained in this AIF may not becomparable to information made public by United States companies subject to thereporting and disclosure requirements of the SEC. 

 

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# **GLOSSARY OF MININGTERMS**

#  

The following are abbreviations anddefinitions of terms used in the mining industry and in the AIF:

 
| *“ICP–AES”*               |   | means Inductively Coupled Plasma -  Atomic Emission Spectroscopy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Advanced Stage”*             |   | means a mineral property that has,  determined through the results of exploration, substantial geological merit  but is not advanced to the point where sufficient engineering and economic  data exist to permit an acceptable valuation opinion                                                                                                                                                                                                                                                                                                                                                                                                    |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Cu”*                         |   | is scientific symbol and abbreviation for copper                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Cutoff grade”*               |   | is  the lowest grade of mineralized material that qualifies as ore in a given  deposit. It is used to define a mineral deposit that has reasonable prospects  for economic extraction. In establishing the cut-off grade, it must  realistically reflect the location, deposit scale, continuity, assumed mining  method, metallurgical processes, costs and reasonable metal prices                                                                                                                                                                                                                                                                 |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Hypogene”*                   |   | describes a geologic process, and its resultant features,  occurring within and below the crust of the earth                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“AAS”*                        |   | means Atomic Absorbtion Spectroscopy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Indicated Mineral Resource”* |   | is that part of a Mineral  Resource for which quantity, grade or quality, densities, shape and physical  characteristics, can be estimated with a level of confidence sufficient to  allow the appropriate application of technical and economic parameters, to  support mine planning and evaluation of the economic viability of the  deposit. The estimate is based on detailed and reliable exploration and  testing information gathered through appropriate techniques from locations  such as outcrops, trenches, pits, workings and drill holes that are spaced  closely enough for geological and grade continuity to be reasonably assumed |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Inferred  Mineral Resource”* |   | is that part of a Mineral  Resource for which quantity and grade or quality can be estimated on the  basis of geological evidence and limited sampling and reasonably assumed, but  not verified, geological and grade continuity. The estimate is based on  limited information and sampling gathered through appropriate techniques from  locations such as outcrops, trenches, pits, workings and drill holes                                                                                                                                                                                                                                     |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Mineral Resource”*           |   | is a concentration or occurrence of natural, solid, inorganic or fossilized organic  material in or on the Earth’s crust in such form and quantity and of such a  grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological  characteristics and continuity of a Mineral Resource are known, estimated or  interpreted from specific geological evidence and knowledge                                                                                                                                                                                                               |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Mineral Reserve”*            |   | is the economically mineable part of a Measured or Indicated  Mineral Resource demonstrated by at least a preliminary feasibility study.  This study must include adequate information on mining, processing,  metallurgical, economic and other relevant factors that demonstrate, at the  time of reporting, that economic extraction can be justified. A mineral  reserve includes diluting materials and allowances for losses that may occur  when that material is mined.                                                                                                                                                                      |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“Mineralization”*             |   | is the process by which minerals are introduced and  concentrated within a host rock, and the product of this process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| * *                                 |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *“NPI”*                        |   | means a percentage of the gross dollar proceeds from the  sale of minerals, after all costs relating to the production, manufacture and  sale of the minerals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

 

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| * *          |   | are deducted                                                                                                                                                               |
|-------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * *          |   |                                                                                                                                                                       |
| *“NSR”* |   | means a percentage of the  gross dollar proceeds obtained from the sale of minerals with only minor cost  deductions for shipping, insurance and smelter penalties allowed |

 

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# **CORPORATE STRUCTURE**

#  

## **Name, Address andIncorporation**

##  

Northern Peru Copper Corp. was incorporated under the *Business Corporations Act* (BritishColumbia) (the “BCBCA”) on February 28, 2005. Trading of the Company’s sharescommenced on the Toronto Stock Exchange (the “TSX”) under the symbol “NOC” onMay 19, 2005 as a result of a corporate reorganization of Regalito through astatutory plan of arrangement. See “General Development of the Business” belowfor further details on the reorganization.

 

The head office of the Company is located at Suite 1550 - 625 HoweStreet, Vancouver, BC, V6C 2T6. The Company’s registered office is located atSuite 700 - 625 Howe Street, Vancouver, BC, V6C 2T6.

 

## **IntercorporateRelationships**

##  

The Company has the following direct or indirect subsidiaries:

 

 

# **GENERAL DEVELOPMENT OF THE BUSINESS**

#  

## **History**

##  

The Company commenced operations on May 18,2005 as a result of the corporate reorganization of Regalito which included thetransfer of certain mineral properties and other assets from Regalito, as moreparticularly outlined below.

 

### ***Reorganization***

###  

On May 9, 2005, the shareholders ofRegalito approved the reorganization of Regalito by way of statutory plan ofarrangement (the “Arrangement”) which resulted in the mineral resource assetsof Regalito being divided between four separate public companies; Regalito;Global Copper Corp; (“Global”), Lumina Resources Corp; (“Lumco”) and theCompany.

 

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Shareholder approval to the Arrangement wasreceived at Regalito’s annual and special meeting held on May 9, 2005 and courtand regulatory approvals were received. Pursuant to the Arrangement, commonshares of the Company, Global and Lumco were distributed to shareholders ofRegalito on a one-for-one basis as of May 18, 2005 (the “Effective Date”), withthe result that each of Regalito, Global, Lumco and the Company had the sameshareholders and each shareholder had the same percentage interest in each ofRegalito, Global, Lumco and the Company as they had in Regalito prior to theEffective Date.

 

Under the Arrangement, Regalito’s mostadvanced project, the Regalito Property in Chile, remained in Regalito, whileRegalito’s other properties, related assets and cash were transferred toGlobal, Lumco and the Company.

 

On the Effective Date, the Galeno andPashpap properties in Peru were transferred from Regalito to the Company. Inaddition, all of the issued and outstanding shares of 1327008 Ontario Ltd., anOntario company, and Lumina Copper SAC, a Peruvian company and their respectivesubsidiaries, were transferred to the Company, together with cash ofapproximately $3,275,000.

 

#### *SharePurchase Warrants*

#### * *

Under the Arrangement, each warrant ofRegalito outstanding on the Effective Date, upon exercise of such warrant afterthe Effective Date, entitled the holder thereof to receive one common share ofeach of Global, Lumco, Regalito and the Company at an aggregate exercise priceequal to the exercise price provided for in the certificate representing suchwarrant, subject to the terms and conditions contained in such certificate.

 

If a warrant of Regalito was exercised,****Regalito would use the net proceeds from the exercise ofsuch warrant after the Effective Date to acquire common shares of Global, Lumcoand the Company such that Regalito would receive 95.1% of the net proceeds pershare issued, Global would receive 3.4% of the net proceeds per Global shareissued, Lumco would receive 0.8% of the net proceeds per Lumco share issued andthe Company would receive 0.7% of the net proceeds per share issued by theCompany. Upon receipt of such funds, Global, Lumco and the Company would issueand deliver to Regalito the certificate representing the new common shares ofGlobal, Lumco and the Company to which Regalito was entitled and Regalito wouldassign and deliver the common shares of Global, Lumco and the Company to thewarrant holder.

 

On February 14, 2006, Regalito cancelledits outstanding warrants. Each of Lumco, Global and the Company issued its ownwarrants to the former Regalito warrant holders exercisable at prices equal tothe percentages as stated in the preceding paragraph. The Company, therefore,issued warrants for the acquisition of up to 100,000 common shares exercisableat a price of $0.06 per share to March 14, 2007. These warrants were exercisedindependently of the warrants issued by Lumco and Global on June 28, 2006 andthe Company no longer has any warrants outstanding.

 

#### *StockOptions*

#### * *

On the Effective Date, one option in eachof Global, Lumco and the Company were issued for each outstanding option ofRegalito. The exercise price of each new option was 3.4% of the originalRegalito exercise price for the options of Global, 0.8% of the originalRegalito exercise price for the options of Lumco and 0.7% of the originalRegalito exercise price for the options of the Company.

 

#### *BonusShares*

#### * *

After the Effective Date, if Regalito atany time issues bonus shares to a party pursuant to the Regalito stock optionplan in connection with an agreement entered into prior to the Effective Datethen Global, Lumco and the Company will issue and deliver to that party acertificate representing the same number of common shares of Global, Lumco andthe Company as Regalito issued to the party. All of the issued share capital ofRegalito was sold to an arm’s length third party on May 12, 2006 and, inconsequence, the commitment of the Company to issue shares was fulfilled andthe Company has no further commitments with respect to commitments arisingunder Regalito’s stock option plan.

 

#### *PotentialFuture Stock Issuances*

#### * *

Prior to the Effective Date, Regalito hadeither the option to issue shares or to pay cash to the vendor as part of theconsideration to complete the purchase of two mineral properties. One of themineral properties was the Galeno property which as a part of the Arrangementwas transferred to the Company. The other mineral property was

 

6

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transferred to Global. As a term of theArrangement, both Global and the Company have agreed that unless otherwiseagreed to by all of the affected parties, they will not exercise the right toissue shares to the vendor as part of the consideration to complete thepurchase of their respective properties.

 

In April 2007, both Global and the Company completed their respectivepurchases of the mineral properties with payments in cash. As a consequencethere are no longer any potential future stock issuances resulting from thesetransactions.

 

Global, Lumco and the Company have some directors and officers incommon, and the management teams of Global, Lumco and the Company are comprisedof some, but not all, of the same people. See “Directors and Officers” belowfor details.

 

Further details of the Arrangement are set out in the Regalito Circularunder the heading “The Arrangement” which section is incorporated by referenceinto this AIF. The Regalito Circular has been filed under Regalito’s profile onSEDAR and is available for review at www.sedar.com.

 

### ***Post-Reorganization***

###  

On June 16, 2005 the Company signed anagreement with the Japan Oil, Gas and Metals National Corporation (“JOGMEC”) togrant JOGMEC an option to earn a 51% participating joint venture interest inthe Company’s Pashpap property.

 

The terms of the agreement require JOGMECto complete a minimum of US$5 million on exploration on the property (at leastUS$0.5 million in the first year), including a minimum of 25,000 meters ofdrilling, and including paying annual administrative costs of US$50,000 to theCompany over a four year period to earn its 51% ownership interest.

 

In March and April, 2007, the agreementwith JOGMEC was amended to include one additional concession that had beenstaked by the Company and to decrease the number of meters to be drilled byJOGMEC to 20,000 meters.

 

Upon JOGMEC meeting its investmentobligations, both parties will be responsible for funding their pro-rata shareof the costs necessary to continue to advance and develop the Pashpap property.Should either party not wish to continue to fund its obligations then itsinterest will be diluted accordingly until it is less than 20%, whereupon itwill automatically convert to a 2% net smelter royalty or NSR.

 

### ***Financings***

###  

On December 15, 2005, the Company completeda brokered private placement for gross proceeds of $3,097,500 through asyndicate led by Westwind Partners Inc. These funds were raised by the Companyissuing 2,065,000 common shares at a price of $1.50 per share. Net proceedsfrom this private placement were used for the continuing exploration of theGaleno property and for working capital.

 

On April 12, 2006, the Company completed aprivate placement of 4,000,000 common shares at a price of $3.25 per share to raise gross proceeds of $13,000,000. These funds are being usedto further exploration on the Galeno property including an infill drillprogram, an exploration drilling program at the Hilorico gold target and forworking capital.

 

On May 15, 2007, the Company completed aprivate placement of 2,000,000 common shares at a price of $8.40 per share toraise gross proceeds of $16,800,000. Net proceeds of the private placement wereused to repay a short term debt facility, to fund the acquisition of mineralrights, to continue the work program on the Galeno property and for workingcapital purposes.

 

## **SignificantAcquisitions**

##  

The Company made no significantacquisitions during its financial year ended June 30, 2007 for which disclosureis required under Part 8 of National Instrument 51-102.

 

**Exploration of StrategicAlternatives**

** **

On February 6,2007, the Company announced that it had retained Genuity Capital Markets toexplore various strategic alternatives that the Company is considering. Thisprocess is ongoing.

 

7

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# **DESCRIPTION OF BUSINESS**

#  

## **General**

##  

The Company is a natural resource companyengaged in the exploration and study of advanced stage copper explorationproperties and other exploration mineral properties in Peru. The Companycurrently has interests in two properties in Peru, the Galeno property (whichhas two deposits, the Galeno deposit and the Hilorico deposit) and the Pashpapproperty. The Company obtained its interests in the Galeno and Pashpapproperties by way of the Arrangement. The Company’s primary asset is the Galenoproperty.

 

The Company’s primary strategy is theexploration and study of advanced stage copper exploration properties in Peru. Atpresent, the Company has no producing properties and consequently has nocurrent operating income or cash flow. As of the date of this AIF the Companyis an exploration stage company and has not generated any revenues. There is noassurance that a commercially viable mineral deposit exists on any of theCompany’s interest in the Galeno and Pashpap properties. Further explorationand study will be required before a final evaluation as to the technical,economic and legal feasibility of any of the properties of the Company isdetermined.

 

## **Competitive Conditions**

##  

The mineral exploration and mining businessis a competitive business. The Company competes with numerous other companiesand individuals in the search for and the acquisition of attractive mineralproperties. The ability of the Company to acquire further properties willdepend not only on its ability to operate and develop its properties but alsoon its ability to select and acquire suitable properties or prospects fordevelopment or mineral exploration.

 

## **Employees**

##  

As of September 18, 2007, the Company has21 full-time employees in Peru and nine people working on a consulting basisfrom North America. The operations of the Company are managed by its directorsand officers. The Company engages geological and engineering consultants fromtime to time as required to assist in evaluating its interests and recommendingand conducting work programs.

 

## **Other Assets**

##  

The Company does not have any assets otherthan the properties described herein.

 

## **Properties of theCompany**

##  

##### **Galeno Property**

##### ** **

The following information relating to theGaleno property contains: (a) an excerptof the Summary section from a technical report titled “Technical Report - ElGaleno Property Prefeasibility Study (El Galeno Deposit) and TechnicalInformation (Hilorico Deposit)” dated effective February 19, 2007 and revisedas of April 30, 2007 (the “**Technical Report**”);and (b) a summary of recent developmentsin connection with the Galeno property since the date of the Technical report. See“ – The Technical Report Summary” and “ – Recent Developments”.

 

The qualified persons responsible forpreparing the Technical Report are: Robert Sim, P.Geo., Geologist; Bruce M.Davis, FAusIMM, Ph.D., Geostatistician; William L. Rose, PE, BS, MiningEngineer; Scott C. Elfen, PE, BS, Civil Engineer; and Raymond R. Hyyppa, PE,BS, MS, Metallurgical Engineer. The Technical Report is incorporated byreference in, and forms a part of, this AIF. A copy of the Technical Report canbe obtained under the Company’s profile on the SEDAR website at www.sedar.com.

 

The qualified person responsible for theinformation disclosed in the Recent Developments section is Leo Hathaway, P.Geo., VP exploration of the Company.

 

***TechnicalReport Summary***

 

The El Galeno property consists of twodeposits: (i) the El Galeno porphyryCopper-Gold-Silver-Molybdenum deposit; and (ii) theHilorico gold-silver deposit. This technical report summarizes the results of apre-feasibility study related to the El Galeno deposit and provides technicalinformation related to the Hilorico deposit.

 

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This technical report is authored by RobertSim, P. Geo., Bruce M. Davis, FAusIMM, Ph.D., William L. Rose, P.E., Scott C.Elfen, P.E. and Raymond R. Hyyppa, P.E. Messrs. Sim, Davis, Rose, Elfen andHyyppa are each a “qualified person” for purposes of National Instrument 43-101– *Standards of Disclosure for MineralProjects*(NI 43-101).

 

Northern Peru Copper Corp. (NPC)commissioned Samuel Engineering, Inc. (SE) to provide a prefeasibility study ofthe El Galeno deposit and an independent qualified person’s review andtechnical report. The report is based on the results of a recently completedprefeasibility study and also includes excerpts from the resource sections of atechnical report  submitted with respectto the El Galeno deposit by Norwest Corporation (Norwest) titled “TechnicalReport El Galeno Copper-Gold Property” dated September 22, 2006 and filed onSEDAR on September 26, 2006 (Norwest El Galeno Technical Report). The mineralresource estimate on the El Galeno deposit used in the prefeasibility study isunchanged from the Norwest El Galeno Technical Report.

 

NPC also commissioned Norwest to provide anindependent qualified person’s review and technical report of the Hiloricodeposit. The mineral resources estimate for the Hilorico deposit is notincluded in the pre-feasibility study summarized in this technical report. Inferredmineral resources have a great amount of uncertainty as to their existence andas to whether they can be mined legally or economically. It cannot be assumedthat all or any part of inferred mineral resources will ever be upgraded to ahigher category.

 

All units in this report are statedaccording to the International System (SI) of Units unless otherwise noted. Alldollar amounts are stated in United States Dollars.

 

The El Galeno property is located 600 km byroad north of Lima, in the Department of Cajamarca. The property is comprisedof seven mining concessions which cover a total surface area of 2,250 ha. Theconcessions are centred on the El Galeno deposit. Access to the property fromthe town of Cajamarca is by dirt road. The driving time from Cajamarca isapproximately 2.0 hours.

 

On April 25, 2003 Lumina Copper Corp.,through its wholly owned subsidiary Lumina Copper SAC, entered into anagreement with La Asunción Negociación Minera SAC (ASUMIN), that granted LuminaCopper SAC the option to obtain a 100-percent interest in five concessions (ElGaleno, El Galeno I, El Galeno 10, El Galeno 11 and El Galeno II) by makingstaged cash and/or share payments which in the aggregate total $2.0 million. Asof April 15, 2007 NPC has made all payments required and automaticallyexercised its option to own a 100-percent interest in these five concessions.

 

On April 30, 2004, Lumina Copper Corp.,through its wholly-owned subsidiary Lumina Copper SAC, acquired from TerraceGold NL 100 percent of the shares outstanding of Minera Andes Del Norte SA. OnApril 30, 2004, Lumina Copper Corp. acquired from New Inca Goldmines Ltd. 100percent of the shares outstanding of New Inca Goldmines Ltd.’s wholly-ownedsubsidiary companies, 1327008 Ontario Ltd. (and its wholly-owned subsidiary,Eastpac Minerals SAC). Eastpac Minerals SAC and Minera Andes Del Norte SAcollectively held a 100-percent leasehold interest in the El Molino concession.New Inca Goldmines Ltd. and Terrace Gold NL, through their wholly ownedsubsidiaries, each owned 50 percent of the leaseholder rights to the El Molino concessionthrough an underlying lease. The subsidiaries were transferred to NPC by way ofa court ordered Plan of Arrangement concluded on May 9, 2005.

 

Under the terms of the agreements with NewInca Goldmines Ltd. and Terrace Gold NL, each received a $150,000 payment fortheir respective shares and each retained a combined net profits interest inminerals from the property totalling 20 percent, which reduced to 10 percent bythe end of 2005 and which converted to a one-percent Net Smelter Royalty (NSR)as there was no production from the Molino concession by the end of 2006. Theunderlying lease agreement obliged NPC to pay $300,000 upon commencement ofproduction from the Molino concession and six-percent Net Profit Interest (NPI).NPC has recently concluded a buy-out of the underlying leasehold agreementrelating to the Molino concession, including the six-percent NPI, and hassettled all previously outstanding disputes concerning rights over theconcession.

 

Based on a title opinion dated March 12,2007 prepared by Hernandez & Cia. Abogados, there are no priority miningrights to the areas covered by the El Galeno, El Galeno I, El Galeno II and ElMolino concessions. Other than El Molino, El Galeno and El Galeno Iconcessions, there are no priority mining rights to the areas covered by the ElGaleno 10 or El Galeno 11 concession.

 

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On April 20, 2007, NPC entered into adefinitive agreement to purchase the seventh mining concession, Tiranosaurio 9Fraction (0.88 Hectares).

 

Copper mineralization was first recognizedon the El Galeno property in 1991. Subsequently, the property has undergone anumber of exploration campaigns by Newmont Peru, Ltd., North Ltd., and recentlyby NPC. To date, 30 reverse circulation and 111 diamond drill holes for a totalof 45,098 m have been completed on the El Galeno deposit and included inthe resource estimate. This drilling, along with surface trenching andsampling, and magnetic and induced polarization geophysical surveys, haveassisted in the development of the geologic model for the El Galeno deposit.

 

The El Galeno deposit is categorized as aCopper-Gold-Silver-Molybdenum bearing porphyry occurring within Cretaceoussedimentary rocks (limestone, siltstone and quartzite), which have beenintruded by porphyritic rocks of dioritic composition. Deeper hypogenemineralization, comprised of pyrite and chalcopyrite, tends to occur near theboundaries of the main porphyry intrusive. The primary (hypogene)mineralization tends to grade into an overlying zone of enrichment in whichsecondary copper minerals, chalcocite and covellite, are present. There isevidence of a near-surface leach cap and an oxide zone but these are bothrelatively minor and somewhat poorly developed.

 

The mineral resource estimate for the ElGaleno deposit has been generated from drill hole sample assay results and theinterpretation of a geologic model which relates to the spatial distribution ofcopper, gold, silver and molybdenum. Individual domains, reflecting distinctzones or types of mineralization, have been outlined and individualinterpolation characteristics have been defined based on the geology, drillhole spacing and geostatistical analysis of the data. The mineral resourceshave been classified by their proximity to the sample locations and arereported, as required by NI 43-101, according to the CIM standards on MineralResources and Reserves. This mineral resource estimate is shown in Tables 3.1and 3.2 below. The mineral resources are summarized in the tables below. Mineralresources are summarized, for comparison purposes, at a series of cutoff grades.Robert Sim, P.Geo. of Norwest Corporation is the independent qualified personwithin the meaning of NI 43-101 for the purpose of the mineral resourceestimate for the El Galeno deposit included in this report and the effectivedate of the mineral resource estimate is September 22, 2006 (the mineralresource estimation information listed in this report has been derived from theNorwest El Galeno Technical Report).

 

**TABLE 3.1 - EL GALENO DEPOSIT - INDICATEDMINERAL RESOURCE**

 
| **Cutoff Grade  (CuEq%)** | ** ** | **Mtonnes** | ** ** | **Cu%**  | ** ** | **Au g/t** | ** ** | **Ag g/t** | ** ** | **Mo%**   | ** ** | **CuEq%**  | ** ** |
|--------------------------------|------------|-------------|------------|----------|------------|-----------------|------------|-----------------|------------|-----------|------------|------------|------------|
| 0.3                            |       | 1,028       |       | 0.43     |       | 0.10            |       | 2.5             |       | 0.013     |       | 0.57       |       |
| ***0.4**                       | ** ** | **765**     | ** ** | **0.49** | ** ** | **0.11**        | ** ** | **2.6**         | ** ** | **0.014** | ** ** | ****0.64** | ** ** |
| 0.5                            |       | 526         |       | 0.56     |       | 0.13            |       | 2.7             |       | 0.015     |       | 0.73       |       |
| 0.6                            |       | 347         |       | 0.64     |       | 0.14            |       | 2.8             |       | 0.017     |       | 0.82       |       |
| 0.7                            |       | 227         |       | 0.72     |       | 0.15            |       | 2.9             |       | 0.018     |       | 0.91       |       |
| 0.8                            |       | 153         |       | 0.79     |       | 0.16            |       | 3.0             |       | 0.019     |       | 0.99       |       |

 

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| Notes: |   | (1) |   | *Base-case cutoff grade of 0.4% CuEq highlighted in table                                                     |
|--------|--------|-----|--------|---------------------------------------------------------------------------------------------------------------|
|   |   | (2) |   | **Cu Equivalent cutoff  grade (CuEq%) is based on metals prices of $1.00/lb Cu, $400/oz Au, and  $6.00/lb Mo. |
|   |   | (3) |   | Mineral resources that  are not mineral reserves do not have demonstrated economic viability.                 |
|   |   | (4) |   | Mineral resources were  estimated using a 3-dimensional block model.                                          |

 

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** **

**TABLE 3.2 - EL GALENO DEPOSIT – INFERRED MINERALRESOURCE**

 
| **Cutoff Grade  (CuEq%)** | ** ** | **Mtonnes** | ** ** | **Cu%**  | ** ** | **Au g/t** | ** ** | **Ag g/t** | ** ** | **Mo%**   | ** ** | **CuEq%**  | ** ** |
|--------------------------------|------------|-------------|------------|----------|------------|-----------------|------------|-----------------|------------|-----------|------------|------------|------------|
| 0.3                            |       | 553         |       | 0.27     |       | 0.08            |       | 2.1             |       | 0.007     |       | 0.36       |       |
| ***0.4**                       | ** ** | **98**      | ** ** | **0.35** | ** ** | **0.11**        | ** ** | **2.1**         | ** ** | **0.010** | ** ** | ****0.48** | ** ** |
| 0.5                            |       | 25          |       | 0.43     |       | 0.14            |       | 2.3             |       | 0.012     |       | 0.59       |       |
| 0.6                            |       | 7           |       | 0.54     |       | 0.16            |       | 2.8             |       | 0.014     |       | 0.71       |       |
| 0.7                            |       | 3           |       | 0.66     |       | 0.18            |       | 2.8             |       | 0.014     |       | 0.85       |       |
| 0.8                            |       | 2           |       | 0.72     |       | 0.18            |       | 2.8             |       | 0.015     |       | 0.92       |       |

 

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| Notes: |   | (1) | *Base-case cutoff grade  of 0.4% CuEq highlighted in table.                                                                                                                                                                                                              |
|--------|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (2) | **Cu Equivalent cutoff  grade (CuEq%) is based on metals prices of $1.00/lb Cu, $400/oz Au, and  $6.00/lb Mo.                                                                                                                                                            |
|   |   | (3) | Mineral resources that  are not mineral reserves do not have demonstrated economic viability.                                                                                                                                                                            |
|   |   | (4) | Inferred mineral  resources have a great amount of uncertainty as to their existence and as to  whether they can be mined legally or economically. It cannot be assumed that  all or any part of inferred mineral resources will ever be upgraded to a  higher category. |
|   |   | (5) | Mineral resources are  estimated using a 3-dimensional block model.                                                                                                                                                                                                      |
|   |   | (6) | Mineral and  metallurgical recoveries are assumed to be 100%.                                                                                                                                                                                                            |

 

The recent drilling programcompleted on the El Galeno deposit has been successful in establishing asubstantial indicated resource that is the basis of the prefeasibility study. Thisincrease in confidence in the mineral resource provides for better decisionsrelated to the ongoing technical and economic evaluations. The additionaldrilling information has also better defined the overall limits of the mineralresources.

 

At a prefeasibility level ofmine planning, probable mineral reserves for the El Galeno deposit areestimated as of February 19, 2007 at about 661 Mtonnes grading 0.50% Cu, 0.013%Mo, 0.12 g/t Au and 2.5 g/t Ag above an internal NSR cutoff of $3.50/t(contained metal at these grades is projected at approximately 7.3 billionpounds of copper, 190 million pounds of molybdenum, 2.6 million troy ounces ofgold, and 53 million troy ounces of silver). None of the mineral reserves areclassified as proven at this stage of evaluation. Waste stripping is projectedat about 182 Mtonnes, for a stripping ratio of 0.28:1. Inferred mineralresources within the designed ultimate pit, which is included in the above 182Mtonnes of waste stripping, totals about 55 Mtonnes. The pit was designed onthe basis of $0.90/lb Cu, $5.40/lb Mo, $360/oz Au and $5.85/oz Ag metal prices.Mr. William Rose, PE of WLR Consulting, Inc. (WLR) is the independent qualifiedperson within the meaning of NI 43-101 responsible for the El Galeno depositmineral reserve estimate included in this report and the effective date of themineral reserve estimate is February 19, 2007. Mineral reserves reported havebeen included in the mineral resource estimates and are not in addition to the mineralresources reported.

 

The El Galeno deposit will bedeveloped by large-scale, open-pit methods. The orebody is near surface with alow average stripping ratio of about 0.28:1. Mineral reserve production isscheduled at 90,000 tonnes per day (32.4 Mtonnes per year) and total production(mineral reserve and waste) will generally range between 110,000 and 130,000tonnes per day. Operations will be conducted on 15-m benches around the clockfor 360 days per year. Diesel-powered equipment will be used to maximizeoperating flexibility and reduce electric power infrastructure costs. At theabove mining rates and probable mineral reserves estimate, the mine life forthe El Galeno deposit has been estimated at 20.4 years.

 

Mill head grades during Years1-3 will be about 50% higher than average. As determined in the prefeasibilitystudy, total preproduction stripping and ore stockpiling tonnages will be lowand is estimated to be 7.4 million tonnes (1.43 million tonnes to the orestockpile, and 5.94 million tonnes to waste). About 1.2 million tonnes ofadditional excavation will be required for external mine access roads andconnections to the tailings dam haulage road. Peak stripping rates will occurduring Years 1-4 where 14.1 million tpy of waste will be handled.

 

Metallurgical testing on theEl Galeno deposit indicates that the average LOM metal recoveries will beapproximately 89.6% for copper, 52.9% for molybdenum, 67.0% for gold, and 77.3%for silver. Average annual LOM production rates are estimated to be 144,353tonnes of copper, 2,277 tonnes of molybdenum, 82,324 ounces of gold, and2,021,573 ounces of silver for the El Galeno deposit.

 

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The processing plant designfor the El Galeno deposit is based on typical treatment of porphyry deposits: acopper/molybdenum (Cu/Mo) sulfide concentrator including gyratory crushing,SABC comminution, bulk Cu/Mo flotation, Cu/Mo separation, and filtration ofconcentrates for shipment via trucks to the port for loading on ocean vessels. Theplant is designed to process 90,000 tpd of ore for the estimated 20.4-yearlife-of-mine project. The copper concentrate will contain significant gold andsilver credits. A separate molybdenum concentrate will be produced.

 

The total life-of-mine (LOM)capital cost is estimated at $1.249 billion, which includes $975.5 millionduring preproduction (initial capital), $14.7 million for working capital, and$258.6 million in sustaining capital over the LOM. The total LOM operating costis estimated at $3.911 billion, or $5.917/tonne ore. Base-case NPV (at 8%discount rate, $1.35/lb Cu, $10/lb MoO3, $475/oz Au, and $8.50/ozAg) is estimated at $559.4 million. Base-case IRR is estimated at 18.2%. Therange of accuracy (confidence) of the contingency analysis is deemed to be -2%to +13.9% therefore a contingency of 13.9% has been applied. The accuracy levelof the capital cost estimate is slightly better than the industry expectedaverage of ±25% as a result of the availability of historical information fromsimilar projects completed recently. The sensitivity analysis shows that the ElGaleno deposit is more sensitive to metal prices and production than eitheroperating or capital costs.

 

Raymond R. Hyyppa, the qualified person with respect to theprefeasibility study on the El Galeno deposit, recommends that NPC undertake afeasibility study on the El Galeno deposit to further refine the data. Consistentwith this recommendation, the following work and studies should be commissioned as the projectmoves forward:

 

•                  Continue drilling to confirm the El Galenodeposit size and expand the measured and indicated resources, primarily throughan in-fill pattern.

 

•                  Conduct geotechnical drilling, rock-strengthtesting, hydrological studies, and detailed geologic and structural mapping tosupport feasibility-grade slope angle recommendations for the open pit.

 

•                  Advance mine engineering studies to feasibilitylevel.

 

•                  Conduct detailed metallurgical testing.

 

•                  Advance process engineering and infrastructurerequirements to a feasibility level of design.

 

•                  Conduct feasibility-level geotechnical andhydrogeological investigations and advance tailings and mine waste-rock storagefacility designs.

 

•                  Conduct detailed environmental andsocio-economic studies consistent to support completion of a formalEnvironmental Impact Assessment and all permitting requirements.

 

Advance capital costs,operating costs and project economics to a feasibility level.

 

•                  Acquire surface rights for the plant site andtailings impoundment areas

 

•                  Conduct exploration drilling for deep skarntargets

 

The Hilorico deposit occurswithin the El Molino concession and is located 1 km from the El Galeno deposit.Hilorico is characterized as a high sulphidation epithermal gold deposit hostedin siliciclastic sedimentary rocks. The distribution of gold is related todilatational feeder structures and related zones of brecciation. The deposit isbounded to the east by a prominent N-S, west dipping thrust fault which formsthe boundary between the host Farrat formation and the Pulluicana Limestones.

 

It is important to note thatthe Hilorico deposit is separate both in location and style from the El Galenodeposit. The Hilorico deposit contains only inferred mineral resources atpresent, which have not been included in the prefeasibility study on the ElGaleno deposit. Inferred mineral resources have a great amount of uncertaintyas to their existence and as to whether they can be mined legally oreconomically. It cannot be assumed that all or any part of inferred mineralresources will ever be upgraded to a higher category.

 

The drill program at theHilorico deposit was primarily designed to delineate the oxide gold and silverresources to a level of understanding consistent with inferred mineralresources. A secondary objective was to explore the underlying sulfide zone forareas of higher grade capable of producing a saleable gold/silver concentrate.Both of these objectives have been achieved. As both the oxide and sulfideparts of the deposit are at the lower end of the

 

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grade spectrum for theenvisioned process options, their viability is largely contingent onmetallurgical testing. Preliminary metallurgical test work for the oxide andsulfide parts of the deposit is as yet inconclusive and will be continued.

 

A mineral resource estimatefor the Hilorico deposit has been prepared from drill hole sample assay resultsand the interpretation of a geologic model which relates to the spatial distributionof gold and silver. Individual domains, reflecting distinct zones or types ofmineralization, have been outlined and individual interpolation characteristicshave been defined based on the geology, drill hole spacing and geostatisticalanalysis of the data. The mineral resources have been classified by theirproximity to the sample locations and are reported, as required by NI 43-101,according to the CIM standards on Mineral Resources and Mineral Reserves. Themineral resources presented in the tables below are summarized for comparisonpurposes at a series of cut-off grades. The estimate of inferred mineralresources is included in this report to complete information about the entireEl Galeno property even though they are not included as part of any economicanalysis. Robert Sim, P.Geo., of Norwest Corporation is the independentqualified person within the meaning of NI 43-101 for the purpose of themineral resource estimate for the Hilorico deposit included in this report andthe effective date of the mineral resource estimate provided herein is October 23, 2006.

 

**TABLE 3.3 -**HILORICO DEPOSIT OXIDE ZONE – INFERRED MINERAL RESOURCE

 
| **Cut-off Grade  (Au g/t)** | ** ** | **Mtonnes** | ** ** | **Au g/t** | ** ** | **Ag g/t** | ** ** | **Contained  Au (koz)** | ** ** | **Contained  Ag (koz)** | ** ** |
|---------------------------------------|------------|-------------|------------|-----------------|------------|-----------------|------------|------------------------------|------------|------------------------------|------------|
| 0.2                                   |       | 27.3        |       | 0.53            |       | 3.5             |       | 469                          |       | 3,038                        |       |
| ***0.3**                              | ** ** | **19.4**    | ** ** | **0.65**        | ** ** | **3.3**         | ** ** | **407**                      | ** ** | **2,076**                    | ** ** |
| 0.4                                   |       | 13.7        |       | 0.78            |       | 3.3             |       | 344                          |       | 1,459                        |       |
| 0.5                                   |       | 9.8         |       | 0.91            |       | 3.3             |       | 287                          |       | 1,021                        |       |
| 0.6                                   |       | 7.3         |       | 1.04            |       | 3.3             |       | 242                          |       | 776                          |       |
| 0.7                                   |       | 5.4         |       | 1.17            |       | 3.4             |       | 205                          |       | 588                          |       |

 

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| Notes: | (1) | *Oxide “base case”  cut-off grade of 0.3 g/t Au highlighted in table.                                                                                                                                                                                          |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (2) | Mineral resources that  are not mineral reserves have no economic viability.                                                                                                                                                                                             |
|   | (3) | Inferred mineral  resources have a great amount of uncertainty as to their existence and as to  whether they can be mined legally or economically. It cannot be assumed that  all or any part of inferred mineral resources will ever be upgraded to a  higher category. |
|   | (4) | Mineral resources were  estimated using a 3-dimensional block model.                                                                                                                                                                                                     |

 

**TABLE 3.4 -**HILORICO DEPOSIT SULPHIDE ZONE – INFERREDMINERAL RESOURCE

 
| **Cut-off Grade  (Au g/t)** | ** ** | **Mtonnes** | ** ** | **Au g/t** | ** ** | **Ag g/t** | ** ** | **Contained  Au (koz)** | ** ** | **Contained  Ag (koz)** | ** ** |
|---------------------------------------|------------|-------------|------------|-----------------|------------|-----------------|------------|------------------------------|------------|------------------------------|------------|
| 0.2                                   |       | 58.6        |       | 0.54            |       | 5.2             |       | 1,020                        |       | 9,738                        |       |
| 0.3                                   |       | 40.1        |       | 0.68            |       | 5.2             |       | 877                          |       | 6,634                        |       |
| 0.4                                   |       | 29.6        |       | 0.80            |       | 5.0             |       | 760                          |       | 4,736                        |       |
| ***0.5**                              | ** ** | **21.3**    | ** ** | **0.93**        | ** ** | **4.8**         | ** ** | **641**                      | ** ** | **3,321**                    | ** ** |
| 0.6                                   |       | 16.4        |       | 1.05            |       | 4.6             |       | 556                          |       | 2,427                        |       |
| 0.7                                   |       | 13.5        |       | 1.14            |       | 4.3             |       | 494                          |       | 1,863                        |       |
| 1.0                                   |       | 6.6         |       | 1.45            |       | 3.7             |       | 309                          |       | 777                          |       |

 

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| Notes: |   | (1) |   | *Sulphide “base case”  cut-off grade of 0.5 g/t Au highlighted in table.                                                                                                                                                                                       |
|--------|--------|-----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (2) |   | Mineral resources that  are not mineral reserves have no economic viability.                                                                                                                                                                                             |
|   |   | (3) |   | Inferred mineral  resources have a great amount of uncertainty as to their existence and as to  whether they can be mined legally or economically. It cannot be assumed that  all or any part of inferred mineral resources will ever be upgraded to a  higher category. |
|   |   | (4) |   | Mineral resources were  estimated using a 3-dimensional block model.                                                                                                                                                                                                     |

 

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The distribution of gold onthe Hilorico deposit appears to be related to dilatational fault structuresand/or within brecciated rocks. However, it is difficult to interpret thisassumption in three dimensions throughout the deposit. This may be rectifiedthrough additional detailed geologic evaluation and segregation of the varioustypes of brecciated rocks present at the Hilorico deposit. Although there maybe some deficiencies in the current geologic model, the density of drillingcurrently available on the Hilorico deposit is considered sufficient in orderto provide a reliable estimate of inferred mineral resources.

 

The recommendations relatingto the Hilorico deposit of Robert Sim, P.Geo. and Geologist, and Bruce M.Davis, FAusIMM, Ph.D., the qualified persons with respect to the information inthis report relating to the Hilorico deposit, are listed below:

 

•                  Conduct a detailed, 1:1,000 scale mappingprogram in conjunction with a program of drill core re-logging. Particularattention should be paid to 3D mapping and categorization of breccias relatedto the distribution of gold in the deposit.

 

•                  Conduct selective sampling of breccia andlithology types in order to fully understand controls on gold mineralization.

 

•                  Carry out detailed mapping of structures toallow the development of a time related kinematic model which should be relatedto the observed feeder structures within the deposit.

 

•                  Map and characterize alteration mineralogyusing a PIMA instrument. This should be done at the same time as re-logging andre-mapping work, ideally in the field at the same time that visual observationsare recorded.

 

•                  Conduct further metallurgical testwork on theoxide part of the deposit, focusing on crush size and related gold recovery andthe identification and distribution of potential cyanide consumers.

 

•                  Conduct flotation tests on reject material fromthe principal mineralized rock types within the sulfide zone in order todetermine whether further testwork to ascertain if a saleable gold concentratecan be produced is required.

 

•                  Drill test the potential for underlyingporphyry copper and related skarn mineralization with a deep drill hole.

 

***Recent Developments***

 

On July 16, 2007, the Companyentered into a Private Agreement, updating a previous agreement, for thepurchase of the seventh mining concession, the Tiranosaurio 9 Fraction (0.88hectares), for a cash payment of US$2,000,000 and the issuance of 175,000Common Shares, to be paid and issued upon the transfer of title to theconcession to the Company.

 

In August, 2007, the Companydrilled a 461 meter long hole at the Hilorico deposit. The hole (HR-07-31)intercepted 40 meters grading 3.09 grams/tonne gold from 178 to 218 meters withina wider intercept of 122.6 meters grading 1.57 grams/tonne gold from 111.4 to2.34 meters in brecciated quartzites with a sulphide matrix.  The highest gold valuein both intervals was 6.79 grams/tonne gold and the lowest values were 0.31grams/tonne and 0.05 grams/tonne respectively. At a 0.5 grams/tonne gold cutoff grade internal dilution in the reported intervals is 10% and 30%respectively. The sample size varied from 0.5m to 2.0m over both intervals withacceptable core recovery, averaging in the region of 80%. There is insufficientinformation available to calculate the true width of these intercepts. The holeis a step out hole to depth on the southern margin of the deposit and theinterval is open in this direction. Jeff O’Toole, a geologist with over 25years of experience, is supervising the quality control and quality assuranceprogram on site.  Logging and samplingare completed in the Company’s secure facility located at the project.  The drill cores are split on site and samplesare transported to the ALS Chemex facility in Lima for sample preparation andanalysis. Each sample is analysed by 50 gram fire assay with flame AASfinish.  The Company inserts standards,blanks and duplicates selected on a random basis into the sample stream andsends 5% of the sample pulps to check laboratories in Vancouver. This data wasvalidated and intersections calculated by Leo Hathaway, P. Geo., Vice-PresidentExploration, the designated Qualified Person as defined in NI 43-101.

 

Also in August, 2007, theCompany reported a new silver-gold-zinc-lead prospect on the El Molino concession.Known as Sartenes, the prospect is located on a regional structure that passesthrough the Hilorico gold deposit, 1.5 kilometers to the southwest, and theGaleno copper deposit, 3.0 kilometers to the west-southwest. Prospecting of theCompany’s claims initially identified an area of small-scale historic mineworkings and surface mapping, rock chip sampling and ground geophysicsfollowed. Mineralization at surface occurs in sulphide replacement bodies andepithermal veins that are hosted in limestones and minor intrusive dikes. Seventy-ninesurface rock chip grab samples have been taken at the prospect over an area ofapproximately 750 meters in diameter, focussed on the historic mine workings.Highlights of the sampling include a grab sample from a jasperoid outcropreturning 1,210 gram/tonne silver with 3.1 gram/tonne gold and a grab samplefrom an altered volcanic outcrop assaying 471 gram/tonne silver, 2.1 gram/tonnegold and 6.9% zinc. The samples averaged 66ppm silver, 194ppb gold, 0.33%

 

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zinc, including results belowthe detection limit for these elements. Due to poor exposure any true width ofmineralization cannot be determined.  Jeff O’Toole, a geologist with over 25 yearsof experience supervises the quality control and quality assurance program onsite. Each sample is analyzed by 50 gram fire assay with AAS finish andalso by conventional ICP-AES for other elements. Elements found to be over thedetection limit are reanalyzed, and this was the case for the reported silverand zinc values. Reanalysis for silver was by 50 gram fire assay with flame AASfinish and by AAS for zinc.  The Companyinserts standards, blanks and duplicates selected on a random basis into thesample stream and sends 5% of the sample pulps to check laboratories inVancouver. The disclosed information concerning Sartenes has been validated byLeo hathaway, P. Geo., Vice-President Exploration, the designated QualifiedPerson as defined in NI 43-101.

 

In August, 2007, the Company respectedsignificant advances on its progress towards a feasibility study focussing onthe Galeno deposit. The Company has completed a 20,500 meter infill drillingprogram which will enable the estimation of a Measured Resource for theproposed starter pit. In addition, an additional 1,150 meter metallurgicaldrilling program had been completed and the metallurgical testing program isscheduled for completion in October by SGS Mineral Services of Santiago.  This disclosure hasbeen reviewed by Leo Hathaway, P. Geo., Vice-President Exploration, thedesignated Qualified Person as defined in NI 43-101.

 

##### **Pashpap Property**

##### ** **

#### ***Acquisition of the Pashpap Property***

#### * *

The Company obtained itsinterests in the Pashpap property by way of the Arrangement.

 

The Pashpap property wasoriginally acquired by Regalito through staking in July 2003. The Company holdsa 100% undivided interest in the Pashpap property. Located 450 kilometres northof Lima, in the Ancash Department, the property is currently made up of sixteenmining concessions that cover a total surface area of 12,043 hectares. Theproperty has five identified copper-molybdenum porphyry targets (only one ofwhich has been drilled) which offer exploration potential.

 

The Pashpap property containsan Andean type “porphyry copper” hydrothermal system that has at least fiveporphyry centres and a skarn zone. Copper mineralization was first recognisedon the Pashpap property in 1914. Subsequently the property has undergone anumber of exploration campaigns by the following companies: Newmont, AMAX,Homestake, Buenaventura and Noranda. A total of 16,245 metres of diamonddrilling in 88 holes have been completed on the property by these companies.

 

Pursuant to an agreement datedJune 16, 2005 between the Company and JOGMEC, the Company granted JOGMEC anoption to earn a 51% participating joint venture interest in the Pashpapproperty. The terms of the agreement require JOGMEC to complete a minimum ofUS$5 million on exploration on the property, (at least $0.5 million in year 1)including a minimum of 25,000 meters of drilling over a period of four years toearn its interest.

 

In March and April 2007, theagreement with JOGMEC was amended to include one additional concession that hadbeen staked by the Company and to decrease the number of meters to be drilledby JOGMEC to 20,000 meters.

 

Upon JOGMEC meeting itsinvestment obligations, both parties will be responsible for funding theirpro-rata share of the future costs. Should either party not wish to continueits obligations then its interest will be diluted accordingly until it is lessthan 20% interest, whereupon it will automatically convert to a 2% NSR.

 

#### ***Exploration Program***

#### * *

During the period ended June30, 2007, management’s efforts were focused on review of drilling results fromthe 2006 drill program and approval of JOGMEC’s 2007 program. The Company alsoprovided permitting, legal and additional mineral concession acquisitionsupport to the project. In support of the exploration program, JOGMEC worked onsecuring surface access agreements with the local community and private landowners as well as permits and approvals from Peruvian regulatory authorities. Asummary of the key developments is provided below:

 

•                  In 2005, JOGMEC spent US$739,000 on explorationincluding 1,852m of drilling in six diamond drill holes, three kilometers ofnew road construction and extensive geological mapping and geochemicalsampling.

 

•                  All drill holes contained significant sulphidemineralization and confirm the presence of a cluster of coalescing porphyrycopper systems of at least seven kilometres in diameter, within which extensiveareas remain untested by drilling.

 

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•                  In 2006, JOGMEC spent approximatelyUS$1,200,000 on exploration which included 4,833 meters of diamond drilling inten holes. New exploration targets peripheral to the known mineralization werestaked and geologic mapping and sampling were carried out on the new area.

 

•                  Additional staking of new exploration targetsin 2006 and 2007 in the Pashpap district has increased the size of the propertyfrom its original 4,823 hectares to 12,043 hectares and from seven to 16 miningconcessions. The enlarged property remains 100% owned by the Company and issubject to the JOGMEC earn-in agreement.

 

•                  In 2007, the exploration program for the 2007field season was approved. The program, which has not yet commenced, will costan estimated US$1,800,000 and will include upgrading of access roads, detailedgeological mapping, geochemical survey, IP/magnetic geophysical survey,environmental studies and 8,800 meters of rotary drilling.

 

# **RISK FACTORS**

#  

The following risks currentlyapply to the Company:

 

*(1)**                              **Themineral properties of the Company are in the exploration stage only andconsequently exploration of the Company’s mineral properties may not result inany discoveries of commercial bodies of mineralization.*

 

The property interests ownedby the Company are in the exploration stages only, are without known bodies ofcommercial mineralization, and have no ongoing mining operations. Mineralexploration involves a high degree of risk and few properties which areexplored are ultimately developed into producing mines. Exploration of theCompany’s mineral exploration may not result in any discoveries of commercialbodies of mineralization.

 

*(2)**                              **There is no certainty thata feasibility study focusing on the Company’s Galeno deposit will conclude withpositive results.*

 

The Company’s Galeno deposit hasreached the stage of development where a positive pre-feasibility studysupported a decision by the Company to proceed with undertaking a feasibilitystudy. The feasibility study, when completed, will determine whether economicdevelopment of the Galeno deposit is economically justifiable and feasible, andwill also determine whether the Company can expect to raise sufficientfinancing in order for the Company to proceed with development. There can be nocertainty that the feasibility study will conclude with positive results. Someadditional factors which may affect the feasibility of mining the Galenodeposit include, but are not limited to: insufficient metallurgical recovery;the existence of penalty metals which render the project uneconomic; a decreasein metal prices; inadequate surface rights; insufficient water rights, power orother necessary infrastructure; impracticable mining economics; poor ordangerous ground conditions; lack of appropriate labour; inability to secureconcentrate off-take agreements; and inhospitable climate or climate change.

 

*(3)**                              **Governmentexpropriation may result in the total loss of the Company’s mineral properties.*

 

Even if the Company’s mineralproperties are proven to host economic reserves of copper or other precious ornon-precious metals, governmental expropriation may result in the total loss ofthe Company’s mineral properties without any compensation to the Company.

 

*(4)**                              **Governmentalregulation may have negative impacts on the Company.*

 

The Company’s activities aresubject to extensive Canadian, Peruvian and other foreign federal, state,provincial, territorial and local laws and regulations governing variousmatters, including:

 

•                  environmental legislation and protection;

 

•                  management and use of toxic substances andexplosives;

 

•                  management of natural resources;

 

•                  exploration, development of mines, productionand post-closure reclamation;

 

•                  exports;

 

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•                  price controls;

 

•                  taxation;

 

•                  mining royalties;

 

•                  onerous development criteria;

 

•                  labour standards and occupational health andsafety, including mine safety; and

 

•                  historic and cultural preservation.

 

The costs associated withcompliance with these laws and regulations are substantial and possible futurelaws and regulations, changes to existing laws and regulations (including theimposition of higher taxes and mining royalties which has been implemented orthreatened in Peru) or more stringent enforcement of current laws andregulations by governmental authorities, could cause additional expenses,capital expenditures, restrictions on or suspensions of the Company’soperations and delays in the development of its properties. Moreover, theselaws and regulations may allow governmental authorities and private parties tobring lawsuits against the Company based upon damage to property and injury topersons resulting from the environmental, health and safety impacts of theCompany’s past and current operations, or possibly even those actions ofparties from whom the Company acquired its properties, and could lead to theimposition of substantial fines, penalties or other civil or criminal sanctions.It is difficult to strictly comply with all regulations imposed on the Company.The Company retains competent and well trained individuals and consultants injurisdictions in which it does business; however, there is no certainty thatthe Company will continuously be compliant with all applicable laws. Thefailure to comply with all applicable laws could lead to financialrestatements, fines, penalties and other material negative impacts on theCompany.

 

*(5)**                              **Failure to comply strictly withapplicable mining laws, regulations and local practices may have a materialadverse impact on the Company’s operations or business.*

 

Failure to comply strictlywith applicable laws, regulations and local practices relating to mineral rightapplications and tenure could result in loss, reduction or expropriations ofentitlements, or the imposition of additional local or foreign parties as jointventure partners with carried or other interests. Any such loss, reduction orimposition of partners could have a material adverse impact on the Company’soperations or business. Further, the increasing complexity of mining laws andregulations may render the Company incapable of strict compliance.

 

*(6)**                              **The exploration and developmentof the Company’s properties is subject to extensive environmental laws andregulations.*

 

The Company’s activities are subject toextensive laws and regulations governing the protection of the environment,waste disposal, worker safety, mine development and protection of endangeredand protected species. The Company’s ability to obtain permits and approvalsand to successfully operate in particular communities may be adversely impactedby real or perceived detrimental events associated with the Company’sactivities or those of other mining companies affecting the environment, humanhealth and safety of the surrounding communities. Delays in obtaining orfailure to obtain government permits and approvals may adversely affect theCompany’s ability to explore or develop its properties. The Company has made,and expects to make in the future, significant expenditures to comply with suchlaws and regulations and, to the extent possible, create social and economicbenefit in the surrounding communities. Future changes in applicable laws,regulations and permits or changes in their enforcement or regulatoryinterpretation could have an adverse impact on the Company’s financial condition.

 

*(7)**                              **TheCompany may not be able to obtain or renew permits that are necessary to itsoperations.*

 

In the ordinary course ofbusiness, the Company is required to obtain and renew governmental permits forexisting operations and any ultimate development, construction and commencementof new mining operations. Obtaining or renewing the necessary governmentalpermits is a complex and time-consuming process involving numerousjurisdictions and often involving public hearings and costly undertakings on theCompany’s part. The duration and success of the Company’s efforts to obtain andrenew permits are contingent upon many variables not within its control,including the interpretation of applicable requirements implemented by thepermitting authority. The Company may not be able to obtain or renew permitsthat are necessary to its operations, or the cost to obtain or renew permitsmay exceed what the Company believes it can recover from a given property oncein production.

 

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Any unexpected delays or costsassociated with the permitting process could delay the development or impedethe operation of a mine, which could adversely impact the Company’s operationsand profitability.

 

*(8)**                              **TheCompany has no significant source of operating cash flow and failure togenerate revenues in the future could cause the Company to go out of businessor require the Company to raise funds causing dilution.*

 

The Company has no revenuesfrom operations and has recorded losses since its inception. The Company haslimited financial resources. The Company’s ability to achieve and maintainprofitability and positive cash flow is dependent upon the Company being ableto:

 

•                  locate a profitable mineral property;

 

•                  generate revenues in excess of expenditures;and

 

•                  reduce exploration and administrative costs inthe event revenues are insufficient.

 

Additional funds raised by theCompany through the issuance of equity or convertible debt securities willcause the Company’s current shareholders to experience dilution. Suchsecurities may grant rights, preferences or privileges senior to those of theCompany’s common shareholders. There is no certainty the Company will be ableto raise funds in the event it needs to do so.

 

The Company does not have anycontractual restrictions on its ability to incur debt and, accordingly, theCompany could incur significant amounts of indebtedness to finance itsoperations. Any such indebtedness could contain covenants, which would restrictthe Company’s operations.

 

*(9)**                              **Themineral exploitation industry is intensely competitive in all its phases andthe Company competes with many companies possessing greater financial resourcesand technical facilities.*

 

The mineral exploitationindustry is intensely competitive in all its phases. The Company competes withmany companies possessing greater financial resources and technical facilitiesand abilities than itself for the acquisition of mineral concessions, claims,leases and other mineral interests as well as for the recruitment and retentionof qualified employees. In addition, there is no assurance that even ifcommercial quantities of minerals are discovered, a ready market will exist fortheir sale. Factors beyond the control of the Company may affect the marketabilityof any minerals discovered. These factors include market fluctuations, theproximity and capacity of natural resource markets and processing equipment,international economic and political trends, expectations of inflation,currency exchange fluctuations (specifically, the U.S. dollar relative to othercurrencies), interest rates and global or regional consumption patterns,speculative activities, government regulations, including regulations relatingto prices, taxes, royalties, land tenure, land use, importing and exporting ofminerals and environmental protection. The exact effect of these factors cannotbe accurately predicted, but the combination of these factors may result in theCompany not receiving an adequate return on invested capital or losing itsinvested capital. As the Company is in the exploration stage, the above factorshave had no material impact on operations or income.

 

*(10)**                       **Substantialexpenditures are required to be made by the Company to establish proven mineralreserves and expand its probable mineral reserves, and the Company either maynot discover minerals in sufficient quantities or grade or may not have thenecessary required funds.*

 

Substantial expenditures arerequired to establish proven mineral reserves and expand the Company’s probablemineral reserves through drilling. Although substantial benefits may be derivedfrom the discovery of a major mineralized deposit, the Company may not discoverminerals in sufficient quantities or grades to justify commercial operation andthe funds required for development may not be obtained on a timely basis. Estimatesof reserves and mineral deposits can also be affected by environmental factors,unforeseen technical difficulties and unusual or unexpected geologicalformations. In addition, the grade of mineral ultimately mined may differ fromthat indicated by drilling results. Material changes in mineral reserves,grades, stripping ratios or recovery rates may affect the economic viability ofany project.

 

*(11)**                       **The lack of availableinfrastructure may adversely affect the Company’s operations and profitability.*

 

Mining, development and/orexploration activities depend, to one degree or another, on adequateinfrastructure. Reliable roads, bridges, power sources and water supply areimportant determinants which affect capital and

 

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operating costs. The lack ofavailability on acceptable terms or the delay in the availability of any one ormore of these items could prevent or delay development of the Company’sprojects. If adequate infrastructure is not available in a timely manner, therecan be no assurance that the development of the Company’s projects will becommenced or completed on a timely basis, if at all; the Company’s operationswill achieve anticipated results; or the construction costs and ongoingoperating costs associated with the development of the Company’s advanced-stageprojects will not be higher than anticipated. In addition, unusual orinfrequent weather phenomena, sabotage, government or other interference in themaintenance or provision of such infrastructure could adversely affect theCompany’s operations and profitability.

 

*(12)**                       **TheCompany currently has very limited insurance and as a consequence could incur considerablelosses or costs including loss of its properties.*

 

Mineral exploration involvesrisks, which even a combination of experience, knowledge and careful evaluationmay not be able to overcome. Operations in which the Company has a direct orindirect interest may be subject to all the hazards and risks normallyincidental to exploration of precious and non-precious metals, any of whichcould result in work stoppages, damage to property, and possible environmentaldamage. The Company has very limited commercial liability insurance and doesnot presently intend to increase its liability insurance. As a result of havinglimited insurance, the Company could incur significant costs that could have amaterially adverse effect on its financial condition and even cause the Companyto cease operations.

 

To date, the Company has notexperienced any material losses due to hazards arising from its operations.

 

*(13)**                       **Developments regardingaboriginal, first nations and indigenous communities may alter the Company’s existingarrangements or conventions.*

 

The Company operates in areasinhabited by aboriginal, first nations and indigenous communities. Developinglaws and movements respecting the acquisition of lands and other rights fromsuch communities may negatively alter the Company’s existing arrangements orconventions or negatively impact the Company and its plans.

 

*(14)**                       **TheCompany’s mineral properties may be subject to prior unregistered agreements ortransfers or native land claims and as such title to some of the Company’smineral properties may be affected.*

 

Although the Company hassought and received such representations as it has been able to achieve fromvendors in connection with the acquisition of or options to acquire an interestin its mining properties and has conducted its own investigation of legal titleto each such property, the mining properties may be subject to priorunregistered agreements or transfers or native land claims and title may beaffected by undetected defects.

 

*(15)**                       **The increased involvementof local communities and non-governmental organizations may adversely affectthe Company’s operations.*

 

In recent years, local communities andnon-governmental organizations (“**NGOs**”)have become more vocal and active with respect to mining activities. Thesecommunities and NGOs have taken assertive actions to prevent or delay miningactivities, including effecting road closures and work stoppages and initiatinglegal proceedings to seek damages. In some cases, local communities and NGOshave also taken similar action against prior owners of mining properties. Thereis no assurance that the Company’s operations will not be affected by localcommunities and NGOs.

 

*(16)**                       **The priceof copper, base and precious metals has fluctuated widely in recent years andmay adversely affect the economic viability of any of the Company’s mineralproperties.*

 

The Company’s revenues, ifany, are expected to be in large part derived from the mining and sale ofcopper and other precious and non-precious metals. The price of thosecommodities has fluctuated widely, particularly in recent years, and isaffected by numerous factors beyond the Company’s control includinginternational economic and political trends, expectations of inflation,currency exchange fluctuations, interest rates, consumption patterns,speculative activities and increased production due to new mine developmentsand improved mining and production methods. The effect of these factors on theprice of copper, base and precious metals and therefore the economic viabilityof any of the Company’s mining properties cannot be accurately predicted butmay adversely affect the Company’s operations, share price, marketcapitalization with value, and its ability to raise capital.

 

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*(17)**                       **The business of exploration forminerals and development of mineral properties involves a high degree of risk,as a result, few properties that are explored are ultimately developed intoproducing mines.*

 

The Company’s exploration and developmentactivities are subject to a high degree of risk due to factors that, in somecases, cannot be foreseen or anticipated. The operations of the Company may bedisrupted by a variety of risks and hazards which may be beyond the control ofthe Company. These risks include, but are not limited to, labour disruptions,the inability to obtain adequate sources of power, suitable or adequatemachinery and equipment and the inability to retain consultants and otherexperts. In addition, the Company may be unable to acquire or obtain suchthings as water rights and surface rights which may be critical for thecontinued advancement of exploration and/or development activities on itsmineral properties.

 

*(18)**                       **All of the Company’s mineralproperties are in a foreign country and as such, the Company’s business may beexposed to various levels of political, economic and other risks anduncertainties.*

 

All of the Company’sproperties are located in Peru. As the Company’s business is carried on in aforeign country it is exposed to various levels of political, economic andother risks and uncertainties. These risks and uncertainties include, but arenot limited to: terrorism; hostage taking; military repression; extremefluctuations in currency exchange rates; high rates of inflation; labourunrest; the risks of war or civil unrest; expropriation and nationalization;renegotiation or nullification of existing concessions, licenses, permits andcontracts; illegal mining; changes in taxation policies; restrictions on foreignexchange and repatriation; and changing political conditions, currency controlsand governmental regulations that favour or require the awarding of contractsto local contractors or require foreign contractors to employ citizens of, orpurchase supplies from, a particular jurisdiction. The status of Peru as adeveloping country may make it more difficult for the Company to obtain anyrequired exploration financing for its projects.

 

Changes, if any, in mining orinvestment policies or shifts in political attitude in Peru may adverselyaffect the Company’s operations or potential profitability. Operations may beaffected in varying degrees by government regulations with respect to, but notlimited to, restrictions on production, price controls, export controls,currency remittance, income taxes, expropriation of property, foreigninvestment, maintenance of claims, environmental legislation, land use, landclaims of local people, water use and mine safety.

 

Failure to comply strictlywith applicable laws, regulations and local practices relating to mineral rightapplications and tenure, could result in loss, reduction or expropriation ofentitlements or the imposition of additional local or foreign parties as jointventure partners with carried or other interests.

 

The occurrence of thesevarious factors and uncertainties cannot be accurately predicted and could havean adverse effect on the Company’s operations or potential profitability.

 

*(19)**                       **ForeignSubsidiaries*

 

The Company conducts operations throughforeign subsidiaries and substantially all of its assets are held in suchentities. Accordingly, any limitation on the transfer of cash or other assetsbetween the parent corporation and such entities, or among such entities, couldrestrict the Company’s ability to fund its operations efficiently. Any suchlimitations, or the perception that such limitations may exist now or in thefuture, could have an adverse impact on the Company’s valuation and stockprice.

 

*(20)**                       **There arerisks relating to an uncertain or unpredictable political environment which mayaffect the Company’s operations in that country.*

 

All of the Company’s mineralproperties are located in Peru. There are risks relating to an uncertain orunpredictable political environment in Peru. In the short term, significantmacroeconomic instability in the region is expected to negatively impact on thebusiness environment and may lead to longer term negative changes in thenational approach taken to ownership by foreign companies of natural resources.

 

There is the risk of politicalviolence and increased social tension in Peru as a result of the increasedcivil unrest, crime and labour unrest. Roadblocks by members of the localcommunities, unemployed people and unions can occur on most national andprovincial routes without notice. Civil disruptions may become more frequent ifthe

 

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economic situation in Perucontinues to deteriorate. A large portion of Peru’s population have expresseddispleasure at the outcome of most recent elections and appear willing toengage in protest and civil unrest.

 

Peru has experienced politicaland social unrest and protestors have from time to time targeted foreign miningfirms. As an example of political unrest, in January 2005, a retired armymajor and a group of armed followers captured a police station in Andahuaylas,a small town in the southern Andes and subsequently killed four policemen. Therebel leader listed a number of grievances against Peru’s President AlejandroToledo, including that he had sold out Peru’s interests to foreigners, anddemanded that he resign. The incident lasted three days until all of the rebelswere captured and put in jail in Lima pending charges.

 

Alan Garcia was electedPresident of Peru in a run-off vote held on June 4, 2006 followingelections held during April in which none of the candidates received more than50% of the vote. Mr. Garcia, the candidate of the American PopularRevolutionary Alliance who has been described in the media as a socialist,pledged during his campaign to promote trade, attract international investment,reduce poverty and contain inflation. Mr. Garcia was President of Perufrom 1985 to 1990 during a period of high inflation, currency devaluation,economic stagnation and significant terrorist activity. Mr. Garcia has to datehad limited negative impact on business in Peru.

 

*(21)**                       **Peru has been the subject ofterrorist activity in the past.*

 

Peru has been the subject ofterrorism by the Sendero Luminoso, a Maoist group intent on creating asocialist government, and the Tupac Amaru Revolutionary Movement (the “MRTA”). Inrecent years neither group has been active. In 1997, the Sendero Luminoso wasimplicated in a car-bombing. In 1996-1997, 17 people were killed when the MRTAattacked the Japanese embassy in Peru. The Company may not be able to findsuitable labour for its Peruvian projects, may have difficulty in obtainingfinancing for its Peruvian projects and may not be able to continue itsactivities if the terrorism resumes.

 

*(22)**                       **As the Company is aCanadian company it may be difficult for U.S. shareholders of the Company toeffect service on the Company or to realize on judgments obtained against theCompany in the United States.*

 

The Company is a Canadian corporation. All ofits directors and officers, with the exception of Mr. Marshall Koval, areresidents of Canada and a significant part of its assets are, or will be,located outside of the United States. As a result, it may be difficult forshareholders resident in the United States to effect service within the UnitedStates upon the Company, directors, officers or experts who are not residentsof the United States, or to realize in the United States judgments of courts ofthe United States predicated upon civil liability of any of the Company and itsdirectors or officers under any United States securities laws. If a judgment isobtained in the U.S. courts based on civil liability provisions of U.S.securities laws against the Company or its directors or officers, it will bedifficult to enforce the judgment in the Canadian courts against the Companyand any of the Company’s non-U.S. resident executive officers or directors. Accordingly,United States shareholders may be forced to bring actions against the Companyand its respective directors and officers under Canadian law and in Canadiancourts in order to enforce any claims that they may have against the Company orits directors and officers. Nevertheless, it may be difficult for United Statesshareholders to bring an original action in the Canadian courts to enforceliabilities based on U.S. securities laws against the Company and any of theCompany’s non-U.S. resident executive officers or directors.

 

*(23)**                       **The Company has not declared anydividends since its inception in 2005, and has no present intention of payingany cash dividends on its common stock in the foreseeable future.*

 

The Company has not declared any dividendssince its inception in February 2005, and has no present intention of payingany cash dividends on its common stock in the foreseeable future. The paymentby the Company of dividends, if any, in the future, rests in the discretion ofthe Company’s Board of Directors and will depend, among other things, upon theCompany’s earnings, its capital requirements and financial condition, as wellas other relevant factors.

 

*(24)**                       **The possible issuance ofadditional shares may impact the value of the Company’s stock.*

 

The Company is authorized to issue anunlimited number of shares of common stock without par value. It is the Company’sintention to issue more shares. Sales of substantial amounts of common stock(including shares issuable upon the exercise of stock options, the conversionof notes and the exercise of warrants), or the perception that such sales couldoccur, could materially adversely affect prevailing market prices for thecommon stock and the ability of

 

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the Company to raise equity capital in thefuture.

 

*(25)**                       **Forward Looking Statements.*

 

This AIF includes “forward-lookingstatements.”  A shareholder orprospective shareholder should bear this in mind when assessing the Company’sbusiness. All statements, other than statements of historical facts, includedin this registration statement, including, without limitation, the statementsunder and located elsewhere herein regarding industry prospects and the Company’sfinancial position are forward-looking statements. Although the Companybelieves that the expectations reflected in such forward looking statements arereasonable, it can give no assurance that such expectation will prove to havebeen correct. There is significant risk that actual results will vary, perhapsmaterially, from results projected depending on such factors as changes ingeneral economic conditions, financial markets, copper and other metal prices,technology and exploration hazards. (See Page 1 – “Special Note RegardingForward-Looking Statements.)

 

*(26)**                       **The Company’s futureperformance is dependent on key personnel, consultants and service providers.**The loss of the services of anyof the Company’s executives or directors could have a material adverse effecton the Company’s business.*

 

The Company’s performance is substantiallydependent on the performance and continued efforts of the Company’s executivesand its Board of Directors, as well as key consultants and service providers. Theloss of the services of any of the Company’s executives, directors, consultantsor service providers could have a material adverse effect on the Company’sbusiness, results of operations and financial condition. The Company currentlydoes not carry any key person insurance on any of its executives or directors. TheCompany has limited resources and is currently unable to compete with largerorganizations with respect to compensation and perquisites.

 

*(27)**                       **Certain of the Company’sdirectors are also directors, officers or shareholders of other companies thatare engaged in the business of acquiring, developing and exploiting naturalresource properties and accordingly conflicts of interest may arise.*

 

Certain of the Company’sdirectors are also directors or officers of other companies,**including Global, which are engaged inthe business of acquiring, developing and exploiting natural resource properties.   Such associations may give rise to conflictsof interest from time to time.  As a result, opportunities provided to adirector of the Company may not be made available to the Company, but rathermay be offered to a company with competing interests.  The directors ofthe Company are required by law to act honestly and in good faith with a viewto the best interests of the Company, to disclose any personal interest whichthey may have in any project or opportunity of the Company, and to abstain fromvoting on such matters.

 

The directors and officers ofthe Company are aware of the existence of laws governing the accountability ofdirectors and officers for corporate opportunity and requiring disclosure bythe directors of conflicts of interests and the Company will rely upon suchlaws in respect of any directors’ and officers’ conflicts of interest or inrespect of any breaches of duty by any of its directors and officers.

 

In order to address conflictsor perceived conflicts as they relate to Global and the Company, the companieshave agreed that Global shall be given the first right to acquire all copperexploration properties with known defined resources in Chile and Argentina ofwhich any of the companies or their directors (excluding independent directors)or officers become aware, and the Company shall be given the first right toacquire all copper exploration properties with known defined resources in Peruof which any of the companies or their directors (excluding independentdirectors) or officers become aware. In addition each company shall have thefirst right to acquire any asset which is subject of an existing agreement oris complementary or adjacent to their existing properties. The companies haveagreed to review and renew this commitment annually. See “Conflicts of Interest”for further disclosure.

 

*(28)**                       **An increase in the numberof legal proceedings brought against the Company or its properties can have amaterial adverse impact on the Company and its activities.*

 

In recent years, due to the effect of metalprices on the value of mining properties and the corresponding increase offunds made available to mining companies, it has become increasingly common forthird parties to initiate legal proceedings against businesses engaged in miningactivities, irrespective of whether such legal proceedings have any legal merit.An increase in the number of legal proceedings brought against the Company orits properties can

 

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have a material impact on the Company bysubstantially delaying its activities, causing interruptions for management,triggering unbudgeted legal costs and creating contingent liabilities which maynot be resolved for an extended period of time or which may not be resolved inthe Company’s favour.

 

*(29)**                       **The Company may not havetimely access to service providers who are familiar with NI 43-101 and therecan be no assurance that the Company will be able to satisfy the requirements ofNI 43-101.*

 

The Company relies on and works with a number offoreign entities and service providers who are not familiar with therequirements of, and who do not meet the definition of “qualified person” forthe purposes of, NI 43-101. As a result, the Company may not be in a positionto satisfy the timely disclosure requirements for required scientific andtechnical information under NI 43-101. The failure to strictly comply with NI43-101 may result in regulatory reviews of proceedings being initiated againstor penalties being imposed upon the Company by applicable securities regulatoryauthorities in Canada, which may negatively impact the price of the CommonShares.

 

*(30)**                       **The Company may fail toachieve and maintain the adequacy of internal control over financial reportingas per the requirements of the United States Sarbanes-Oxley Act.*

 

Beginning in the 2008 fiscal year, theCompany will be required to satisfy the requirements of Section 404 of theUnited States *Sarbanes-Oxley Act of 2002*(“SOX”). Section 404 of SOX requires an annual assessment by management of theeffectiveness of the Company’s internal control over financial reporting. Inthe 2009 fiscal year, the Company’s independent auditors will be required toissue an attestation report addressing management’s annual assessment. In thefuture, the Company may fail to achieve and maintain the adequacy of itsinternal control over financial reporting as such standards are modified,supplemented or amended from time to time, and the Company may not be able toensure that it can conclude on an ongoing basis that it has effective internalcontrols over financial reporting in accordance with Section 404 of SOX. TheCompany’s failure to satisfy the requirements of Section 404 of SOX on anongoing and timely basis could result in the loss of investor confidence  in the reliability of its financial statements,which in turn could harm the Company’s business and negatively impact thetrading price of the Common Shares or market value of its other securities. Inaddition, any failure to implement required new or improved controls, ordifficulties encountered in their implementation could harm the Company’soperating results or cause it to fail to meet its reporting obligations. Therecan be no assurance that the Company will be able to remediate materialweaknesses, if any, identified in future periods or maintain all of thecontrols necessary for continued compliance and there can be no assurance thatthe Company will be able to retain sufficient skilled finance and accountingpersonnel, especially in light of the increased demand for such personnel amongpublicly traded companies. Future acquisitions of companies may provide theCompany with challenges in implementing the required processes, procedures andcontrols in its acquired operations. Acquired companies may not have disclosurecontrols and procedures or internal control over financial reporting that areas thorough or effective as those required by securities laws currentlyapplicable to the Company.

 

No evaluation can provide complete assurancethat the Company’s internal control over financial reporting will detect oruncover all failures of persons within the Company to disclose materialinformation otherwise required to be reported. The effectiveness of the Company’scontrol and procedures could also be limited by simple errors, faulty judgmentsor corrupt fraudulent behaviour. In addition, as the Company continues toexpand, the challenges involved in implementing appropriate internal controlsover financial reporting will increase and will require that the Companycontinue to improve its internal controls over financial reporting. Althoughthe Company intends to devote substantial time and incur costs, as necessary,to ensure ongoing compliance, the Company cannot be certain that it will besuccessful in complying with Section 404.

 

# **DIVIDENDS**

#  

The Company has not paid anydividends on its common shares since its incorporation, nor has it any presentintention of doing so. The Company anticipates that all available funds will beused to undertake exploration and development programs on its mineral propertiesas well as for the acquisition of additional mineral properties. Other thanlack of available funds, there are no restrictions on the Company’s ability topay dividends.

 

23

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# **DESCRIPTION OF CAPITALSTRUCTURE**

#  

## **Common Shares**

##  

The Company is authorized toissue an unlimited number of common shares without nominal or par value. As ofSeptember 18, 2007, there are 29,319,442 common shares issued and outstanding. Inaddition, 1,808,000 common shares are reserved for issuance pursuant to theexercise of stock options granted to directors, officers, and employees of theCompany.

 

All of the issued commonshares of the Company are fully paid and non-assessable. All of the commonshares issued rank equally as to dividends, voting rights (one vote per share)and distribution of assets on winding up or liquidation. Shareholders have nopre-emptive rights, nor any right to convert their common shares into othersecurities. There are no existing indentures or agreements affecting the rightsof shareholders other than the Notice of Articles and Articles of the Company.

 

# **MARKET FOR SECURITIES**

#  

## **Market**

##  

The common shares of theCompany are listed and posted for trading on the Toronto Stock Exchange underthe symbol “NOC”. The shares commenced trading on May 19, 2005.

 

## **Trading Price andVolume**

##  

The following table sets forththe particulars of the trading of the common shares of the Company during themost recently completed financial year: 

 
| **Month**      | ** ** | **High** | ** ** | **Low** | ** ** | **Trading Volume** | ** ** |
|----------------|------------|----------|------------|---------|------------|-------------------------|------------|
| July 2006      |       | $        | 4.20       |    | $          | 3.12                    |       | 144,800 |   |
| August 2006    |       | $        | 4.50       |    | $          | 3.60                    |       | 309,900 |   |
| September 2006 |       | $        | 4.87       |    | $          | 4.15                    |       | 113,700 |   |
| October 2006   |       | $        | 6.81       |    | $          | 4.32                    |       | 145,600 |   |
| November 2006  |       | $        | 7.38       |    | $          | 5.59                    |       | 119,000 |   |
| December 2006  |       | $        | 7.29       |    | $          | 5.68                    |       | 97,200 |   |
| January 2007   |       | $        | 6.69       |    | $          | 5.37                    |       | 104,100 |   |
| February 2007  |       | $        | 7.24       |    | $          | 5.80                    |       | 114,300 |   |
| March 2007     |       | $        | 8.12       |    | $          | 5.87                    |       | 109,100 |   |
| April 2007     |       | $        | 9.97       |    | $          | 7.55                    |       | 143,900 |   |
| May 2007       |       | $        | 11.66      |    | $          | 9.90                    |       | 172,700 |   |
| June 2007      |       | $        | 11.50      |    | $          | 10.09                   |       | 102,000 |   |

# ** **

# **DIRECTORS AND OFFICERS**

#  

## **Name, Occupationand Security Holding**

##  

The name, province or stateand country of residence, position with and principal business or occupation inwhich each director and executive officer of the Company has been engagedduring the immediately preceding five years, is as follows:  ** **

 
| **Name, Position, Province or  State and Country of Residence** | ** ** | **Principal Occupation or Employment  for the Past Five Years**               | ** ** | **Director Since** |
|----------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|-------------------------|
| ROSS BEATY  British Columbia, Canada*Director*                                                     |       | Geologist.  Chairman of the Board of Pan American Silver Corp., a silver mining company,  since September, 1988. |       | August 9/06             |

 

24

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| **Name, Position, Province or  State and Country of Residence** | ** ** | **Principal Occupation or Employment  for the Past Five Years**                                                                                                                                           | ** ** | **Director Since** |
|----------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|
| Ross Cory (1), (2),  (3)British Columbia, Canada*Director*                                         |       | Senior Vice President of Raymond  James Ltd., an investment counselling firm, since 1989; currently on  long-term leave of absence from Raymond James Ltd.                                                                                   |       | May 9/05                |
|                                                                                               |       |                                                                                                                                                                                                                                         |       |                    |
| ANTHONY FLOYD  British Columbia, Canada*Director*                                                  |       | Geologist. President of Inca  Pacific Resources Inc., a junior exploration company, since April 1994.                                                                                                                                        |       | May 9/05                |
|                                                                                               |       |                                                                                                                                                                                                                                         |       |                    |
| MARSHALL KOVAL  Washington, U.S.A.*Chief Executive Officer,  President and Director*               |       | Geologist. President of the  Company since May 9, 2005; Senior Principal of Hart Crowser Inc., an  engineering consulting firm, and President of Pincock Allen & Holt, a  mining and engineering consulting firm, from 1991 to 2002.     |       | May 10/06               |
|                                                                                               |       |                                                                                                                                                                                                                                         |       |                    |
| DONALD SHUMKA (1), (3)British Columbia, Canada*Director*                                           |       | President of Walden Management  Ltd., a management company, since 2004; Managing Director of Raymond James  Ltd., an investment counselling firm, from 1993 to 2004.                                                                         |       | May 9/05                |
|                                                                                               |       |                                                                                                                                                                                                                                         |       |                    |
| JOHN WRIGHT (1), (2)British Columbia, Canada*Director*                                             |       | Metallurgical Engineer; President  and Chief Operating Officer of Pan American Silver Corp., a silver mining  company, until July 1, 2003                                                                                                    |       | May 9/05                |
|                                                                                               |       |                                                                                                                                                                                                                                         |       |                    |
| SANDRA LIM  British Columbia, Canada*Chief Financial Officer*                                      |       | Certified General Accountant.  Chief Financial Officer of the Company since May 9, 2005; Associate with G.  Ross McDonald, Chartered Accountant (which merged with Smythe Ratcliffe,  Chartered Accountants) from November 1988 to May 2005. |       | N/A                     |

 

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(1)          Member of Audit Committee.

 

(2)          Member of Compensation Committee.

 

(3)          Member of Nominating and Governance Committee.

 

The information as toresidence and principal occupation, not being within the knowledge of theCompany, has been furnished by the respective individuals.

 

The term of office for theCompany’s directors and officers and members of the Company’s committeesexpires at each annual general meeting. The board of directors after each suchmeeting appoints the Company’s officers and committees for the ensuing year.

 

As of September 18, 2007, thedirectors and executive officers of the Company, as a group, beneficially own,directly or indirectly, or exercise control or direction over an aggregate of7,313,601 common shares, which together represent approximately 24.95% of theCompany’s issued and outstanding common shares and also hold incentive stockoptions to purchase 1,120,000 common shares.

 

## **Cease TradeOrders, Bankruptcies, Penalties or Sanctions**

##  

None of the directors,officers or promoters of the Company or a shareholder holding a sufficientnumber of securities of the Company to affect materially the control of theCompany are, or have been within the past ten years, a director or executiveofficer of other company which, during such individual’s tenure:

 

(a)                                  was the subject of a cease trade or similarorder or an order that denied that company access to any statutory exemptionsunder securities legislation for a period exceeding 30 consecutive days;

 

(b)                                 was subject to an event that resulted, afterthe director of executive officer ceased to be a director or executive officer,in the company being the subject of a cease trade or similar order or an orderthat denied that issuer access to any statutory exemptions under securitieslegislation for a period exceeding 30 consecutive days; or

 

25

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(c)                                  within a year of that person ceasing to act inthat capacity, became bankrupt, made a proposal under any legislation relatingto bankruptcy or insolvency or was subject to or instituted any proceedings,arrangement or compromise with creditors or had a receiver, receiver manager ortrustee appointed to hold the assets of that issuer.

 

None of the directors,officers or promoters of the Company or a shareholder holding a sufficientnumber of securities of the Company to affect materially the control of theCompany are, or have been within the past ten years, directors, officers orpromoters of other companies which were declared bankrupt or made a voluntaryassignment in bankruptcy, made a proposal under any legislation relating tobankruptcy or insolvency or has been subject to or instituted any proceedings,arrangement or compromise with any creditors or had a receiver, receivermanager or trustee appointed to hold the assets of that company.

 

None of the directors orexecutive officers of the Company or a shareholder holding a sufficient numberof securities of the Company to affect materially the control of the Companyhas been subject to:

 

(a)                                  any penalties or sanctions imposed by a courtrelating to securities legislation or by a securities regulatory authority orhas entered into a settlement agreement with a securities regulatory authority;or

 

(b)                                 any other penalties or sanctions imposed by acourt or regulatory body that would likely be considered important to areasonable investor in making an investment decision.

 

## **Conflicts ofInterest**

##  

All of the Company’s directorsare also directors or officers of other companies,**includingGlobal, that are engaged in the business of acquiring, developing andexploiting natural resource properties. In addition Anthony Floyd, a directorof the Company, is also the president, a principal and a director of IncaPacific Resources Inc. (“Inca”). Inca is a junior mining company engaged in theexploration of copper in Peru. Such associations may give rise to conflicts ofinterest from time to time. As a result, opportunities provided to a directorof the Company may not be made available to the Company, but rather may beoffered to a company with competing interests. The directors of the Company arerequired by law to act honestly and in good faith with a view to the bestinterests of the Company, to disclose any personal interest which they may havein any project or opportunity of the Company, and to abstain from voting onsuch matters.

 

The directors and officers ofthe Company are aware of the existence of laws governing the accountability ofdirectors and officers for corporate opportunity and requiring disclosure bythe directors of conflicts of interests and the Company will rely upon suchlaws in respect of any directors’ and officers’ conflicts of interest or inrespect of any breaches of duty by any of its directors and officers.

 

In order to address conflictsor perceived conflicts as they relate to Global, Inca and the Company thecompanies have agreed that the Company shall be given the first right toacquire all copper exploration properties with known defined resources in Peruof which any of the companies or their directors (excluding independentdirectors) or officers become aware, Global shall be given the first right toacquire all copper exploration properties with known defined resources in Chileand Argentina of which any of the companies or their directors (excludingindependent directors) or officers become aware, Inca shall be given the firstright to acquire all greenfield copper exploration opportunities, withoutdefined resources, in Peru of which any of the companies or their directors(excluding independent directors) or officers become aware. In addition eachcompany shall have the first right to acquire any asset which is subject of anexisting agreement or is complementary or adjacent to their existingproperties. The companies have agreed to review and renew this commitmentannually. Lumco was sold to an arms length third party in November, 2006. Priorto the sale of Lumco, the aforementioned agreement also extended to Lumcowhereby Lumco was given the first right to acquire all copper explorationproperties with known or defined resources in Canada of which any of thecompanies or their directors (excluding independent directors) or officersbecome aware,

 

# **LEGAL PROCEEDINGS**

#  

In May, 2007 an action wasfiled against the Company in connection with its purchase, in 2005, of 398hectares of surface rights from a Peruvian landowner, pursuant to a landtransfer agreement. The surface rights are situated over the Galeno deposit. Theformer landowner has filed an action seeking to nullify the land transferagreement, or in

 

26

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the alternative, to demand ahigher price for the surface rights purchased by the Company. In addition, theformer landowner is seeking damages of 10 million Peruvian sols. The Companybelieves the action is wholly without merit and has contested the action in thePeruvian law courts.

 

Other than as disclosed above,the Company and its properties or holdings are not subject to any legal orother actions, current or pending, which may materially affect the Company’soperating results, financial position or property ownership.

 

# **INTEREST OF MANAGEMENTAND OTHERS IN MATERIAL TRANSACTIONS**

#  

The Company has an ExecutiveBonus/Retention Agreement, which became effective May 15, 2005, with itsPresident, Marshall Koval. Under the agreement, if Mr. Koval remains undercontract with the Company until the following dates, he will be entitled to thefollowing bonus shares: (i) 10,000 common shares until May 15, 2006 (issued);(ii) a further 10,000 common shares until May 15, 2007 (issued) and (iii) afurther 10,000 common shares until May 15, 2008.

 

In addition, should Mr. Kovalbe under contract with the Company at such time as the price of the Company’sshares reaches: (i) $3.00 and trades at or above an average of $3.00 for aperiod of 20 consecutive trading days, the Company will award 15,000 commonshares as a fully-earned bonus (issued); and (ii) $6.00 and trades at or abovean average of $6.00 for a period of 20 consecutive trading days, the Companywill award a further 15,000 common shares as a fully-earned bonus (issued).

 

Further, provided Mr. Koval isunder contract with the Company when the Company undertakes a sale in respectof its Galeno property, in a single transaction, for a value greater than$70,000,000, Mr. Koval shall be awarded 40,000 shares of the Company as afully-earned bonus.

 

The Company also hasagreements with all of its directors and officers pursuant to which retentionor compensation payments in the aggregate amount of $1,645,000 will become payableby the Company upon the termination of services provided by these individualsto the Company in connection with a change of control of the Company.

 

# **TRANSFER AGENTS ANDREGISTRARS**

#  

The registrar and transferagent of the Company is Pacific Corporate Trust Company at its offices inVancouver, BC, at 2nd Floor, 510 Burrard Street, Vancouver, BC V6C 3B9,and in Toronto, Ontario, at 66 Wellington Street West, TD Tower, Suite 5210,Toronto, ON  M5K 1J3.

 

# **MATERIAL CONTRACTS**

#  

The Company has entered intothe following material contracts:

 

 

1.                                      Management Consulting Agreement and ExecutiveBonus/Retention Agreement, effective May 15, 2005, with its President, MarshallKoval. See “Interest of Management and Others in Material Transactions”.

 

2.                                      Arrangement Agreement dated March 28, 2005among Regalito, Global, Lumco and the Company. See “General Development of theBusiness – Reorganization”.

 

3.                                      Option Agreement dated April 25, 2003 betweenRegalito and ASUMIN, which was assigned to the Company pursuant to theArrangement. See “Description of Business – Galeno Property”.

 

4.                                      Extrajudicial Conciliation agreement datedApril 2, 2007 among the Company, Lumina Copper S.A.C., Proemina S.A.C. and ElMolino de Cajamarca. See “Description of Business – Galeno Property.”

 

5.                                      Private Agreement dated July 16, 2007 amongLumina Copper S.A.C., Mrs. Ina Maria Drago Ludowieg, Mr. Maco Antonio AlarcónPlana and Mrs. Ivana Carughi Ferrini. See “ – Recent Developments”.

 

27

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# **INTERESTS OF EXPERTS**

#  

To the best of the Company’sknowledge, none of B. Davis, FAusIMM, R. Sim, P.Geo, R. Hyyppa, PE, S. Elfen,PE and W.L. Rose, PE, the authors of the Technical Report, or NorwestCorporation,  Samuel Engineering, Inc.,WLR Consulting, Inc. and Vector Peru S.A.C. have any interests in or hold anysecurities of the Company.

 

# **AUDIT COMMITTEE ANDEXTERNAL AUDITOR SERVICES**

#  

## **Audit Committee**

##  

Pursuant to the provisions ofMultilateral Instrument 52-110 Audit Committees (“MI 52-110”) reporting issuersin those jurisdictions which have adopted MI 52-110 are required to providedisclosure with respect to its audit committee including the text of the auditcommittee’s charter, composition of the committee, and the fees paid to theexternal auditor. Accordingly, the Company provides the following disclosurewith respect to its Audit Committee:

 

***Audit Committee Charter***

 

1.                                       **Mission**

 

Senior management, as overseenby the Board of Directors, has primary responsibility for the Company’sfinancial reporting, accounting systems and internal controls. The AuditCommittee is a standing committee of the Board of Directors established to assistthe Board of Directors in fulfilling its responsibilities in this regard.

 

2.                                       **Composition and Meetings**

 

(a)                                 The Audit Committee shall be composed of threeindependent directors.

 

(b)                                The members of the Audit Committee shall beappointed by the Board of Directors to serve one year terms and are permittedto serve an unlimited number of consecutive terms.

 

(c)                                 The Audit Committee shall meet at least fourtimes per year and any member may call special meetings as required. A quorumat meetings of the Audit Committee shall be two members.

 

(d)                                The minutes of the Audit Committee meetingsshall accurately record the decisions reached and shall be distributed to alldirectors with copies to the chief financial officer and the external auditor.

 

3.                                       **Responsibilities**

 

(a)                                  ***FinancialInformation***

 

Review:

 

(i)                                    the annual financial statements and recommendtheir approval to the Board, after discussing matters such as the selection ofaccounting policies, major accounting judgements, accruals and estimates withmanagement;

 

(ii)                                 other financial information included in theannual report;

 

(iii)                              the annual information form;

 

(iv)                             management’s discussion and analysis containedin the annual report and quarterly statements, if any;

 

(v)                                the planning and results of the external audit,including:

 

A.                                   the auditor’s engagement letter;

 

28

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B.                                    the reasonableness of the estimated audit fees;

 

C.                                    the scope of the audit, including materiality,locations to be visited, audit reports required, areas of audit risk,timetable, deadlines and coordination with internal audit;

 

D.                                   the post-audit management letter together withmanagement’s response;

 

E.                                     the form of the audit report;

 

F.                                     any other related audit engagements (e.g. auditof the company pension plan);

 

G.                                    assessing the auditor’s performance;

 

H.                                   recommending the auditor for appointment by theBoard; and

 

I.                                        meeting privately with the auditors to discusspertinent matters, including the quality of accounting personnel.

 

(vi)                              the planning and results of non-audit servicesperformed by the auditor. The Audit Committee will approve once per fiscal yearthose services which are pre-approved for the fiscal year, and the maximumamounts which may be incurred on such services. The pre-approval requirement iswaived if:

 

A.                                  the aggregate amount of all such non-auditservices provided to the Company constitutes not more than five percent of thetotal amount of fees paid by the Company to its auditors during the fiscal yearin which the non-audit services are provided;

 

B.                                    such services were not recognized by theCompany at the time of the engagement to be non-audit services; and

 

C.                                    such services are promptly brought to theattention of the Audit Committee by the Company and approved prior to the completionof the audit by the Audit Committee or by one or more members of the AuditCommittee who are members of the Board of Directors to whom authority to grantsuch approvals has been delegated by the Audit Committee. Provided thepre-approval of the non-audit services is presented to the Audit Committee’sfirst scheduled meeting following such approval, such authority may bedelegated by the Audit Committee to one or more members of the Audit Committee.

 

(b)                                 ***InterimFinancial Statements***

 

(i)                                   Obtain reasonable assurance on the process forpreparing reliable quarterly interim financial statements from discussions withmanagement and, where appropriate, reports from the external and internalauditors.

 

(ii)                                Review, or engage the external auditors toreview, the quarterly interim financial statements.

 

(iii)                             Obtain reasonable assurance from managementabout the process for ensuring the reliability of other public disclosuredocuments that contain audited and unaudited financial information.

 

(c)                                  ***Accounting Systemand Internal Controls***

 

(i)                                   Obtain reasonable assurance from discussionswith and(or) reports from management, and reports from external and internalauditors that the Company’s accounting systems are reliable and that theprescribed internal controls are operating effectively.

 

(ii)                                Direct the auditors’ examinations to particularareas.

 

29

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(iii)                              Request the auditors to undertake specialexaminations (e.g., review compliance with conflict of interest policies).

 

(iv)                             Review control weaknesses identified by theexternal and internal auditors, together with management’s response.

 

A.                                  Review the appointments of the chief financialofficer and key financial executives.

 

B.                                    Review accounting and financial human resourcesand succession planning within the Company.

 

(d)                                 ***InternalAudit***

 

Ifrequired or deemed necessary,

 

(i)                                    Review the terms of reference of the internalaudit function and the appointment of the director of the internal audit.

 

(ii)                                 Review the resources, budget, reportingrelationships and planned activities of the internal audit function.

 

(iii)                              Review internal audit findings and determinethat they are being properly followed up.

 

(e)                                  ***StatutoryResponsibilities***

 

Ensure compliance by theCompany of any regulatory requirements.

 

(f)                                    ***OtherResponsibilities***

 

Additional responsibilities tobe defined as required, but may include:

 

(i)                                    reviewing the prospectuses and other offeringmemoranda;

 

(ii)                                 monitoring compliance with the corporate codeof conduct;

 

(iii)                              investigating fraud, illegal acts or conflictsof interest;

 

(iv)                             discussing selected issues with corporatecounsel; and

 

(v)                                reviewing compliance with environmental codesof conduct and legislation.

 

(g)                                 ***Liaison withOther Financial Officer/Audit Committees of Subsidiary Companies***

 

(i)                                    Review the mandate and terms of reference of asubsidiary’s Audit Committee.

 

(ii)                                 Review the report(s) of the subsidiary’s AuditCommittee to its Board of Directors.

 

(iii)                              Follow up, as appropriate, with management, thechairperson of the Audit Committee or the audit partner of the subsidiary onany matters of concern.

 

(h)                                 ***Reporting***

 

(i)                                    Report, through the chairperson, to the Boardof Directors following each meeting on the major discussions and decisions madeby the Audit Committee.

 

(ii)                                 Report annually, through the Board ofDirectors, to the shareholders on the Audit Committee’s responsibilities andhow it has discharged them.

 

30

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(iii)                              Review the Audit Committee’s terms of reference annually and proposerecommended changes to the Board of Directors.

 

**4.            Regulations**

 

(a)                                  The members and the chairperson of the Audit Committee shall beappointed by the Board of Directors for a one year term and may serve anynumber of consecutive terms.

 

(b)                                 The chairperson shall, in consultation with management and theauditors, establish the agenda for the meetings and ensure that properlyprepared agenda materials are circulated to members with sufficient time forstudy prior to the meeting.

 

(c)                                  The Audit Committee shall have the power, authority and discretiondelegated to it by the Board of Directors which shall not include the power tochange the membership of or fill vacancies in the Audit Committee.

 

(d)                                 The Audit Committee shall conform to the regulations which may fromtime to time be imposed upon it by the Board of Directors.

 

(e)                                  The Audit Committee may meet and adjourn, as they think proper.Questions arising shall be determined by a majority of votes of the members ofthe Audit Committee present, and in the case of an equality of votes, thechairman shall not have a second or casting vote.

 

(f)                                    A resolution approved in writing by the members of the AuditCommittee shall be valid and effective as if it had been passed at a dulycalled meeting. Such resolution shall be filed with the minutes of theproceedings of the Audit Committee and shall be effective on the date statedthereon or on the latest date stated in any counterpart.

 

(g)                                 The Audit Committee shall keep regular minutes of its meetings andrecord all material matters and shall cause such minutes to be recorded in thebooks kept for that purpose and shall distribute such minutes to the Board ofDirectors.

 

(h)                                 The Board of Directors shall have the power at any time to revoke oroverride the authority given to or acts done by the Audit Committee except asto acts done before such revocation or act of overriding and to terminate theappointment or change the membership of the Audit Committee or fill vacanciesin it as it shall see fit.

 

(i)                                     A majority of the members of the Audit Committee shall constitute aquorum thereof.

 

(j)                                     The Audit Committee shall have unrestricted and unfettered access toall Company personnel and documents and shall be provided with the resourcesnecessary to carry out its responsibilities.

 

***Compositionof Audit Committee***

 

The Audit Committee is comprised of RossCory, John Wright and Donald Shumka, all of whom are independent directors ofthe Company within the meaning of MI 52-110. The Chairman of the AuditCommittee is Donald Shumka. All members of the Audit Committee are financiallyliterate. The Company considers “financial literacy” to be the ability to readand understand a company’s fundamental financial statements, including acompany’s balance sheet, income statement and a cash flow statement. Themembers of the Audit Committee are elected by the Board of Directors at itsfirst meeting following the annual shareholders’ meeting to serve one yearterms and are permitted to serve an unlimited number of consecutive terms.

 

***RelevantEducation and Experience***

 

In addition to each member’s generalbusiness experience, the education and experience of each Audit Committeemember that is relevant to the performance of his responsibilities as an AuditCommittee member is as follows:

 

31

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*Ross Cory* – Mr. Cory, of Vancouver, BC, is a Senior Vice-President ofInvestment Banking at Raymond James Ltd. As a founding shareholder of apredecessor firm, Mr. Cory has held various senior executive positions in theinvestment industry since 1987 with a primary focus on providing investmentbanking services to the mining sector. Mr. Cory is currently on long term leavefrom Raymond James Ltd. Mr. Cory is also a director of Eldorado GoldCorporation. Mr. Cory is a graduate of the University of British Columbia witha Bachelor of Science degree in General Sciences and a MBA in Finance andInternational Business.

 

*Donald Shumka* – Mr. Shumka, of Vancouver, BC, is Managing Director of WaldenManagement Ltd., a firm providing financial consulting services to a variety ofclients. Mr. Shumka received his Bachelor of Arts degree from the University ofBritish Columbia and a Master of Business Administration from HarvardUniversity. From 1996 to 1979 he worked in a variety of positions in theforestry industry, from 1979 to 1989 he was Vice-President and Chief FinancialOfficer of West Fraser Timber Co. Ltd., and from 1989 to 2004 he headed theForest Products Group for two Canadian investment banks. Mr. Shumka has beenactive in the not for profit sector and is currently Chair of the BritishColumbia Arts Council. Mr. Shumka is also a director of Eldorado GoldCorporation and Paladin Resources Ltd.

 

*John Wright* – Mr.Wright, of Vancouver, BC, is a Metallurgical Engineer and Honours graduate ofQueens University in Ontario. Mr. Wright is a co-founder, director and formerPresident and Chief Operating Officer of Pan American Silver Corp. and was co-founderof Equinox Resources. Mr. Wright is also a director of Global Copper Corp.Previously, he spent 10 years with Teck Cominco where he worked at the TrailSmelter operations and later participated in the management of the feasibilitystudies, marketing and mine construction at the Afton, Highmont, Bull Moose andDavid Bell Mines.

 

***Relianceon Certain Exemptions***

 

At no time since the commencement of theCompany’s most recently completed financial year has the Company relied on theexemptions in Sections 2.4 (De Minimis Non-audit Services), 3.2 (Initial PublicOfferings), or 3.4 (Death, Disability or Resignation of Audit Committee Member)of MI 52-110, or an exemption from MI 52-110, in whole or in part, grantedunder Part 8 (Exemptions) of MI 52-110.

 

***Relianceon the Exemption in Subsection 3.3(2) or Section 3.6***

 

At no time since the commencement of theCompany’s most recently completed financial year has the Company relied on theexemption in Subsection 3.3(2) (Controlled Companies) or Section 3.6 (TemporaryExemption for Limited and Exceptional Circumstances) of MI 52-110.

 

***Relianceon the Exemption in Subsection 3.8***

 

At no time since the commencement of theCompany’s most recently completed financial year has the Company relied on theexemption in Section 3.8 (Acquisition of Financial Literacy) of MI 52-110.

 

***AuditCommittee Oversight***

 

At no time since the commencement of theCompany’s most recent completed financial year was a recommendation of theAudit Committee to nominate or compensate an external auditor not adopted bythe Board of Directors.

 

***Pre-ApprovalPolicies and Procedures***

 

The Committee has adopted specific policiesand procedures for the engagement of non-audit services as described aboveunder the heading “Audit Committee and External Auditor Services – AuditCommittee – Audit Committee Charter”.

 

32

----

 

***ExternalAuditor Service Fees (By Category)***

 

The aggregate fees billed by the Company’sexternal auditors in each of the last three fiscal years are as follows:

 
| **Financial Year   Ending** | ** ** | **Audit Fees** | ** **   | **Audit Related Fees(1)** | ** ** | **Tax Fees(2)** | ** ** | **All Other Fees(3)** | ** ** |
|---------------------------------------|------------|---------------------|--------------|-------------------------------------|------------|----------------------|------------|---------------------------------|------------|
| 2007                                  |       | $                   | 58,000  |                                | $          | 5,220           |       | $                               | 2,000      |   | $ | nil |   |
| 2006                                  |       | $                   | 75,449       |                                | $          | 38,876               |       | $                               | 2,175      |   | $ | nil |   |
| 2005                                  |       | $                   | 25,000(4     | )                                   | $          | nil                  |       | $                               | nil        |   | $ | nil |   |

 

----

(1)          Fees charged forassurance and related services reasonably related to the performance of anaudit, and not included under “Audit Fees”.

 

(2)          Fees charged fortax compliance, tax advice and tax planning services.

 

(3)          Fees for servicesother than disclosed in any other column.

 

(4)          For the periodfrom the date of incorporation on February 28, 2005 to June 30, 2005.

 

# **ADDITIONALINFORMATION**

#  

Information relating to the Company may befound under the Company’s profile on the SEDAR website at www.sedar.com. Theinformation available at www.sedar.com includes copies of the full text of thetechnical report prepared for the Company in respect of the Company’s Galenoproperty described herein. Further details of the Arrangement are set out in the RegalitoCircular under the heading “The Arrangement”, which section is incorporated byreference into this AIF. The Regalito Circular may be found under Regalito’sprofile on SEDAR website at www.sedar.com.

 

Additional information, includingdirectors’ and officers’ remuneration and indebtedness, principal holders ofthe Company’s securities, securities authorized for issuance under equitycompensation plans, where applicable, is contained in the Company’s informationcircular for its annual general meeting scheduled to be held onNovember 7, 2007.

 

Additional financial information isprovided in the Company’s audited consolidated financial statements andmanagement discussion and analysis for the fiscal year ended June 30, 2007.

 

33

----

 

**Document No. 2**

 

----

 

 

(An Exploration  StageEnterprise)

 

**CONSOLIDATED FINANCIAL STATEMENTS**

**JUNE 30, 2007 and 2006**

 

**TSX:   NOC**

www.northernperu.com

 

----

 

 

**Grant Thornton LLP**

**Chartered Accountants**

**Management Consultants**

Canadian Member of 

Grant Thornton International

 

**Report of Independent Registered Chartered Accounting Firm**

 

To the Shareholders ofNorthern Peru Copper Corp.

 

We have audited the accompanying consolidatedbalance sheets of Northern Peru Copper Corp. (An Exploration Stage Enterprise)and subsidiaries, as at June 30, 2007 and 2006 and the consolidated statementsof operations and deficit, cash flows and changes in shareholders’ equity forthe years ended June 30, 2007 and 2006, for the period from inception (February 28,2005) to June 30, 2005 and for the cumulative period from inception(February 28, 2005) to June 30, 2007. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

 

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States) andauditing standards generally accepted in Canada. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audit included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion,the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Northern Peru Copper Corp. andsubsidiaries as at June 30, 2007 and 2006 and the results of theiroperations and their cash flows for the years ended June 30, 2007 and 2006, forthe period from inception (February 28, 2005) to June 30, 2005 and for thecumulative period from inception (February 28, 2005) to June 30, 2007 inaccordance with Canadian generally accepted accounting principles.

 

Canadian generally accepted accountingprinciples vary in certain respects from accounting principles generallyaccepted in the United States of America. Information related to the nature andeffect of such differences is presented in Note 12 to the consolidatedfinancial statements.

 
| Vancouver, Canada  |   | “Grant Thornton LLP” (signed) |
|--------------------|--------|-----------------------------------------|
| September 18, 2007 |   | Chartered Accountants                   |

 

Suite 1600 – 333 Seymour Street

Vancouver, British Columbia

V6B 0A4

Tel:    (604)687-2711

Fax:   (604)685-6569

 

----

 

**NORTHERN PERU COPPER CORP.**

*(AnExploration Stage Enterprise)*

**CONSOLIDATED BALANCE SHEETS**

 
| ** **                                        | ** ** | **June 30,   2007** | ** ** | **June 30,   2006** | ** ** |
|---------------------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|
| ** **                                        | ** ** | ** **                    | ** ** | ** **                    | ** ** |
| **ASSETS**                                        |       |                          |       |                          |       |
| CURRENT ASSETS                                    |       |                          |       |                          |       |
| Cash                                              |       | $                             | 7,056,669  |                          | $          | 9,145,830 |   |
| Receivables                                       |       | 35,753                        |       | 22,381                        |       |
| Prepaid expenses                                  |       | 87,404                        |       | 71,375                        |       |
|                                              |       |                          |       |                          |       |
| TOTAL CURRENT ASSETS                              |       | 7,179,826                     |       | 9,239,586                     |       |
|                                              |       |                          |       |                          |       |
| EQUIPMENT, net (Note 3)                           |       | 94,922                        |       | 43,236                        |       |
|                                              |       |                          |       |                          |       |
| MINERAL PROPERTIES (Note 4)                       |       | 33,729,055                    |       | 13,374,555                    |       |
|                                              |       |                          |       |                          |       |
| TOTAL ASSETS                                      |       | $                             | 41,003,803 |                          | $          | 22,657,377 |   |
|                                              |       |                          |       |                          |       |
| **LIABILITIES**                                   |       |                          |       |                          |       |
| CURRENT LIABILITIES                               |       |                          |       |                          |       |
| Accounts payable                                  |       | $                             | 4,400,409  |                          | $          | 1,171,989 |   |
| Accrued liabilities                               |       | 1,578,655                     |       | 85,155                        |       |
|                                              |       |                          |       |                          |       |
|                                              |       | 5,979,064                     |       | 1,257,144                     |       |
|                                              |       |                          |       |                          |       |
| FUTURE INCOME TAX (Note 10)                       |       | 131,787                       |       | —                        |       |
|                                              |       |                          |       |                          |       |
| TOTAL LIABILITIES                                 |       | 6,110,851                     |       | 1,257,144                     |       |
|                                              |       |                          |       |                          |       |
| **SHAREHOLDERS’  EQUITY**                    |       |                          |       |                          |       |
| SHARE CAPITAL (Note 6)                            |       | 38,205,738                    |       | 22,459,154                    |       |
|                                              |       |                          |       |                          |       |
| CONTRIBUTED SURPLUS (Note 7)                      |       | 1,983,985                     |       | 1,066,605                     |       |
|                                              |       |                          |       |                          |       |
| DEFICIT ACCUMULATED DURING THE EXPLORATION  STAGE |       | (5,296,771                    | )          | (2,125,526                    | )          |
|                                              |       |                          |       |                          |       |
| TOTAL SHAREHOLDERS’ EQUITY                   |       | 34,892,952                    |       | 21,400,233                    |       |
|                                              |       |                          |       |                          |       |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   |       | $                             | 41,003,803 |                          | $          | 22,657,377 |   |

 

Going concern (Note 1)

Commitments and contingencies (Notes 4(a) and13)

Subsequent events (Note 14)

 
| APPROVED BY THE DIRECTORS    |
|------------------------------|
|                         |
| *“Marshall Koval”* | * * |
| Director                     |
|                         |
| *“Anthony Floyd”*  | * * |
| Director                     |

 

*See Accompanying Notes to the Consolidated Financial Statements*

 

----

 

**NORTHERN PERU COPPER CORP.**

*(An Exploration Stage Enterprise)*

**CONSOLIDATED STATEMENTS OFOPERATIONS AND DEFICIT**

 
| ** **                                                             | ** ** | **For the**            | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                  | ** ** |
|------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                             | ** ** | **Cumulative**              | ** ** | ** **                  | ** ** | ** **                  | ** ** | **For the**            | ** ** |
| ** **                                                             | ** ** | **Period from**        | ** ** | ** **                  | ** ** | ** **                  | ** ** | **Period from**        | ** ** |
| ** **                                                             | ** ** | **Inception**               | ** ** | ** **                  | ** ** | ** **                  | ** ** | **Inception**               | ** ** |
| ** **                                                             | ** ** | **(February 28,**      | ** ** | **For the**            | ** ** | **For the**            | ** ** | **(February 28,**      | ** ** |
| ** **                                                             | ** ** | **2005) to**           | ** ** | **Year Ended**         | ** ** | **Year Ended**         | ** ** | **2005) to**           | ** ** |
| ** **                                                             | ** ** | **June 30, 2007** | ** ** | **June 30, 2007** | ** ** | **June 30, 2006** | ** ** | **June 30, 2005** | ** ** |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| GENERAL AND ADMINISTRATIVE EXPENSES                                    |       |                        |       |                        |       |                        |       |                        |       |
| Management and administrative services                                 |       | $                           | 2,832,533  |                        | $          | 1,218,308                   |       | $                           | 1,106,861  |   | $ | 507,364 |   |
| Consultants                                                            |       | 350,056                     |       | 350,056                     |       | —                      |       | —                      |       |
| Legal                                                                  |       | 334,714                     |       | 293,979                     |       | 40,735                      |       | —                      |       |
| Investor relations and promotion                                       |       | 395,048                     |       | 187,933                     |       | 201,293                     |       | 5,822                       |       |
| Audit and accounting                                                   |       | 247,668                     |       | 132,692                     |       | 89,316                      |       | 25,660                      |       |
| Office and administration                                              |       | 179,912                     |       | 104,974                     |       | 69,497                      |       | 5,441                       |       |
| Regulatory and transfer agent fees                                |       | 133,404                     |       | 74,939                      |       | 56,416                      |       | 2,049                       |       |
| Financing costs (Note 5(b))                                            |       | 60,082                      |       | 60,082                      |       | —                      |       | —                      |       |
| Travel and accommodation                                               |       | 39,692                      |       | 28,304                      |       | 11,388                      |       | —                      |       |
| Amortization                                                           |       | 12,698                      |       | 2,469                       |       | 10,070                      |       | 159                         |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
|                                                                   |       | 4,585,807                   |       | 2,453,736                   |       | 1,585,576                   |       | 546,495                     |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| OTHER INCOME (EXPENSES)                                                |       |                        |       |                        |       |                        |       |                        |       |
| Interest income                                                        |       | 261,215                     |       | 168,859                     |       | 90,559                      |       | 1,797                       |       |
| Foreign exchange gain (loss)                                           |       | 125,711                     |       | 210,699                     |       | (72,611                     | )          | (12,377                     | )          |
| Donations (Note 2(l))                                                  |       | (1,005,000                  | )          | (1,005,000                  | )          | —                      |       | —                      |       |
| Property investigations                                                |       | (92,890                     | )          | (92,067                     | )          | (558                        | )          | (265                        | )          |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
|                                                                   |       | (710,964                    | )          | (717,509                    | )          | 17,390                      |       | (10,845                     | )          |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| NET LOSS FOR THE PERIOD                                                |       | (5,296,771                  | )          | (3,171,245                  | )          | (1,568,186                  | )          | (557,340                    | )          |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| DEFICIT, BEGINNING OF PERIOD                                           |       | —                      |       | (2,125,526                  | )          | (557,340                    | )          | —                      |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| DEFICIT, END OF PERIOD                                                 |       | $                           | (5,296,771 | )                           | $          | (5,296,771                  | )          | $                           | (2,125,526 | ) | $ | (557,340 | ) |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| BASIC AND DILUTED LOSS PER SHARE                                       |       |                        |       | $                           | (0.12      | )                           | $          | (0.07                       | )          | $ | (0.08 | ) |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| WEIGHTED AVERAGE NUMBER OF SHARES  OUTSTANDING, BASIC AND DILUTED |       |                        |       | 27,553,705                  |       | 23,047,582                  |       | 7,312,603                   |       |

 

*See Accompanying Notes to the Consolidated Financial Statements*

 

----

 

**NORTHERN PERU COPPER CORP.**

*(An Exploration Stage Enterprise)*

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

 
| ** **                                                             | ** ** | **For the**            | ** ** | ** **                  | ** ** | ** **                  | ** ** | ** **                  | ** ** |
|------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                             | ** ** | **Cumulative**              | ** ** | ** **                  | ** ** | ** **                  | ** ** | **For the**            | ** ** |
| ** **                                                             | ** ** | **Period from**        | ** ** | ** **                  | ** ** | ** **                  | ** ** | **Period from**        | ** ** |
| ** **                                                             | ** ** | **Inception**               | ** ** | ** **                  | ** ** | ** **                  | ** ** | **Inception**               | ** ** |
| ** **                                                             | ** ** | **(February 28,**      | ** ** | **For the**            | ** ** | **For the**            | ** ** | **(February 28,**      | ** ** |
| ** **                                                             | ** ** | **2005) to**           | ** ** | **Year Ended**         | ** ** | **Year Ended**         | ** ** | **2005) to**           | ** ** |
| ** **                                                             | ** ** | **June 30, 2007** | ** ** | **June 30, 2007** | ** ** | **June 30, 2006** | ** ** | **June 30, 2005** | ** ** |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| CASH PROVIDED FROM (USED IN):                                          |       |                        |       |                        |       |                        |       |                        |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| OPERATING ACTIVITIES                                                   |       |                        |       |                        |       |                        |       |                        |       |
| Net loss for the period                                                |       | $                           | (5,296,771 | )                           | $          | (3,171,245                  | )          | $                           | (1,568,186 | ) | $ | (557,340 | ) |
| Items not involving cash:                                              |       |                        |       |                        |       |                        |       |                        |       |
| Amortization                                                           |       | 12,698                      |       | 2,469                       |       | 10,070                      |       | 159                         |       |
| Stock-based compensation                                               |       | 2,519,490                   |       | 1,016,654                   |       | 999,831                     |       | 503,005                     |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| Net changes in non-cash working  capital items:                   |       |                        |       |                        |       |                        |       |                        |       |
| Receivables                                                            |       | (34,645                     | )          | (13,372                     | )          | (20,254                     | )          | (1,019                      | )          |
| Prepaid expenses                                                       |       | (66,003                     | )          | (16,029                     | )          | (48,548                     | )          | (1,426                      | )          |
| Accounts payable                                                       |       | 70,616                      |       | (4,942                      | )          | 32,110                      |       | 43,448                      |       |
| Accrued liabilities                                                    |       | 1,303,250                   |       | 1,218,095                   |       | 60,155                      |       | 25,000                      |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
|                                                                   |       | (1,491,365                  | )          | (968,370                    | )          | (534,822                    | )          | 11,827                      |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| FINANCING ACTIVITIES                                                   |       |                        |       |                        |       |                        |       |                        |       |
| Shares issued for cash upon incorporation                              |       | 1                           |       | —                      |       | —                      |       | 1                           |       |
| Shares issued for cash upon reorganization  of Lumina (Note 1(a)) |       | 3,274,555                   |       | —                      |       | —                      |       | 3,274,555                   |       |
| Shares issued for cash, net of issue costs  (Note 6(b)(i))        |       | 31,194,325                  |       | 15,539,780                  |       | 15,654,545                  |       | —                      |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
|                                                                   |       | 34,468,881                  |       | 15,539,780                  |       | 15,654,545                  |       | 3,274,556                   |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| INVESTING ACTIVITIES                                                   |       |                        |       |                        |       |                        |       |                        |       |
| Purchase of equipment                                                  |       | (122,246                    | )          | (63,781                     | )          | (35,739                     | )          | (22,726                     | )          |
| Expenditures on mineral properties                                     |       | (30,396,024                 | )          | (20,105,557                 | )          | (10,067,433                 | )          | (223,034                    | )          |
| Accounts payable incurred for mineral  property expenditures           |       | 4,322,018                   |       | 3,233,362                   |       | 1,088,656                   |       | —                      |       |
| Accrued liabilities incurred for mineral  property expenditures        |       | 275,405                     |       | 275,405                     |       | —                      |       | —                      |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
|                                                                   |       | (25,920,847                 | )          | (16,660,571                 | )          | (9,014,516                  | )          | (245,760                    | )          |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| INCREASE (DECREASE) IN CASH                                            |       | 7,056,669                   |       | (2,089,161                  | )          | 6,105,207                   |       | 3,040,623                   |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| CASH, BEGINNING OF PERIOD                                              |       | —                      |       | 9,145,830                   |       | 3,040,623                   |       | —                      |       |
|                                                                   |       |                        |       |                        |       |                        |       |                        |       |
| CASH, END OF PERIOD                                                    |       | $                           | 7,056,669  |                        | $          | 7,056,669                   |       | $                           | 9,145,830  |   | $ | 3,040,623 |   |

 

Supplemental cash flow information (Note 8)

 

*See Accompanying Notes to the Consolidated Financial Statements*

 

----

 

**NORTHERN PERU COPPER CORP.**

*(An Exploration Stage Enterprise)*

**CONSOLIDATED STATEMENT OF CHANGESIN SHAREHOLDERS’ EQUITY**

 
| ** **                                                       | ** ** | ** **             | ** ** | ** **      | ** ** | ** **      | ** ** | **Deficit**            | ** ** | ** ** | ** ** |
|------------------------------------------------------------------|------------|------------------------|------------|-----------------|------------|-----------------|------------|------------------------|------------|------------|------------|
| ** **                                                       | ** ** | ** **             | ** ** | ** **      | ** ** | ** **      | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
| ** **                                                       | ** ** | ** **             | ** ** | ** **      | ** ** | ** **      | ** ** | **during the**    | ** ** | **Total**  | ** ** |
| ** **                                                       | ** ** | **Common Shares** | ** ** | **Contributed** | ** ** | **Exploration** | ** ** | **Shareholders’** | ** ** |
| ** **                                                       | ** ** | **Number**             | ** ** | **Amount**      | ** ** | **Surplus**     | ** ** | **Stage**              | ** ** | **Equity** | ** ** |
|                                                             |       |                   |       |            |       |            |       |                   |       |       |       |
| Balance, February 28, 2005                                       |       | 1                      |       | $               | 1          |            | $          | —                 |       | $          | —     |   | $ | 1 |   |
| Common stock issued pursuant to the  reorganization of Lumina    |       | 20,917,441             |       | 6,153,591       |       | —          |       | —                 |       | 6,153,591  |       |
| Stock-based compensation                                         |       |                   |       |            |       | 551,906         |       |                   |       | 551,906    |       |
| Net loss for the period ended June 30, 2005                      |       | —                 |       | —          |       | —          |       | (557,340               | )          | (557,340   | )          |
|                                                             |       |                   |       |            |       |            |       |                   |       |       |       |
| Balance, June 30, 2005                                           |       | 20,917,442             |       | 6,153,592       |       | 551,906         |       | (557,340               | )          | 6,148,158  |       |
|                                                             |       |                   |       |            |       |            |       |                   |       |       |       |
| Common shares issued for private  placements, net of issue costs |       | 6,065,000              |       | 15,643,845      |       | —          |       | —                 |       | 15,643,845 |       |
| Common shares issued on exercise of options                      |       | 95,000                 |       | 4,700           |       | —          |       | —                 |       | 4,700      |       |
| Fair value of options exercised                                  |       | —                 |       | 76,326          |       | (76,326         | )          | —                 |       | —     |       |
| Common shares issued on exercise of  warrants                    |       | 100,000                |       | 6,000           |       | —          |       | —                 |       | 6,000      |       |
| Fair value of warrants exercised                                 |       | —                 |       | 224,211         |       | (224,211        | )          | —                 |       | —     |       |
| Common shares issued for services                                |       | 110,000                |       | 350,480         |       | —          |       | —                 |       | 350,480    |       |
| Stock based compensation                                         |       | —                 |       | —          |       | 815,236         |       | —                 |       | 815,236    |       |
| Net loss for the year ended June 30, 2006                        |       | —                 |       | —          |       | —          |       | (1,568,186             | )          | (1,568,186 | )          |
|                                                             |       |                   |       |            |       |            |       |                   |       |       |       |
| Balance, June 30, 2006                                           |       | 27,287,442             |       | 22,459,154      |       | 1,066,605       |       | (2,125,526             | )          | 21,400,233 |       |
|                                                             |       |                   |       |            |       |            |       |                   |       |       |       |
| Common shares issued for private placement,  net of issue costs  |       | 2,000,000              |       | 15,539,700      |       | —          |       | —                 |       | 15,539,700 |       |
| Common shares issued on exercise of options                      |       | 2,000                  |       | 80              |       | —          |       | —                 |       | 80         |       |
| Fair value of options exercised                                  |       | —                 |       | 1,504           |       | (1,504          | )          | —                 |       | —     |       |
| Common shares issued for services                                |       | 25,000                 |       | 205,300         |       | —          |       | —                 |       | 205,300    |       |
| Stock based compensation                                         |       | —                 |       | —          |       | 918,884         |       | —                 |       | 918,884    |       |
| Net loss for the year ended June 30, 2007                        |       | —                 |       | —          |       | —          |       | (3,171,245             | )          | (3,171,245 | )          |
|                                                             |       |                   |       |            |       |            |       |                   |       |       |       |
| Balance, June 30, 2007                                           |       | 29,314,442             |       | $               | 38,205,738 |            | $          | 1,983,985              |       | $          | (5,296,771 | ) | $ | 34,892,952 |   |

 

*See Accompanying Notes to the Consolidated Financial Statements*

 

----

 

**NORTHERN PERU COPPER CORP.**

*(An Exploration Stage Enterprise)*

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**June 30, 2007**

 

**1.****                                    ****NATUREOF OPERATIONS**

 

**Going concern andoperations**

 

Northern Peru CopperCorp. was incorporated on February 28, 2005, pursuant to the BusinessCorporations Act of British Columbia and was inactive until May 19, 2005. Onthis date, Lumina Copper Corp. (“Lumina”) completed a reorganization, by way ofa statutory plan of arrangement, and restructured into four separate companies,Lumina, which changed its name to Regalito Copper Corp., and three newcompanies, one of which was Northern Peru Copper Corp. Shareholders of Luminareceived one share of each of the three new companies for each share held inthe existing company.

 

The Company is one ofthe three new companies formed under the reorganization. The Company receivedall of the issued and outstanding shares of Lumina Copper SAC, a companyincorporated under the laws of Peru, and 1327008 Ontario Ltd., a companyincorporated under the laws of Canada, which together hold an option to acquirea 100% interest in the Galeno property and a 100% interest in the Pashpapproperty. The Company also received cash and other net assets from Lumina. Inconsideration, the Company issued 20,917,441 common shares. These shares werevalued at $6,153,591, being the aggregate value of the cash received and thecarrying value of the vended net assets at the date of the reorganization. Asthe reorganization of Lumina resulted in no substantive change in the beneficialownership of Lumina and the ownership interests of the Company were identicalto that of Lumina on the date of reorganization, the vended net assets havebeen recorded in the Company’s accounts at their carrying values to Lumina onthe reorganization date.

 

The Company isengaged in the identification, acquisition, exploration and development ofmineral resources. The Company is considered to be in the exploration stage asit has not placed any of its mineral properties into production.

 

The Company’s ability to continue as a going concernis dependent on continued financial support from its shareholders, the abilityof the Company to raise equity or debt financing or the attainment ofprofitable operations to meet the Company’s liabilities as they become payable.These consolidated financial statements have been prepared on a going concernbasis, which assumes the realization of assets and liquidation of liabilitiesin the normal course of business. These financial statements do not include anyadjustments to the recoverability and classification of recorded asset amountsand classification of liabilities that might be necessary, should the Companybe unable to continue as a going concern.

 

The Company hasentered into mineral property acquisition agreements that will require futureoutlays of cash in order to maintain the properties in good standing or inorder to fulfil contractual obligations. The Company’s continuing operations asintended are dependent on management’s ability to raise required fundingthrough future equity issuances, debt, asset sales or a combination thereof.

 

1

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**2.****                                    ****SIGNIFICANTACCOUNTING POLICIES**

 

**(a)****                                ****Principlesof presentation**

 

These consolidated financialstatements are presented in Canadian dollars and in accordance with Canadiangenerally accepted accounting principles (“Canadian GAAP”) They include theaccounts of Northern Peru Copper Corp. and the following subsidiaries(collectively, the “Company”):

 
| • |   | 1327008 Ontario Ltd. (wholly-owned)                                         |
|--------|--------|-----------------------------------------------------------------------------|
| • |   | Eastpac Minerals Peru SA  (wholly-owned subsidiary of 1327008 Ontario Ltd.) |
| • |   | Lumina Copper SAC  (wholly-owned)                                           |
| • |   | Minera Andes Del Norte SA  (subsidiary of Lumina Copper SAC)                |

 

These accounting principles conform inall material respects to principles generally accepted in the United States ofAmerica (“U.S. GAAP”) except as disclosed in Note 12.

 

**(b)****                                ****Managementestimates**

 

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

 

**(c)****                                ****Equipment**

 

Equipment is stated at cost. Amortization isprovided on the declining balance basis on furniture and equipment at 20% perannum and on computer equipment at 30% per annum.

 

**(d)****                                ****Mineral properties**

 

The Company capitalizes all costs related toinvestments in mineral property interests on a property by property basis. Suchcosts include mineral property acquisition costs and exploration anddevelopment expenditures, net of any recoveries. Costs are deferred until suchtime as the extent of mineralization has been determined and mineral propertyinterests are either developed, the property sold or the mineral rights areallowed to lapse.

 

Capitalized costs are reviewed, on a property byproperty basis, to consider whether there are any conditions that may indicateimpairment. When the carrying value of a property exceeds its net recoverableamount estimated by quantifiable evidence of an economic geological resource orreserve, joint venture expenditure commitments or the Company’s assessment ofits ability to sell the property for an amount less than the deferred costs,the property is written down to fair value.

 

From time to time the Company may acquireor dispose of a mineral property interest pursuant to the terms of an optionagreement. Where the options are exercisable entirely at the discretion of theCompany or the optionee, the amounts payable or receivable are recorded asproperty costs or recoveries when the payments are made or received.

 

2

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Capitalized costs are depleted over the usefullives of the properties upon commencement of commercial production or writtenoff if the properties are abandoned or the claims allowed to lapse.

 

Although the Company hastaken steps to verify the title to mineral properties in which it has aninterest, in accordance with industry standards for the current stage ofexploration of such properties, these procedures do not guarantee the Company’stitle. Property title may be subject to unregistered prior agreements ortransfers and title may be affected by undetected defects.

 

**(e)****                                ****Asset retirement obligations**

 

The Company recognizes thefair value of liabilities for asset retirement obligations in the period inwhich a reasonable estimate of such costs can be made. The asset retirementobligation is recorded as a liability with a corresponding increase to thecarrying amount of the related long-lived asset. Subsequently, the assetretirement cost is allocated to expenses using a systematic and rational methodand is also adjusted to reflect period-to-period changes in the liabilityresulting from passage of time and revisions to either timing or the amount ofthe original estimate of the undiscounted cash flow. As at June 30, 2007and 2006, the Company did not have any material asset retirement obligations.

 

**(f)****                                  ****Environmentalprotection practices**

 

The Company is subject to the laws and regulationsrelating to environmental matters in all jurisdictions in which it operates,including provisions relating to property reclamation, discharge of hazardousmaterial and other matters. The Company may also be held liable shouldenvironmental problems be discovered that were caused by former owners andoperators of its properties and properties in which it has previously had aninterest.

 

The Company conducts its mineral explorationactivities in compliance with applicable environmental protection legislation.The Company is not aware of any existing environmental problems related to anyof its current or former properties that may result in material liabilityto the Company.

 

**(g)****                               ****Capital stock issued for otherthan cash**

 

Capital stock issued for other than cash is valuedat the price at which the stock traded on the principal stock exchange on whichthe stock trades at the time the agreement to issue the stock is made or, ifsuch issuance is at the option of the Company, at the time the Companydetermines to issue such stock.

 

**(h)****                               ****Stock based compensation**

 

The Companyfollows the recommendations of CICA Handbook Section 3870, *“Stock-Based Compensation and Other Stock-Based Payments”*. ThisSection establishes standards for the recognition, measurement anddisclosure of stock-based compensation and other stock-based payments made inexchange for goods and services. This standard requires that all stock-basedawards made to employees and non-employees be measured and recognized using afair value based method.

 

3

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**(i)****                                  ****Foreign currency translation**

 

The Company’s and itssubsidiaries’ functional currency is the Canadian dollar. The subsidiaryoperations are regarded as being integrated with the parent company andtherefore the temporal method of translation has been applied. Monetary assetsand liabilities denominated in foreign currencies are translated into Canadiandollars at the exchange rate in effect at the balance sheet date andnon-monetary assets and liabilities at the exchange rates in effect at the timeof the transaction. Revenues and expenses are also translated at rates ineffect at the time of the transaction. Gains and losses on translation areincluded in the results from operations.

 

**(j)****                                  ****Amountsper share**

 

Amounts per share are calculated using the weighted average number ofshares outstanding. The Company uses the treasury stock method to calculatediluted earnings per share. Diluted per share amounts do not include 1,813,000(2006 – 1,530,000, 2005 – 1,265,000) outstanding options and nil (2006 –nil, 2005 – 100,000) outstanding warrants as the effect of these options andwarrants is anti-dilutive.

 

**(k)****                              ****Incometaxes**

 

The Company follows the asset and liability method of accounting forincome taxes. Future income tax assets and liabilities are recognized in the periodfor temporary differences between the tax and accounting bases of assets andliabilities as well as for the potential benefit of income tax losses carriedforward to future years.

 

Future income tax assets and liabilities are measured using substantivelyenacted tax rates and laws expected to apply in the years in which temporarydifferences are expected to be recovered or settled. The effect of a change intax rates on future income tax assets and liabilities is recognized inoperations in the period that includes the substantive enactment date. Avaluation allowance is recognized to the extent it is considered not likelythat future income tax assets will be realized.

 

**(l)****                                  ****Donations**

 

The Company records donations when amounts are pledged and reasonablydeterminable and payment is expected. During the year, the Company pledged$1,005,000 to a major Canadian university to be settled in cash or shares inthree tranches over a two-year period.

 

**(m)****                            ****Comparative amounts**

 

Certain amounts in the comparative periods have been reclassified to conform withthe current presentation.

 

4

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**3.****                                    ****EQUIPMENT**

 
| ** **               | ** ** | **Cost** | ** ** | **Accumulated  Amortization** | ** ** | **Net Book Value  June 30, 2007** | ** ** |
|--------------------------|------------|----------|------------|-------------------------------|------------|-------------------------------------------------------|------------|
| Furniture  and equipment |       | $        | 122,246    |                          | $          | 27,324                                                |       | $ | 94,922 |   |
|                          |            |          |            |                               |            |                                                       |            |  |  |  |

 
| ** **               | ** ** | **Cost** | ** ** | **Accumulated  Amortization** | ** ** | **Net Book Value  June 30, 2006** | ** ** |
|--------------------------|------------|----------|------------|-------------------------------|------------|-------------------------------------------------------|------------|
| Furniture  and equipment |       | $        | 58,465     |                          | $          | 15,229                                                |       | $ | 43,236 |   |
|                          |            |          |            |                               |            |                                                       |            |  |  |  |

 

**4.****                                    ****MINERAL PROPERTIES**

 

The Company’s mineralproperties are comprised of properties located in Peru.

 
| ** **                                         | ** ** | **Galeno** | ** ** | **Pashpap** | ** ** | **Total**  | ** ** |
|----------------------------------------------------|------------|------------|------------|-------------|------------|------------|------------|
|                                               |       |       |       |        |       |       |       |
| Balance, June 30,  2005                       |       | $          | 2,921,006  |        | $          | 215,431    |       | $ | 3,136,437 |   |
|                                               |       |       |       |        |       |       |       |
| Additions  during year:                            |       |       |       |        |       |       |       |
| Property  acquisition (Note 4(a)(i))               |       | 463,687    |       | —      |       | 463,687    |       |
| Property  exploration                              |       |       |       |        |       |       |       |
| Drilling                                           |       | 6,270,938  |       | —      |       | 6,270,938  |       |
| Geological                                         |       | 2,058,562  |       | 32,872      |       | 2,091,434  |       |
| Assays                                             |       | 730,019    |       | —      |       | 730,019    |       |
| Travel &  accommodation                   |       | 327,465    |       | 847         |       | 328,312    |       |
| Metallurgical                                      |       | 222,804    |       | —      |       | 222,804    |       |
| Field office  and administration                   |       | 194,289    |       | 1,322       |       | 195,611    |       |
| Taxes and  tenure fees                             |       | 41,784     |       | 34,759      |       | 76,543     |       |
| Amortization                                       |       | 4,800      |       | —      |       | 4,800      |       |
| Recoveries                                         |       | —     |       | (146,030    | )          | (146,030   | )          |
|                                               |       |       |       |        |       |       |       |
| Balance, June 30,  2006                       |       | 13,235,354 |       | 139,201     |       | 13,374,555 |       |
|                                               |       |       |       |        |       |       |       |
| Additions  during year:                            |       |       |       |        |       |       |       |
| Property  acquisition (Notes 4(a)(i) and (ii) |       | 7,678,289  |       | —      |       | 7,678,289  |       |
| Property  exploration                              |       |       |       |        |       |       |       |
| Drilling                                           |       | 5,393,852  |       | —      |       | 5,393,852  |       |
| Geological                                         |       | 2,649,135  |       | 8,054       |       | 2,657,189  |       |
| Engineering                                        |       | 1,619,679  |       | 7,599       |       | 1,627,278  |       |
| Equipment  rental                                  |       | 769,646    |       | —      |       | 769,646    |       |
| Geotechnical                                       |       | 743,151    |       | —      |       | 743,151    |       |
| Travel and  accommodation                          |       | 350,929    |       | —      |       | 350,929    |       |
| Assays                                             |       | 346,121    |       | —      |       | 346,121    |       |
| Legal                                              |       | 230,887    |       | 4,531       |       | 235,418    |       |
| Metallurgical                                      |       | 266,142    |       | —      |       | 266,142    |       |
| Field office  and administration                   |       | 91,895     |       | —      |       | 91,895     |       |
| Taxes and  filing fees                             |       | 35,825     |       | 55,998      |       | 91,823     |       |
| Environmental                                      |       | 20,287     |       | —      |       | 20,287     |       |
| Amortization                                       |       | 9,626      |       | —      |       | 9,626      |       |
| Expense  recoveries                                |       | —     |       | (58,933     | )          | (58,933    | )          |
| Future  income tax (Note 10)                       |       | 131,787    |       | —      |       | 131,787    |       |
|                                               |       |       |       |        |       |       |       |
| Balance, June 30,  2007                       |       | $          | 33,572,605 |        | $          | 156,450    |       | $ | 33,729,055 |   |

 

5

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**(a)****                                ****Galeno Property**

 

(i)                                    Pursuant to an agreement dated April 25,2003 with La Asunción Negociadora Minera SAC (ASUMIN), the Company had anoption to acquire a 100% interest in the Galeno Copper-Gold Property located innorthern Peru. The property consists of 5 mining concessions covering an areaof approximately 1,563 hectares. Consideration for the acquisition was anaggregate of US $2,000,000 in cash payments, of which US $480,000 waspaid by the predecessor company (Note 1), US $400,000(C $463,687) was paid by the Company in April, 2006 and  US $1,120,000 (C $1,258,313) waspaid by the Company in April, 2007.

 

The Company will be requiredto make bonus payments of US $250,000 upon completion of a positivefeasibility study and US $1,300,000 one year after the commencement ofcommercial production.

 

(ii)                                 TheCompany also owns all of the shares of two companies which, collectively, own a100% interest in the Molino mining concession. The Molino concession iscontiguous to the Galeno concessions and is considered to be an extension ofthe Galeno property. The vendors retain a 1% net smelter royalty. Pursuant tothe terms of an underlying agreement, the Company was also obligated to payUS $300,000 upon commencement of commercial production and 6% of the netprofits, before income taxes, to the owner of this concession.

 

Pursuant to an agreementdated April 2, 2007, the Company purchased the existing leaseholdagreement, as well as the US $300,000 cash obligation and 6% net profitsroyalty. In addition, all litigation on the property was settled. Considerationfor this transaction was US $4,000,000 (C $4,496,802) which was paid inApril, 2007. With this buy-out, the Company owns 100% of the Molino concession,subject only to the 1% net smelter royalty.

 

6

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**(b)****                                ****Pashpap Property**

 

The Company owns a 100% interest in 16 copperconcessions located in northern Peru.

 

Pursuant to an agreement dated June 16, 2005,the Company granted an option to Japan Oil, Gas and Metals National Corporation(“JOGMEC”) to earn a 51% participating joint venture interest in the Pashpapproperty in consideration of JOGMEC incurring a total of US $5,000,000 ofexploration expenditures and completing 25,000 meters of drilling on theproperty before March 31, 2009.

 

In March and April, 2007, the agreement withJOGMEC was amended to include one additional concession that had been staked bythe Company and to decrease the number of meters to be drilled by JOGMEC to20,000 meters.

 

Upon JOGMEC earning a 51% interest in the property,a joint venture will be formed with each of JOGMEC and the Company contributingtheir pro-rata share of 51% and 49% respectively, towards future project costs.

 

**5.****                                    ****RELATED PARTY TRANSACTIONS**

 

(a)                                 The Company sharesgeneral and administrative expenses on a pro-rata basis with three othercompanies with certain directors in common.

 

These expensesinclude $9,493 (2006 - $9,885, 2005 - $1,342) for rental of office premises and$39,180 (2006 - $20,172, 2005 - $1,454) for management fees.Included in accounts payable is an amount of $27,729 (2006 - $48,572) owed toone of the companies for shared expenses.

 

The foregoing relatedparty transactions are recorded at the exchange amount which is the amount ofconsideration paid or received as established and agreed to between the parties.In management’s opinion, the exchange amount was negotiated and established andagreed to by the related parties as if they were dealing at arm’s length.

 

(b)                                During March andApril, 2007 the Company received loans in the aggregate of US $7,120,000from a director in order to pay for acquisition costs on the Galeno propertyand to assist in operations. The loans were repaid in full in May, 2007 withinterest in the amount of $60,082.

 

7

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**6.****                                    ****SHARECAPITAL**

 

**(a)****                                ****Authorized**

 

An unlimited numberof common shares without par value.

 

**(b)****                                ****Issuedand outstanding**

 

**Commonshares:**

 
| ** **                                                  | ** ** | **Number of  Shares** | ** ** | **Amount** | ** ** |
|-------------------------------------------------------------|------------|----------------------------|------------|------------|------------|
|                                                        |       |                       |       |       |       |
| Balance, June 30, 2005                                 |       | 20,917,442                 |       | $          | 6,153,592  |   |
|                                                        |       |                       |       |       |       |
| Issued for cash                                             |       |                       |       |       |       |
| Private placements, net of issue costs  (Note 6(b)(i)) |       | 6,065,000                  |       | 15,643,845 |       |
|                                                        |       |                       |       |       |       |
| Exercise of  options (Note 7(a))                            |       |                       |       |       |       |
| - for cash                                                  |       | 95,000                     |       | 4,700      |       |
| - fair value of options exercised                           |       | —                     |       | 76,326     |       |
|                                                        |       |                       |       |       |       |
| Exercise of warrants                                        |       |                       |       |       |       |
| - for cash                                                  |       | 100,000                    |       | 6,000      |       |
| - fair value of warrants exercised                          |       | —                     |       | 224,211    |       |
|                                                        |       |                       |       |       |       |
| Common shares issued for services (Note  6(b)(ii))          |       | 110,000                    |       | 350,480    |       |
|                                                        |       |                       |       |       |       |
| Balance, June 30, 2006                                 |       | 27,287,442                 |       | 22,459,154 |       |
|                                                        |       |                       |       |       |       |
| Issued for cash                                             |       |                       |       |       |       |
| Private placement, net of issue costs (Note  6(b)(i))       |       | 2,000,000                  |       | 15,539,700 |       |
|                                                        |       |                       |       |       |       |
| Exercise of options (Note 7(a))                             |       |                       |       |       |       |
| - for cash                                                  |       | 2,000                      |       | 80         |       |
| - fair value of options exercised                           |       | —                     |       | 1,504      |       |
|                                                        |       |                       |       |       |       |
| Common shares issued for services (Note  6(b)(ii))          |       | 25,000                     |       | 205,300    |       |
|                                                        |       |                       |       |       |       |
| Balance, June 30, 2007                                 |       | 29,314,442                 |       | $          | 38,205,738 |   |

 

8

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**(i)****                                  ****Privateplacements**

 

In December 2005,the Company completed a private placement and issued of 2,065,000 common sharesat a price of $1.50 per share. The Company received proceeds of $2,908,031, netof issue costs of $189,469.

 

In April 2006,the Company completed a private placement and issued 4,000,000 common shares ata price of $3.25 per share. The Company received proceeds of $12,735,814, netof issue costs of $264,186.

 

In May 2007, theCompany completed a brokered private placement and issued 2,000,000 commonshares at a price of $8.40 per share. The Company received proceeds of$15,539,700, net of issue costs of $1,260,300.

 

**(ii)****                              ****Bonusshares issued for remuneration**

 

**Fiscal 2006**

 

The Company issued31,000 common shares with a fair value of $97,780 for management and geologicalconsulting services.

 

Pursuant to acompensation agreement entered into between the predecessor company and itsPresident prior to the reorganization (Note 1), the Company issued 79,000common shares with a fair value of $252,700 to the president as compensationfor services rendered.

 

**Fiscal 2007**

 

The Company issued25,000 common shares with a fair value of $205,300 for management services(Note 13).

 

**7.****                                    ****STOCK OPTIONS**

 

**(a)****                                ****Options outstanding**

 

Under the Company’sstock option plan, the board of directors may grant options for thepurchase of up to a total of 10% of the total number of issued and outstandingcommon shares of the Company. Options granted under the plan vest over time atthe discretion of the board of directors. Exercise prices on options grantedunder the plan are determined by reference to the market value on the date ofthe grant.

 

9

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A summary of theCompany’s stock options as at June 30, 2007 and 2006 and changes duringthe periods then ended is as follows:

 
| ** **                        | ** ** | **Number of  Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|-----------------------------------|------------|----------------------------|------------|----------------------------------------|------------|
|                              |       |                       |       |                                   |       |
| Outstanding at June 30, 2005 |       | 1,265,000                  |       | $                                      | 0.58       |   |
|                              |       |                       |       |                                   |       |
| Granted                           |       | 360,000                    |       | 2.87                                   |       |
| Exercised                         |       | (95,000                    | )          | 0.05                                   |       |
|                              |       |                       |       |                                   |       |
| Outstanding at June 30, 2006 |       | 1,530,000                  |       | 1.16                                   |       |
|                              |       |                       |       |                                   |       |
| Granted                           |       | 360,000                    |       | 6.34                                   |       |
| Exercised                         |       | (2,000                     | )          | 0.04                                   |       |
| Cancelled                         |       | (75,000                    | )          | 1.65                                   |       |
|                              |       |                       |       |                                   |       |
| Outstanding at June 30, 2007 |       | 1,813,000                  |       | $                                      | 2.17       |   |

 

At June 30,2007, the Company has outstanding stock options to purchase an aggregate1,813,000 common shares as follows:

 
| **Options Outstanding**       | ** ** | **Options Exercisable** | ** ** |
|------------------------------------|------------|------------------------------|------------|
| **Number**** ****of  Shares** | ** ** | **Expiry Date**         | ** ** | **Exercise  Price** | ** ** | **Number********of Shares** | ** ** | **Exercise  Price** | ** ** |
|                               |       |                         |       |   |   |   |   |   |   |
| 450,000                            |       | June 6,  2008           |       | $ | 0.01 |   | 450,000 |   | $ | 0.01 |   |
| 25,000                             |       | August 8,  2008         |       | 0.01 |   | 25,000 |   | 0.01 |   |
| 150,000                            |       | October 17,  2008       |       | 0.02 |   | 150,000 |   | 0.02 |   |
| 30,000                             |       | December 17,  2008      |       | 0.03 |   | 30,000 |   | 0.03 |   |
| 55,000                             |       | April 20,  2009         |       | 0.06 |   | 55,000 |   | 0.06 |   |
| 48,000                             |       | December 2,  2009       |       | 0.04 |   | 48,000 |   | 0.04 |   |
| 20,000                             |       | January 27,  2010       |       | 0.04 |   | 20,000 |   | 0.04 |   |
| 200,000                            |       | May 26,  2010           |       | 1.72 |   | 200,000 |   | 1.72 |   |
| 190,000                            |       | June 17,  2010          |       | 1.98 |   | 190,000 |   | 1.98 |   |
| 5,000                              |       | August 23,  2010        |       | 1.30 |   | 5,000 |   | 1.30 |   |
| 280,000                            |       | January 13,  2011       |       | 3.23 |   | 186,667 |   | 3.23 |   |
| 360,000                            |       | December 20,  2011      |       | 6.34 |   | 120,004 |   | 6.34 |   |
|                               |       |                         |       |   |   |   |   |   |   |
| 1,813,000                          |       |                         |       | $ | 2.17 |   | 1,479,671 |   | $ | 1.42 |   |

 

10

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**(b)****                                ****Stock based compensation**

 
| ** **                              | ** ** | **Number of** | ** ** | **Fair Value Amount** | ** ** |
|-----------------------------------------|------------|--------------------|------------|---------------------------------|------------|
| ** **                              | ** ** | **Options**        | ** ** | **Unvested**                    | ** ** | **Vested** | ** ** |
|                                    |       |               |       |                            |       |   |   |
| Unexercised options, June 30, 2005 |       | 1,265,000          |       | 316,820                         |       | 551,906 |   |
| Options granted                         |       | 360,000            |       | 459,260                         |       | 201,495 |   |
| Options vested                          |       | —             |       | (389,530                        | )          | 389,530 |   |
| Options exercised                       |       | (95,000            | )          | —                          |       | (76,326 | ) |
|                                    |       |               |       |                            |       |   |   |
| Unexercised options, June 30, 2006 |       | 1,530,000          |       | 386,550                         |       | 1,066,605 |   |
| Options granted                         |       | 360,000            |       | 726,366                         |       | 363,188 |   |
| Options vested                          |       | —             |       | (555,696                        | )          | 555,696 |   |
| Options exercised                       |       | (2,000             | )          | —                          |       | (1,504 | ) |
| Options cancelled                       |       | (75,000            | )          | (62,798                         | )          | — |   |
|                                    |       |               |       |                            |       |   |   |
| Unexercised options, June 30, 2007 |       | 1,813,000          |       | $                               | 494,422    |   | $ | 1,983,985 |   |
|                                         |            |                    |            |                                 |            |  |  |  |  |

 

Pursuant to theCompany’s accounting policy for stock-based compensation (Note 2(h)), the fairvalue of options granted, and which vested during the year, in the amount of$918,884 (2006 - $591,025, 2005 - $551,906) has been recorded. Of this amount,$811,354 (2006 - $422,343, 2005 - $503,005) has been expensed to management andadministrative services, nil (2006 - $2,797, 2005 - nil) has been expensed toinvestor relations and promotion and $107,530 (2006 - $165,885, 2005 - $48,901)has been charged to deferred exploration costs.

 

The fair value usedto calculate the compensation expense related to the stock options issued isestimated using the Black-Scholes Option Pricing Model with the followingassumptions:

 
| ** **                      | ** ** | **Year Ended********June 30,********2007** | ** ** | **Year Ended********June 30,********2006** | ** ** | **Period from********inception  (February 28,********2005) to********June 30,********2005** | ** ** |
|---------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|
|                            |       |                                                 |       |                                                 |       |                                                                                                            |       |
| Risk-free interest rate         |       | 2.87% - 3.96                                         | %          | 2.87% - 3.79                                         | %          | 2.87% - 2.97                                                                                                    | %          |
| Expected dividend yield         |       | —                                               |       | —                                               |       | —                                                                                                          |       |
| Expected stock price volatility |       | 74% - 126                                            | %          | 74% - 126                                            | %          | 74% - 126                                                                                                       | %          |
| Expected option life in years   |       | 2 - 3                                                |       | 2 - 3                                                |       | 2                                                                                                               |       |

 

Option pricing modelsrequire the input of highly subjective assumptions including the expected pricevolatility. Changes in the subjective input assumptions can materially affectthe fair value estimate, and therefore the existing models do not necessarilyprovide a reliable single measure of the fair value of the Company’s stockoptions.

 

11

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**8.****                                    ****SUPPLEMENTALCASH FLOW INFORMATION**

 

Significant non-cash financing and investingactivities are as follows:

 
| ** **                                                                 | ** ** | **Cumulative  Period from  Inception  (February 28,********2005) to********June 30,********2007** | ** ** | **Year Ended********June 30,********2007** | ** ** | **Year Ended********June 30,********2006** | ** ** | **Period from********Inception  (February 28,  2005) to********June 30,********2005** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|
|                                                                       |       |                                                                                                                  |       |                                                 |       |                                                 |       |                                                                                                      |       |
| Shares issued pursuant to reorganization of  Lumina (Note 1) for |       |                                                                                                                  |       |                                                 |       |                                                 |       |                                                                                                      |       |
| - mineral properties                                                       |       | $                                                                                                                     | 2,864,302  |                                                 | $          | —                                               |       | $                                                                                                         | —     |   | $ | 2,864,302 |   |
| - net working capital                                                      |       | $                                                                                                                     | 14,734     |                                                 | $          | —                                               |       | $                                                                                                         | —     |   | $ | 14,734 |   |
|                                                                       |       |                                                                                                                  |       |                                                 |       |                                                 |       |                                                                                                      |       |
| Shares issued for services                                                 |       |                                                                                                                  |       |                                                 |       |                                                 |       |                                                                                                      |       |
| - included in mineral property expenditures                                |       | $                                                                                                                     | 69,640     |                                                 | $          | —                                               |       | $                                                                                                         | 69,640     |   | $ | — |   |
| - included in expenses                                                     |       | $                                                                                                                     | 486,140    |                                                 | $          | 205,300                                              |       | $                                                                                                         | 280,840    |   | $ | — |   |
| Amortization included in mineral property  expenditures                    |       | $                                                                                                                     | 14,626     |                                                 | 9,626      |                                                 | $          | 4,800                                                                                                     |       | $ | 200 |   |
| Stock based compensation included  in mineral property expenditures   |       | $                                                                                                                     | 252,676    |                                                 | $          | 107,530                                              |       | $                                                                                                         | 96,245     |   | $ | 48,901 |   |
| Future income tax included in mineral  property expenditures               |       | $                                                                                                                     | 131,787    |                                                 | $          | 131,787                                              |       | $                                                                                                         | —     |   | $ | — |   |

 

**9.****                                    ****SEGMENTEDDISCLOSURE**

 

The Company has oneoperating segment, mineral exploration, and all capital assets of the Companyare located in Canada except for its mineral properties (Note 4), andcertain equipment with a net book value of $85,859 at June 30, 2007 (2006- $33,592), which are located in Peru.

 

The Company operatesin two geographical segments:  Canada andPeru. Corporate administrative activities are conducted from Canada.

 

**10.****                             ****INCOMETAXES**

 

As at June 30, 2007, the Company hasnon-capital losses of approximately $2,277,000 which may be appliedagainst future income for income tax purposes. The potential future taxbenefits of these losses have not been recorded in these financial statements. Theamounts of losses and years of expiry are as follows:

 
| 2027   |   | $       | 1,476,000 |   |
|--------|--------|---------|-----------|--------|
| 2026   |   | 752,000 |      |
| 2015   |   | 49,000  |      |
|   |   |    |      |
|   |   | $       | 2,277,000 |   |

 

12

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The reconciliation of anincome tax provision computed at statutory rates to the reported income taxprovision is as follows:

 
| ** **                                               | ** ** | **Year Ended********June 30,  2007** | ** ** | **Year Ended********June 30,********2006** | ** ** | **Period from********Inception  (February 28,********2005) to********June 30,********2005** | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|
|                                                     |       |                                           |       |                                                 |       |                                                                                                            |       |
|                                                     |       | 34.12%                                         |       | 34.12                                                | %          | 35.62                                                                                                           | %          |
|                                                     |       |                                           |       |                                                 |       |                                                                                                            |       |
| Income tax benefit computed at Canadian  statutory rates |       | $                                              | 1,082,029  |                                                 | $          | 535,065                                                                                                         |       | $ | 215,943 |   |
| Foreign tax rates different from statutory  rate         |       | (285                                           | )          | 4,327                                                |       | (290                                                                                                            | )          |
| Stock based compensation                                 |       | (346,882                                       | )          | (341,142                                             | )          | (196,589                                                                                                        | )          |
| Tax losses utilized                                      |       | 173,585                                        |       | 77,314                                               |       | —                                                                                                          |       |
| Other differences                                        |       | 250,582                                        |       | 20,889                                               |       | (103                                                                                                            | )          |
| Change in valuation allowance                            |       | (1,159,029                                     | )          | (296,453                                             | )          | (18,961                                                                                                         | )          |
|                                                     |       |                                           |       |                                                 |       |                                                                                                            |       |
|                                                     |       | $                                              | —     |                                                 | $          | —                                                                                                          |       | $ | — |   |

 

Future income tax assets and liabilities arerecognized for temporary differences between the carrying amount of the balancesheet items and their corresponding tax values as well as for the benefit oflosses available to be carried forward to future years for tax purposes thatare likely to be realized. Significant components of the Company’s future taxassets and liabilities, after applying enacted corporate income tax rates, areas follows:

 
| ** **                                                 | ** ** | **June 30,  2007** | ** ** | **June 30,  2006** | ** ** | **June 30,  2005** | ** ** |
|------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|
|                                                       |       |                    |       |                    |       |                    |       |
| Future  income tax assets                                  |       |                    |       |                    |       |                    |       |
| Temporary  differences in equipment                        |       | $                       | —     |                    | $          | 576                     |       | $ | 128 |   |
| Net tax  losses carried forward                            |       | 1,601,650               |       | 397,265                 |       | 101,260                 |       |
|                                                       |       |                    |       |                    |       |                    |       |
|                                                       |       | 1,601,650               |       | 397,841                 |       | 101,388                 |       |
| Valuation  allowance for future income tax assets     |       | (1,556,870              | )          | (397,841                | )          | (101,388                | )          |
|                                                       |       |                    |       |                    |       |                    |       |
| Future  income tax assets                                  |       | 44,780                  |       | —                  |       | —                  |       |
|                                                       |       |                    |       |                    |       |                    |       |
| Future  income tax liabilities                             |       |                    |       |                    |       |                    |       |
| Temporary  differences in equipment and mineral properties |       | (176,567                | )          | —                  |       | —                  |       |
|                                                       |       |                    |       |                    |       |                    |       |
| Future  income tax liabilities, net                        |       | $                       | (131,787   | )                       | $          | —                  |       | $ | — |   |

 

13

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**11.****                             ****FINANCIAL INSTRUMENTS**

 

The Company’s financial instruments consist of cash, receivables,accounts payable and accrued liabilities. Fair value estimates are made at thebalance sheet date, based on relevant market information and information aboutthe financial instrument. These estimates are subjective in nature and may involvesignificant uncertainties in matters of judgment and, therefore, cannot bedetermined with precision. The fair values of these financial instrumentsapproximate their carrying values due to their short term maturity.

 

It is management’s opinion that the Company is not exposed to significantinterest or credit risks arising from these financial instruments.

 

The Company is exposed to financial risk arising from fluctuations inforeign exchange rates and the degree of volatility of these rates. The Companydoes not use derivative instruments to reduce its exposure to foreign currencyrisks.

 

**12.****                             ****DIFFERENCES BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTINGPRINCIPLES AND PRACTICES**

 

These consolidated financialstatements have been prepared in accordance with Canadian GAAP, which differfrom those principles and practices that the Company would have followed hadits financial statements been prepared in accordance with U.S. GAAP, asdescribed below.

 

**(a)****                                ****Mineral Property Expenditures**

 

Under Canadian GAAP, it isacceptable to defer both mineral property acquisition and exploration costsuntil a decision to abandon the property is made, it is determined that theproperty does not have economically recoverable reserves or that the Company isunlikely to pursue exploration activities on the property. Under U.S. GAAP,mineral exploration costs are expensed when incurred until it can be proventhat economically viable reserves are present on the property and the Companyhas the ability and intention to pursue exploitation of these reserves.

 

**(b)****                                ****Income taxes**

 

Under Canadian GAAP, future incometaxes are calculated based on enacted or substantively enacted tax ratesapplicable to future years. Under U.S. GAAP, only enacted rates are used in thecalculation of future income taxes. This GAAP difference did not result in adifference in the financial position, results of operations or cash flows ofthe Company for the years ended June 30, 2007 and 2006 and for the periodfrom inception on February 28, 2005 to June 30, 2005.

 

14

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Had the Company followed U.S. GAAP,the effect on its financial statements of the foregoing differences are set outbelow.

 

**Consolidated Balance Sheets**

 
| ** **                                                   | ** ** | **June 30,********2007** | ** ** | **June 30,********2006** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------|------------|-------------------------------|------------|
|                                                         |       |                          |       |                          |       |
| Assets under Canadian GAAP                                   |       | $                             | 41,003,803 |                          | $          | 22,657,377 |   |
| Adjustment for mineral exploration costs in  assets acquired |       | (688,548                      | )          | (688,548                      | )          |
| Mineral exploration costs expensed under  U.S. GAAP     |       |                          |       |                          |       |
| - in fiscal 2005                                             |       | (272,135                      | )          | (272,135                      | )          |
| - in fiscal 2006                                             |       | (9,774,431                    | )          | (9,774,431                    | )          |
| - in fiscal 2007                                             |       | (12,676,211                   | )          | —                        |       |
|                                                         |       |                          |       |                          |       |
| Assets under U.S. GAAP                                       |       | $                             | 17,592,478 |                          | $          | 11,922,263 |   |
|                                                         |       |                          |       |                          |       |
| Shareholders’ equity under Canadian GAAP                |       | $                             | 34,892,952 |                          | $          | 21,400,233 |   |
| Adjustment for mineral exploration costs in  assets acquired |       | (688,548                      | )          | (688,548                      | )          |
| Mineral exploration costs expensed under  U.S. GAAP     |       |                          |       |                          |       |
| - in fiscal 2005                                             |       | (272,135                      | )          | (272,135                      | )          |
| - in fiscal 2006                                             |       | (9,774,431                    | )          | (9,774,431                    | )          |
| - in fiscal 2007                                             |       | (12,676,211                   | )          | —                        |       |
|                                                         |       |                          |       |                          |       |
| Shareholders’ equity under U.S. GAAP                    |       | $                             | 11,481,627 |                          | $          | 10,665,119 |   |

 

15

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* *

***NORTHERN PERU COPPER CORP.***

*(An Exploration Stage Enterprise)*

***NOTES TO CONSOLIDATED FINANCIAL STATEMENTS***

 

***June 30, 2007***

 
| **Consolidated Statements of Operations**                                     | ** ** | **For the Period  from Inception  (February 28,  2005) to  June 30,  2007** | ** **  | **For the Year  Ended  June 30,  2007** | ** ** | **For the Year  Ended  June 30,  2006** | ** ** | **For the Period  from Inception  (February 28,  2005) to  June 30,  2005** | ** **  |
|----------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|-------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|-------------|
|                                                                                         |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |        |
| Loss for the  period, under Canadian GAAP                                                    |       | $                                                                                                         | (5,296,771  | )                                                      | $          | (3,171,245                                             | )          | $                                                                                                         | (1,568,186  | ) | $ | (557,340 | ) |
| Mineral  exploration costs expensed under U.S. GAAP                                     |       | (22,722,777                                                                                               | )           | (12,676,211                                            | )          | (9,774,431                                             | )          | (272,135                                                                                                  | )           |
|                                                                                         |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |        |
| Loss for the  period under U.S. GAAP                                                         |       | $                                                                                                         | (28,019,548 | )                                                      | $          | (15,847,456                                            | )          | $                                                                                                         | (11,342,617 | ) | $ | (829,475 | ) |
|                                                                                         |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |        |
| Basic and  diluted loss per share                                                            |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |        |
| Under Canadian  GAAP                                                                         |       |                                                                                                      |        | $                                                      | (0.12      | )                                                      | $          | (0.07                                                                                                     | )           | $ | (0.08 | ) |
| Under U.S.  GAAP                                                                             |       |                                                                                                      |        | $                                                      | (0.58      | )                                                      | $          | (0.49                                                                                                     | )           | $ | (0.11 | ) |
|                                                                                         |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |        |
| Weighted  average number of shares outstanding, under Canadian  and U.S. GAAP |       |                                                                                                      |        | 27,553,705                                             |       | 23,047,582                                             |       | 7,312,603                                                                                                 |        |

 
| **Consolidated Statements of Cash  Flows**                 | ** ** | **For the Period  from Inception  (February 28,  2005) to  June 30,  2007** | ** **  | **For the Year  Ended  June 30,  2007** | ** ** | **For the Year  Ended  June 30,  2006** | ** ** | **For the Period  from Inception  (February 28,  2005) to  June 30,  2005** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|-------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|
|                                                                      |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |       |
| Cash flows provided from operating  activities, under Canadian GAAP       |       | $                                                                                                         | (1,491,365  | )                                                      | $          | (968,370                                               | )          | $                                                                                                         | (534,822   | ) | $ | 11,827 |   |
| Increased loss due to mineral exploration  costs expensed under U.S. GAAP |       | (22,722,777                                                                                               | )           | (12,676,211                                            | )          | (9,774,431                                             | )          | (272,135                                                                                                  | )          |
| Adjustments for items not involving cash                                  |       | 3,474,799                                                                                                 |        | 2,166,357                                              |       | 1,259,341                                              |       | 49,101                                                                                                    |       |
|                                                                      |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |       |
| Cash flows used in operating activities,  under U.S. GAAP                 |       | $                                                                                                         | (20,739,343 | )                                                      | $          | (11,478,224                                            | )          | $                                                                                                         | (9,049,912 | ) | $ | (211,207 | ) |
|                                                                      |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |       |
| Cash flows used in investing activities,  under Canadian GAAP             |       | $                                                                                                         | (25,920,847 | )                                                      | $          | (16,660,571                                            | )          | $                                                                                                         | (9,014,516 | ) | $ | (245,760 | ) |
| Mineral exploration costs expensed under  U.S. GAAP                       |       | 19,247,978                                                                                                |        | 10,509,854                                             |       | 8,515,090                                              |       | 223,034                                                                                                   |       |
|                                                                      |       |                                                                                                      |        |                                                   |       |                                                   |       |                                                                                                      |       |
| Cash flows used in investing activities,  under U.S. GAAP                 |       | $                                                                                                         | (6,672,869  | )                                                      | $          | (6,150,717                                             | )          | $                                                                                                         | (499,426   | ) | $ | (22,726 | ) |

 

16

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**Recentaccounting pronouncements**

 

*Canadian GAAP*

 

Recent accountingpronouncements affecting the Company’s financial reporting under Canadian GAAPare summarized below:

 

(i)            In January 2005, the CICA issued HandbookSection 3855, *“Financial Instruments – Recognition andMeasurement*.*”*  It prescribes when a financial asset,financial liability or non-financial derivative is to be recognized on thebalance sheet and at what amount, requiring fair value or cost-based measuresunder different circumstances. It also specifies how financial instrument gainsand losses are to be presented. It applies to interim and annual financialstatements for fiscal periods beginning after October 1, 2006 and has beenadopted by the Company on July 1, 2007. Transitional provisions vary based onthe type of financial instruments under consideration. The effect on theCompany’s consolidated financial statements is not expected to be material.

 

(ii)           CICA Handbook Section 1530,  *“Comprehensive Income*,*”* was issued inJanuary 2005 to introduce new standards for reporting and presentingcomprehensive income. Comprehensive income is the change in equity (net assets)of a company during a reporting period from transactions and other events andcircumstances from non-owner sources. It includes all changes in equity duringa period except for changes resulting from investments by owners anddistributions to owners. It applies to interim and annual financial statementsfor fiscal periods beginning after October 1, 2006 and has been adopted by theCompany on July 1, 2007. Financial statements for prior periods will berequired to be restated for certain comprehensive income items. The effect onthe Company’s consolidated financial statements is not expected to be material.

 

(iii)          In January 2005, the CICA issued Handbook Section 3251,*“Equity,”* which replaces Section 3250, *“Surplus.”*It establishes standards for the presentation of equity and changes in equityduring reporting periods beginning after October 1, 2006. Financial statementsof prior periods are required to be restated for certain specified adjustments.For other adjustments, the adjusted amount must be presented in the opening balanceof accumulated other comprehensive income. The Company adopted this Section onJuly 1, 2007. The effect on the Company’s consolidated financialstatements is not expected to be material.

 

(iv)          In March 2006, the CICA issued EIC-160 “*StrippingCosts Incurred in the Production Phase of a Mining Operation*” thatis effective for fiscal year beginning on or after July 1, 2006. EIC-160requires the costs associated with the removal of overburden and other minewaste materials that are incurred in the production phase of mining operationsbe charged to income in the period in which they are incurred, except when thecosts represent betterment to the mineral property. Stripping costs representbetterment to the mineral property when the stripping activity provides accessto reserves that will be produced in future periods and that would otherwisenot have been accessible without the stripping activity. When stripping costsare deferred in relation to betterment, the costs are amortized to operationsover the reserve accessed by the stripping activity using the units ofproduction method. This Section has been adopted by the Company as of July 1,2006 and the adoption of this new accounting policy did not have a materialimpact on the consolidated financial statements.

 

17

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(v)           CICA Handbook Section 1506, “*Accounting Changes*”,establishes standards and new disclosure requirements for the reporting ofchanges in accounting policies and estimates and the reporting of errorcorrections. It clarifies that a change in accounting policy can be made onlyif it is a requirement under Canadian GAAP or if it provides reliable and morerelevant financial statement information. Voluntary changes in accountingpolicies require retrospective application to prior period financialstatements, unless the retrospective effects of the changes are impracticableto determine, in which case the retrospective application may be limited to theassets and liabilities of the earliest period practicable with a correspondingadjustment made to opening retained earnings. This Section is effective forfiscal years beginning on or after January 1, 2007. The effect on the Company’sconsolidated financial statements is not expected to be material.

 

*U.S. GAAP*

 

Recent accountingpronouncements affecting the Company’s financial reporting under U.S. GAAP aresummarized below.

 

(i)            InDecember 2004, the FASB issued SFAS 153. This statement addresses themeasurement of exchanges of nonmonetary assets. The guidance in APBNo. 29, *“Accounting for Nonmonetary Transactions”,*is based on the principle that exchanges of nonmonetary assets should bemeasured based on the fair value of the assets exchanged. The guidance in thatOpinion, however, included certain exceptions to that principle. This statementamends APB No. 29 to eliminate the exception for nonmonetary exchanges ofsimilar productive assets and replaces it with a general exception forexchanges of nonmonetary assets that do not have commercial substance. A nonmonetaryexchange has commercial substance if the future cash flows of the entity areexpected to change significantly as a result of the exchange. This statementwas effective for the Company’s 2006 fiscal year. Earlier application ispermitted for nonmonetary asset exchanges incurred during fiscal yearsbeginning after the date this statement is issued. The adoption of thisstatement had no impact on the financial statements of the Company for itsfiscal years ended June 30, 2007 and 2006.

* *

(ii)           In March 2005, the EITF issued EITF 04-6, *“Accounting for Stripping Costs in the Mining Industry”.*Theconsensus indicated that costs of removing overburden and waste materials (“strippingcosts”) after production begins, represent variable production costs and shouldbe considered a component of mineral inventory cost subject to the guidance inChapter 4 of Accounting Research Bulletin No. 43, *“Restatement and Revision of Accounting Research Bulletins”.*EITF04-6 is effective for fiscal years beginning after July 1, 2006 and uponadoption, can be applied by either retroactively restating prior periods orusing a cumulative catch-up adjustment. This Statement has had no impact on thefinancial statements of the Company since adoption.

 

18

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(iii)          In June 2005, the FASB issued Statement of Financial AccountingStandards No. 154, *“Accounting Changes andError Corrections*- *a replacementof APB Opinion No. 20 and FASB Statement No. 3”*(“SFAS 154”).SFAS 154 requires retrospective application to prior periods’ financialstatements of a change in accounting principle unless it is impracticable to doso. This is a change from the existing practice that requires most accountingchanges to be accounted for by including in net income in the period of thechange the cumulative effect of changing to the new accounting principle. SFAS154 will be effective for accounting changes and corrections of errors made infiscal years beginning after December 15, 2005. The adoption of this Statementhad no significant impact on the financial statements of the Company.

 

(iv)          In July 2006, the FASB issued Interpretation No. 48, “*Accounting for Uncertainty in Income Taxes*” – aninterpretation of FASB Statement No. 109. Interpretation 48 clarifiesthe accounting for uncertainty in income taxes recognized in an entity’sfinancial statements in accordance with Statement 109 and prescribes arecognition threshold and measurement attribute for financial statementdisclosure of tax positions taken or expected to be taken on a tax return. Additionally,Interpretation 48 provides guidance on derecognition, classification, interestand penalties, accounting in interim periods, disclosure and transition. Interpretation48 is effective for fiscal years beginning after December 15, 2006, withearly adoption permitted. The Company believes this Interpretation will nothave a material effect on its financial statements once adopted.

 

(v)           In 2006, the FASB issued Statement No. 157, “*Fair ValueMeasurements*”. This new pronouncement provides guidance for usingfair value to measure assets and liabilities. FASB believes the pronouncementalso responds to investors’ requests for expanded information about the extentto which corporations measure assets and liabilities at fair value, theinformation used to measure fair value, and the effect of fair valuemeasurements on earnings. Statement 157 applies whenever other standardsrequire (or permit) assets or liabilities to be measured at fair value but doesnot expand the use of fair value in any new circumstances. The standardclarifies that for items that are not actively traded, such as certain kinds ofderivatives, fair value should reflect the price in a transaction with a marketparticipant, including an adjustment for risk, not just the Company’smark-to-market value. Statement 157 also requires expanded disclosure of theeffects on earnings for items measured using unobservable data. The Companybelieves this Statement will not have a material effect on its financialstatements once adopted.

 

**13.****         ****COMMITMENTSAND CONTINGENCIES**

 

(a)           On May 15, 2005, theCompany entered into a Management Consultant Agreement with its President forthe provision of management services to the Company in consideration ofUS $7,000 per month (increased to US $8,333 per month onJanuary 1, 2007).

 

The Company also entered into an Executive Bonus/Retention Agreementdated May 15, 2006 with its President which provides for an aggregate of30,000 bonus shares (10,000 bonus shares per year) as a retention bonus. Pursuantto the terms of the agreement, the Company issued 10,000 common shares in May,2006 with a fair value of $28,000 and 10,000 common shares in May, 2007 with afair value of $106,000. The agreement also provided for a share appreciationbonus and a transaction bonus as follows:

 

19

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**(i)****           ****Shareappreciation bonus**

 

Provided that its President is under contract with the Company at suchtime as the Company’s share price reaches:

 

•      Cdn $3and trades at or above an average of Cdn $3 for a period of 20 consecutivetrading days on the Toronto Stock Exchange (the “Exchange”), a bonus of 15,000common shares shall be paid (issued in February, 2006 with a fair value of$50,400); and

 

•      Cdn $6and trades at or above an average of Cdn $6 for a period of 20 consecutivetrading days on the Exchange, an additional bonus of 15,000 common shares shallbe paid (issued in January, 2007, with a fair value of $99,300).

 

**(ii)****          ****Transactionbonus**

 

Provided that its President is under contract with the Company at suchtime as the Company undertakes a sale in respect of the Galeno property in asingle transaction for a value greater than Cdn $70,000,000, a bonus of40,000 common shares shall be paid.

 

**(b)****          **In 2005,the Company purchased 398 hectares of surface rights from a Peruvian landowner,pursuant to a land transfer agreement. The surface rights are situated on aportion of the Galeno deposit. The former landowner has filed an action seekingto nullify the land transfer agreement, or in the alternative, that a higherprice be paid for the surface rights by the Company. As well, the plaintiff isseeking damages of 10 million Peruvian sols. The Company believes the action iswholly without merit and has contested the action in the Peruvian law courts.

 

**14.****         ****SUBSEQUENT EVENTS**

 

(a)           In April, 2007 the Company reached anagreement with a Peruvian owner to acquire a small claim fraction on the marginof the Galeno concession in consideration of a cash payment ofUS $2,000,000 and 175,000 common shares of the Company. A formal agreementwas signed in July, 2007. The payment of the cash and issuance of the sharesare pending the completion of title transfers in Peru.

** **

(b)           In July,2007 the Company issued 5,000 common shares for proceeds of $200 pursuant tothe exercise of stock options.

 

(c)           In July,2007 the Company entered into agreements with its directors and officerspursuant to which retention or compensation payments, in the aggregate of$1,645,000, would be payable upon the termination of services provided by theseindividuals to the Company in the event of a change of control of the Company.

 

20

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(d)           In August, 2007 the Company entered into anunsecured bridge financing facility for up to US $5,000,000 from adirector. The facility will be available to the Company for up to eight monthsand may be drawn down as needed. Interest at the rate of 10% per annum will bepayable monthly on amounts advanced under the facility. In addition, the Company will pay a standby fee of$100,000 and a drawdown fee of 3% of the amounts advanced. A total ofUS $1,800,000 has been drawn down on the facility.

 

(e)           In September, 2007 the Company entered intoagreements for a private placement financing of up to 1,759,452 common sharesat a price of $9.10 per share for gross proceeds of up to approximately $16million. Finders fees will be payable on a portion of the financing. The netproceeds from the financing will be used to repay the drawdown on the creditfacility (Note 14(d)), make the payment on the claim fraction (Note 14(a)),fund exploration and acquisition costs on the Galeno property and for generalcorporate working capital purposes.

 

21

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**Document No. 3**

 

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| **Management’s  Discussion and Analysis** | ** ** | ** **             |
|------------------------------------------------|------------|------------------------|
| **For the  Year Ended June 30, 2007**          | ** ** | **September 18, 2007** |

 

Northern Peru Copper Corp. (“Northern Peru” or the “Company”) isa resource exploration company with a focus on developing and advancing copperexploration projects in Peru. Northern Peru’s head office is located inVancouver, Canada. The Company’s common shares trade on the Toronto StockExchange (“TSX”) under the symbol “NOC”.

 

Thismanagement’s discussion and analysis (“MD&A”) focuses on significantfactors that affected Northern Peru and its subsidiaries during the relevantreporting period and to the date of this report. The MD&A supplements, butdoes not form part of, the audited consolidated financial statements of theCompany, and the notes thereto, for the year ended June 30, 2007. Therefore,the following discussion and analysis should be read in conjunction with theaudited consolidated financial statements for the year ended June 30, 2007 andthe related notes thereto. All amounts presented in this MD&A are inCanadian dollars unless otherwise indicated.

 

***ForwardLooking Information***

 

Statements contained in this MD&A that are nothistorical facts are forward-looking statements (within the meaning of theCanadian securities legislation and the U.S. Private Securities LitigationReform Act of 1995) that involve risks and uncertainties. Forward-lookingstatements include, but are not limited to, statements with respect to thefuture price of metals; the estimation of mineral reserves and resources, therealization of mineral reserve estimates; the timing and amount of estimatedfuture production, costs of production, and capital expenditures; costs andtiming of the development of new deposits; success of exploration activities,permitting time lines, currency fluctuations, requirements for additionalcapital, government regulation of mining operations, environmental risks,unanticipated reclamation expenses, title disputes or claims, limitations oninsurance coverage and the timing and possible outcome of pending litigation. Incertain cases, forward-looking statements can be identified by the use of wordssuch as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”,“estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or“believes”, or variations of such words and phrases or state that certainactions, events or results “may”, “could”, “would”, “might” or “will be taken”,“occur” or “be achieved”. Forward-looking statements involve known and unknownrisks, uncertainties and other factors which may cause the actual results,performance or achievements of the Company to be materially different from anyfuture results, performance or achievements expressed or implied by theforward-looking statements. Such risks and other factors include, among others,risks related to the integration of acquisitions; risks related to operations;risks related to joint venture operations; actual results of currentexploration activities; actual results of current reclamation activities;conclusions of economic evaluations; changes in project parameters as planscontinue to be refined; future prices of metals; possible variations in orereserves, grade or recovery rates; failure of plant, equipment or processes tooperate as anticipated; accidents, labour disputes and other risks of themining industry; delays in obtaining governmental approvals or financing or inthe completion of development or construction activities, as well as thosefactors discussed in the sections entitled “Risk Factors” in this MD&A. Althoughthe Company has attempted to identify important factors that could affect theCompany and may cause actual actions, events or results to differ materiallyfrom those described in forward-looking statements, there may be other factorsthat cause actions, events or results not to be as anticipated, estimated orintended. There can be no assurance that forward-looking statements will proveto be accurate, as actual results and future events could differ materiallyfrom those anticipated in such statements. Accordingly, readers should notplace undue reliance on forward-looking statements. The forward-looking statements in thisMD&A speak only as of the date hereof. The Company does not undertake anyobligation to release publicly any revisions to these forward-lookingstatements to reflect events or circumstances after the date hereof to reflectthe occurrence of unanticipated events.

 

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Forward-looking statements and otherinformation contained herein concerning the mining industry and generalexpectations concerning the mining industry are based on estimates prepared bythe Company using data from publicly available industry sources as well as frommarket research and industry analysis and on assumptions based on data andknowledge of this industry which the Company believes to be reasonable. However,this data is inherently imprecise, although generally indicative of relativemarket positions, market shares and performance characteristics. While theCompany is not aware of any misstatements regarding any industry data presentedherein, the industries involve risks and uncertainties and are subject tochange based on various factors.

 

***CautionaryNote to U.S. Investors***

 

All resource estimates inthis MD&A have been prepared in accordance with NI 43-101 under the CIMGuidelines. These standards differ significantly from the requirements of theUnited States Securities and Exchange Commission (the “SEC”), and resourceinformation incorporated by reference herein may not be comparable to similarinformation concerning U.S. companies.

This MD&A uses the terms“Measured Resources”, “Indicated Resources” and “Inferred Resources”. UnitedStates investors are advised that, while such terms are recognized and requiredby Canadian securities laws, the SEC does not recognize them. Under UnitedStates standards, mineralization may not be classified as a “reserve” unlessthe determination has been made that the mineralization could be economicallyand legally produced or extracted at the time the reserve determination ismade. **United States investors are cautionednot to assume that all or any part of Measured Resources or Indicated Resourceswill ever be converted into reserves.** Further, “Inferred Resources”have a great amount of uncertainty as to their existence and as to whether theycan ever be mined legally or economically. It cannot be assumed that all or anypart of the “Inferred Resources” will ever be upgraded to a higher category.Therefore, **United States investors are alsocautioned not to assume that all or any part of the Inferred Resources exist,or that they can ever be mined legally or economically.**  Accordingly, information concerningdescriptions of mineralization and resources contained in this MD&A may notbe comparable to information made public by United States companies subject tothe reporting and disclosure requirements of the SEC.

 

***Overview- Year Ended June 30, 2007***

 

Significantaccomplishments during fiscal 2007 and to the date of this MD&A were asfollows:

 

•      Completionof a prefeasibility study (“PFS”) and initiation of a feasibility study (“FS”)for the Galeno project;

 

•      Completionof a mineral resource estimate for the Hilorico gold deposit;

 

•      InAugust, 2007 discovery of a new silver-gold-zinc-lead mineralized area on theEl Molino concession, now known as the Sartenes prospect;

 

•      Exerciseof option to purchase the five mineral concessions that contain the majority ofthe Galeno copper-gold-molybdenum deposit;

 

•      Acquisitionof a 100% interest in the Molino concession (subject to 1% NSR royalty) whichcontains the Hilorico deposit and Sartenes prospect and a portion of the Galenodeposit;

 

•      Completionof an agreement with a Peruvian owner to acquire a small claim fraction, knownas the Tiranosaurio 9 fraction, on the margin of the Galeno and Molinoconcessions which overlies the Galeno deposit;

 

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With theexercise of the option to acquire the five mineral concessions on the Galenodeposit, the acquisition of the Molino concession and completion of theagreement on the Tiranosaurio 9 fraction, Northern Peru holds a 100%ownership interest in all the concessions comprising the Galeno and Hiloricomineral deposits, subject only to a 1% NSR royalty on the Molino concession.

 

***Significant Events, Transactions and Activities on Mineral Properties***

 

In order to better understandNorthern Peru’s financial results, it is important to gain an appreciation forthe significant events, transactions and activities on mineral properties whichhad occurred during the year ended June 30, 2007 and to the date of thisMD&A.

 

**GalenoProject**

 

The Galeno Projectincludes the Galeno and Hilorico deposits and the Sartenes Prospect.

 

**GalenoDeposit**

 

The mostsignificant accomplishment of the Company during fiscal 2007 was the completionof the PFS in December, 2006 and the initiation of the FS in January, 2007 forthe Galeno copper, gold, molybdenum, and silver project. The decision toproceed with the FS was based on the positive PFS results released on January10, 2007 (NR: 07-02).

 

The salient details of the PFS aresummarized in the following table (all amounts are in US dollars unlessotherwise noted):

 

| ** **                                                     | ** ** | **Prefeasibility Study** | ** ** |
|----------------------------------------------------------------|------------|-------------------------------|------------|
| NPV (after tax, 8% discount rate)                              |       | $ 560 million(1)         |       |
| IRR (after tax)                                                |       | 18.2%                         |       |
| Initial Capital Expenditure                                    |       | $ 976 million            |       |
| LOM C-1 Cash Costs (net by-product credits)                    |       | $ 0.513/lb Cu mined      |       |
| Mill Capacity                                                  |       | 90,000 tpd                    |       |
| Annual Throughput                                              |       | 32.4 million tonnes           |       |
| Mine Life                                                      |       | 20.4 years                    |       |
| Strip Ratio                                                    |       | 0.28:1(2)                     |       |
| LOM average annual copper-in-concentrate  production           |       | 144,000 tonnes                |       |
| First 5 Years average annual  copper-in-concentrate production |       | 202,000 tonnes                |       |
| First 8 years average annual gold  production                  |       | 103,000 ounces                |       |

 

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| (1) |   | based upon US$1.20  copper, $425 gold, $6.50 silver and $10 molybdenum prices, $100 treatment  charge and $0.07 refining charge.                  |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | includes 55  million tonnes of in-pit Inferred Resources categorized as waste. Excluding  Inferred Resources decreases the strip ratio to 0.18:1. |

 

Mineral resources that are not mineralreserves do not have demonstrated economic viability.

 

The PFS was completed by SamuelEngineering, Inc. Raymond R. Hyyppa, Robert Sim, P.Geo, Bruce M. Davis,FAusIMM, William L. Rose, PE and Scott C. Elfen, PE, are the Qualified Personsfor the PFS. The PFS was managed by MTB Project Management Professionals(project management, infrastructure, capital and operating costs) and comprisedseveral studies prepared by Norwest Corporation (resource estimate),  WLR Consulting (reserve, mining, productionschedule), Process Research Associates (metallurgy and environmental testing),Samuel 

 

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Engineering (process engineering,infrastructure and capital and operating costs), Vector Engineering (tailings,waste rock, environmental management, capital and operating costs), Montgomery,Watson, Harza (baseline environmental studies), SRK Consulting (cash flowmodeling and valuation) and Social Capital Group (socioeconomic studies). ThePFS, which was effective as of February 19, 2007 and revised on April 30, 2007,is available on the Company’s website (www.northernperu.com) and on SEDAR(www.sedar.com).

 

The Companyinitiated work on the FS in January 2007 and is scheduled to complete the FS inthe first half of calendar year 2008.

 

The FS is being managed by MTB ProjectManagement Professionals (project management, infrastructure, capital andoperating costs) with the support of several specialized consultants  including: Norwest Corporation (resourceestimate),  WLR Consulting (ore reserveestimation, mining, production schedule and capital and operating costs), SGSMineral Services- Santiago  (metallurgyand environmental testing), Samuel Engineering (process engineering, infrastructureand capital and operating costs), Wiley & Norrish (pit slope design),Vector Engineering-Lima (tailings, waste rock, environmental management,capital and operating costs), Cempro Tech- Lima (port facility engineering),Promotora de Proyectos- Lima (power supply), Montgomery, Watson, Harza-Lima(baseline water quality studies), SRK Consulting (cash flow modeling andvaluation),  and Social CapitalGroup-Lima (socioeconomic studies). FS progress as of the period ending August31, 2007 includes:

 

•      Metallurgical testing program - seven PQ core diamond drill holes were completed in April totalling1,155 meters. SGS Mineral Services-Santiago is conducting the metallurgicaltesting program under Samuel Engineering supervision. To date, testwork completedincludes High Pressure Grinding Roll (HPGR), abrasion, work index, mineralogy,rougher & cleaner flotation and pilot plant operation. Molybdenumseparation, lock-cycle and variability testing and associated mineralogy remainto be completed.

 

•      Pit slope geotechnical field program - twelve diamond drill holes were completed in May totalling 3,948meters. Downhole surveys for structural analysis were completed and downholeinstrumentation was installed and is being monitored. Data analysis is inprogress to support pit slope design recommendations.

 

•      Infill drilling program for resource / reserve estimation - a total of 20,500 meters were planned forthis program. At August 31, 2007 a total of 21,815 meters had been completed in195 drill holes. The program is designed to upgrade the prefeasibility studypayback period to the measured resource category and upgrade as much aspossible of the prefeasibility study +/-55 million tonnes of in-pit inferredresource to indicated resources.

 

•      Groundwater characterization program - drilling for pit slope design, groundwater and water supplycharacterization was completed in July. The program included nine rotary holes totalling 1,687 meters. Anadditional four core holes for an in-pit pump test were completed totalling 650meters. Associated pump tests were completed. Results from this work will beused to finalize pit slope stability design and water supply assessment.

 

•      Water supply / water users survey - a comprehensive stream flow monitoring program is ongoing in theregion surrounding the Galeno project. The focus of this program is tounderstand surface water flow conditions during the wet and dry season in thebroader 

 

4

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projectarea. In addition, existing local water use is being surveyed and assessed. Thisprogram is critical in developing a water supply strategy that meets bothproject and community needs.

 

•      Infrastructure/facility siting studies - as of August 31, a total of 1,136 metersof diamond drilling was completed in 13 drill holes to support geotechnicalinvestigations for the Galeno project infrastructure/facility siting.

 

•      Port facility design-a draft port facility design for the Salaverry port was completed in June. Thisincludes the ship loader, concentrate storage facility, conveyor and dockfacilities. Discussions with government authorities regarding facilitypermitting have been initiated.

 

•      Power supply & transmission - in July, Promotora de Proyectos was retained to develop engineeringstudies for power transmission to the Galeno project.

 

•      Social Environmental Impact Assessment (SEIA) baseline studies - several baseline studies were ongoing orinitiated during the period including social, surface water, groundwater,meteorology, biology and archaeology.

 

A critical component of the Galeno project isthe Company’s environmental and social programs. The Company has advanced asite-wide interim reclamation program which includes erosion control upgradesand revegetation of drilling disturbed areas using local community labor. As ofAugust 31, 2007, the Company has reclaimed 80,000 square meters of surfacedisturbance since starting drilling operations in June, 2005.

 

There are no environmental compliance issuesor violations to report for the year ended June 30, 2007 and to the date ofthis MD&A.

 

The Company’s communityrelations programs are ongoing. The programs are focused on local employment,health care, education and infrastructure improvement. In support of theseprograms, the Company has retained the Social Capital Group (SCG), a Peruvianbased consultancy, to assist in the development and implementation of a SocialManagement System for the development phase of the Galeno project. A primarycomponent of this work is to develop a process of continuous improvement toidentify, prevent and manage social risks. SCG is also assisting in landacquisition and socio-economic baseline data collection for the development ofthe SEIA required for project permitting.

 

In summary, the FS announced on January 10, 2007 iswell underway. The FS is focused on further refining the project design, costsand economics and will maximize the opportunity provided by the near surfacehigh grade zone which would form the basis of a starter pit in the early yearsof a mining operation.

 

In April,2007 the Company exercised its option on five mineral concessions on the GalenoProperty by making the remaining payment of US$1,120,000. The Company now ownsa 100% interest in the Property, subject only to bonus payments of US$250,000payable upon completion of a positive feasibility study and US$1,300,000payable one year after commencement of commercial production.

 

In addition,the Company concluded a buy-out of the existing leasehold agreement for US$4million on the Molino concession, which included buying-out the US$300,000 cashobligation due 

 

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uponcommencement of commercial production and the 6% net profits royalty, as wellas settling all litigation relating to Molino (refer to Note 4(a)(ii) of theconsolidated financial statements for June 30, 2007). The Company now owns a100% interest in the Molino concession, subject only to a 1% net smelterroyalty.

 

On July 16, 2007 the Company signed a formalagreement with a Peruvian owner to acquire a small claim fraction located onthe margin of the Galeno and Molino concessions and which overlies the Galenodeposit. Consideration for the acquisition is US$2 million and 175,000 commonshares. Payment is due upon the completion of the transfer of title to theCompany.

 

In May, 2007 an action was filed against the Company in connection withits purchase, in 2005, of 398 hectares of surface rights from a Peruvianlandowner, pursuant to a land transfer agreement. The surface rights aresituated over the Galeno deposit. The former landowner has filed an actionseeking to nullify the land transfer agreement, or in the alternative, that ahigher price be paid for the surface rights by the Company; as well theplaintiff is seeking damages of 10 million Peruvian sols. The Company believesthe action is wholly without merit and has contested the action in the Peruvianlaw courts.

 

Marshall Koval, P Geo, CEO of the Company, is the Qualified Person forthe Galeno project and is responsible for the disclosure on the Galeno projectin this MD&A.

 

**HiloricoDeposit**

 

In February, 2007, the Company received an independent NI 43-101compliant mineral resource estimate for the Hilorico gold deposit (NR: 07-01),which is located approximately one kilometre east from the Company’slarge-scale Galeno project and 16 kilometers from Yanacocha, South America’slargest gold mine.

 

A revised NI 43-101 technical report incorporating technicalinformation on the Hilorico deposit has been filed on SEDAR and may be obtainedat www.sedar.com. The revised report entitled “Technical Report – El GalenoProperty, Prefeasibility Study (El Galeno Deposit) and Technical Information(Hilorico Deposit)” is effective February 19, 2007 and was revised on April 30,2007.

 

On August 7, 2007 the Company announced the imminent drill testing deepporphyry-related base and gold metal targets in the Hilorico area. A 461 meterlong hole has been drilled and assay results are pending.

 

Marshall Koval, P Geo, CEO of the Company, is the Qualified Person forthe Hilorico deposit and is responsible for the disclosure on the Hiloricodeposit in this MD&A.

 

**SartenesProspect**

 

The prospect is located on a regional structure that passes through theHilorico gold deposit, 1.5 kilometers to the southwest, and the Galeno copperdeposit, 3.0 kilometers to the west-southwest. Prospecting of the Company’sclaims initially identified an area of small-scale historic mine workings andsurface mapping, rock chip sampling and ground geophysics followed.Mineralization at surface occurs in sulphide replacement bodies and epithermalveins that are hosted in limestones and minor intrusive dikes. The Company isnot aware of any previous drilling on the prospect and plans to complete 1,500meters of diamond drilling in September 2007.

 

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Leo Hathaway, P Geo, VP Exploration of the Company, is the QualifiedPerson for the Sartenes prospect and is responsible for the disclosure of theSartenes prospect in this MD&A.

 

**Pashpap Property**

 

The Pashpap Property is being managed by theJapan Oil, Gas and Metals National Corporation (JOGMEC). During the periodending March 31, 2007 the exploration program for the 2007 field season wasapproved. The total cost for the program is estimated at US$1.8M, and willinclude the following work items:

 

1)     Upgrading ofaccess roads,

2)     Detailedgeologic mapping,

3)     Geochemicalsurvey (+/- 1,000 soil/rock samples).

4)     IP/Magneticgeophysical survey,

5)     Environmentalstudies, and

6)     8,800 meters of rotary drilling.

 

In March and April, 2007 the agreement withJOGMEC was amended to include one additional concession that had been stakedand to decrease the number of meters to be drilled by JOGMEC from 25,000 metersto 20,000 meters.

 

JOGMEC will initiate the exploration programin October 2007.

 

***Financial Results From Operations***

** **

Theinformation provided below highlights the Company’s quarterly results for thepast 8 quarters as well as select annual and balance sheet information for theprior three fiscal periods. The financial information referenced below has beenprepared in accordance with Canadian generally accepted accounting principles(Canadian GAAP). The significant accounting policies are outlined within Note 2to the audited consolidated financial statements of the Company for the fiscalyear ended June 30, 2007 and have been followed consistently through the year.

 

**Summary of Unaudited Quarterly Results**

 

 
| **Three Months Ended:**      | ** ** | **June 30,  2007** | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** | **September 30,  2006** | ** ** |
|----------------------------------------|------------|-------------------------|------------|--------------------------|------------|-----------------------------|------------|------------------------------|------------|
| Revenue                                |       | $                       | —     |                     | $          | —                      |       | $                            | —     |   | $ | — |   |
| General  & administrative expenses |       | 811,956                 |       | 617,945                  |       | 767,683                     |       | 256,152                      |       |
| Other income  (expenses)               |       | (868,219                | )          | (103,622                 | )          | 118,809                     |       | 135,523                      |       |
| Loss for the  period                   |       | (1,680,175              | )          | (721,567                 | )          | (648,874                    | )          | (120,629                     | )          |
| Basic and  diluted loss per share      |       | (0.06                   | )          | (0.03                    | )          | (0.03                       | )          | —                       |       |
|                                        |            |                         |            |                          |            |                             |            |                              |            |  |  |  |  |

 
| **Three Months Ended:**      | ** ** | **June 30,********2006** | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** | **September 30,  2005** | ** ** |
|----------------------------------------|------------|-------------------------------|------------|--------------------------|------------|-----------------------------|------------|------------------------------|------------|
| Revenue                                |       | $                             | —     |                     | $          | —                      |       | $                            | —     |   | $ | — |   |
| General  & administrative expenses |       | 998,769                       |       | 362,863                  |       | 100,543                     |       | 123,401                      |       |
| Other income  (expenses)               |       | (13,272                       | )          | 13,564                   |       | 55,930                      |       | (38,832                      | )          |
| Loss for the  period                   |       | (1,012,041                    | )          | (349,299                 | )          | (44,613                     | )          | (162,233                     | )          |
| Basic and  diluted loss per share      |       | (0.03                         | )          | (0.02                    | )          | (0.00                       | )          | (0.01                        | )          |
|                                        |            |                               |            |                          |            |                             |            |                              |            |  |  |  |  |

 

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**Selected Annual Results and Balance SheetInformation**

 
| ** **                                                   | ** ** | **Year Ended**     | ** ** | **Year Ended**     | ** ** | **Period from  Inception  (February 28,  2005) to** | ** ** |
|--------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|--------------------------------------------------------------------|------------|
| **(Unaudited)**                                              | ** ** | **June 30,  2007** | ** ** | **June 30,  2006** | ** ** | **June 30,  2005**                                            | ** ** |
| Revenue                                                      |       | $                       | —     |                    | $          | —                                                             |       | $ | — |   |
| General  & administrative expenses                       |       | 2,453,736               |       | 1,585,576               |       | 546,495                                                            |       |
| Other income  (expenses)                                     |       | (717,509                | )          | 17,390                  |       | (10,845                                                            | )          |
| Loss for the  period                                         |       | (3,171,245              | )          | (1,568,186              | )          | (557,340                                                           | )          |
| Basic and  diluted loss per share                            |       | (0.12                   | )          | (0.07                   | )          | (0.08                                                              | )          |
|                                                         |       |                    |       |                    |       |                                                               |       |
| Working  capital                                             |       | 1,200,762               |       | 7,982,442               |       | 2,989,354                                                          |       |
|                                                         |       |                    |       |                    |       |                                                               |       |
| Properties:                                                  |       |                    |       |                    |       |                                                               |       |
| Mineral  property acquisition and deferred exploration costs |       | 33,597,268              |       | 13,374,555              |       | 3,136,437                                                          |       |
| Equipment                                                    |       | 94,922                  |       | 43,236                  |       | 22,367                                                             |       |
|                                                         |       |                    |       |                    |       |                                                               |       |
| Shareholders’  equity:                                  |       |                    |       |                    |       |                                                               |       |
| Share capital                                                |       | 38,205,738              |       | 22,459,154              |       | 6,153,592                                                          |       |
| Contributed  surplus                                         |       | 1,983,985               |       | 1,066,605               |       | 551,906                                                            |       |
| Deficit                                                      |       | (5,296,771              | )          | (2,125,526              | )          | (557,340                                                           | )          |
|                                                              |            |                         |            |                         |            |                                                                    |            |  |  |  |

 

**Results for the quarter endedJune 30, 2007**

 

During the quarter ended June 30, 2007, theCompany’s efforts were primarily concentrated on carrying out the work of theFS, as described above, and completing a financing for net proceeds of$15,539,700. The Company incurred a loss for the quarter of $1,680,175 whichconsisted of general and administrative (“G&A”) of $811,956 and otherexpenses, net of interest income and foreign exchange gains, of $868,219. G&Aexpenses increased during the quarter due to a retention bonus with a fairvalue of $106,000 (paid in shares) and legal fees relating to regulatory and corporatematters. Other expenses include an accrual for a donation of $1,005,000 pledgedto the University of British Columbia (the “University”) in connection with theUniversity’s plans to build a new earth science systems building. The donation may be made via theissue of common shares, which is subject to regulatory approval, and is payablein three tranches over a two year period.

 

**Resultsfor the year ended June 30, 2007**

 

The Company incurred a net lossof $3,171,245 for the year ended June 30, 2007 compared to a net loss of$1,568,186 for the year ended June 30, 2006. The 2007 loss consisted ofG&A expenses of $2,453,736 (2006 - $1,585,576), interest income of $168,859(2006 - $90,559), foreign exchange gains of $210,699 (2006 - $(72,611),donations expense of $1,005,000 (2006 - nil) and property investigations costsof $92,067 (2006 - $558).

 

G&A expenses for fiscal, 2007 were significantly higher than forfiscal 2006 due to the increase in the overall activity of the Company. Consultingfees (2007 - $350,056, 2006 - $nil) were accrued  for fees to Genuity Capital Markets (“Genuity”)and other advisors for the provision of advisory services toexplore various strategic alternatives. Genuity is an independent Canadianfinancial advisory firm specializing in the mining sector. Legal expensesincreased significantly for services related to regulatory, financing andcorporate matters. In 2006, a portion of 

 

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management and administrativefees and certain overhead expenses were shared with a related company that wassold in November, 2006 and therefore, subsequent to the sale, Northern Perubore a larger portion of these expenses. In 2007, the Company paid $60,082(2006 – nil) of interest on short term loans from a director. The loans were toassist in operations and were repaid in full in May, 2007 from the proceeds ofa financing.

 

Interest income earned on cash balances was higher in 2007 due to thelarger amount of cash held by the Company during 2007 compared to 2006. Foreignexchange gains and losses were due to the fluctuating US dollar versus theCanadian dollar; the Company’s expenditures on mineral properties beingpredominantly in US dollars.

 

On a cash basis, $968,370 was used for operating activities for 2007compared to $534,822 for 2006, reflecting the overall increase in activity infiscal 2007. Cash used in investing activities were $16,660,571 for 2007 versus$9,014,516 for 2006. The increase was due to acquisition costs to exercise theoption on five mineral concessions on the Galeno Property and to acquire theMolino concession and for expenditures and equipment purchases for thecompleted PFS and on-going FS work on the Galeno project. The Company raised$15,539,780 in cash during 2007 from a private placement financing which closedin May, 2007 and from the exercise of stock options. In fiscal 2006, theCompany raised $15,654,545 from two private placements and from the exercise ofstock options. The net change in cash was a decrease of $2,089,161 for the yearended June 30, 2007 compared to an increase of $6,105,207 for 2006. At June 30,2007, the Company had a cash balance of $7,056,669 compared to $9,145,830 atJune 30, 2006.

 

The Company’s primary assets are its mineral property interests. TheCompany capitalizes all costs incurred in connection with the acquisition,exploration and development of its mineral property interests. Mineral propertyexpenditures incurred during the fiscal 2007 totalled $20,222,713 (2006 -$10,238,118). Of this amount, $20,205,464 (2006 - $10,314,348) was incurred onthe Galeno project and $17,249 (2006 - $(76,230)), net of recoveries, wasincurred on Pashpap. As at June 30, 2007, the Galeno property had a carryingvalue of $33,440,818 (2006 - $13,235,354) and the Pashpap property had acarrying value of $156,450 (2006 - $139,201).

 

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***Critical Accounting Policies andManagement’s Estimates***

 

Thepreparation of financial statements in conformity with Canadian GAAP requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Significant estimates and assumptionsare used in determining the deferral of costs incurred for mineral properties,the fair value for recording stock-based compensation, asset retirementobligations and the amount of future income tax liabilities, if any, theCompany may be exposed to. The Company evaluates its estimates on an on-goingbasis and bases them on various assumptions that are believed to be reasonableunder the circumstances. The Company’s estimates form the basis for makingjudgments about the carrying value for assets and liabilities that are notreadily apparent from other sources. Actual results may differ from thoseestimates. Should the Company be unable to meet its ongoing obligations,the realizable value of its assets may decline materially from currentestimates.

 

The accounting policiesdescribed below are considered by management to be essential to theunderstanding and reasoning used in the preparation of the Company’s financialstatements and the uncertainties that could have a bearing on its financialresults.

 

**GoingConcern**

 

The Company’s ability tocontinue as a going concern is dependent on continued financial support fromits shareholders, the ability of the Company to raise equity or debt financingor to sell its assets or the attainment of profitable operations to meet thecompany’s liabilities as they become payable. The Company’s financialstatements are presented on a going concern basis, which assumes that theCompany will continue to realize its assets and discharge its liabilities inthe normal course of operations. The financial statements do not include anyadjustments to the recoverability and classification of recorded asset amountsand classification of liabilities that might be necessary, should the Companybe unable to continue as a going concern.

 

**Mineral propertycosts**

 

The Company capitalizes all costs related toinvestments in mineral property interests on a property by property basis. Suchcosts include mineral property acquisition costs and exploration anddevelopment expenditures, net of any recoveries. Costs are deferred until suchtime as the extent of mineralization has been determined and mineral propertyinterests are either developed, the property sold or the mineral rights are allowedto lapse.

 

Capitalized costs are reviewed, on a property byproperty basis, to consider whether there are any conditions that may indicateimpairment. When the carrying value of a property exceeds its net recoverableamount estimated by quantifiable evidence of an economic geological resource orreserve, joint venture expenditure commitments or the Company’s assessment ofits ability to sell the property for an amount less than the deferred costs,the property is written down for the impairment in value.

 

From time to time the Company may acquire or disposeof a mineral property interest pursuant to the terms of an option agreement.Where the options are exercisable entirely at the discretion of the Company orthe optionee, the amounts payable or receivable are recorded as property costsor recoveries when the payments are made or received.

 

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Capitalized costs will bedepleted over the useful lives of the properties upon commencement ofcommercial production or written off if the properties are abandoned or theclaims allowed to lapse.

 

**Stock based compensation**

 

The Company follows thefair value based method for measuring and recognizing all stock-based awardsmade to employees and non-employees. Fair value isestimated using the Black-Scholes Option Pricing Model. Option pricing modelsrequire the input of highly subjective assumptions including the expected pricevolatility and the period in which the option will be exercised. The estimatesconcerning volatility are made with reference to historical volatility, whichis not necessarily an accurate indicator of future volatility. Changes in thesubjective input assumptions can materially affect the fair value estimate.

 

***New Accounting Policies***

 

On July 1, 2007,subsequent to the year end, the Company adopted CICA Handbook Sections 3855 “FinancialInstruments – Recognition and Measurement”, CICA 1530 , “Comprehensive Income”and CICA “3251 “Equity”. These standards are described below. The adoption ofthese standards had no impact on the Company’s balance sheet of June 30, 2007and is not expected to have an impact on fiscal 2008 results or balances.

 

**Financial Instruments**

 

CICA HandbookSection 3855, “Financial Instruments – Recognition and Measurement”, requiresthat all financial assets except those classified as held to maturity, andderivative financial instruments must be measured at fair value. All financialliabilities must be measured at fair value when they are classified as held fortrading; otherwise, they are measured at cost. Investments classified asavailable-for-sale are reported at fair market value (or marked to market)based on quoted market prices with unrealized gains or losses excluded fromearnings and reported as other comprehensive income or loss. Investmentssubject to significant influence are not adjusted to fair market value.

 

**Comprehensive Income**

 

CICA Handbook Section 1530, “ComprehensiveIncome”, establishes standards for reporting and presenting certain gains andlosses normally not included in net earnings or losses, in a statement ofcomprehensive income. Comprehensive income is the change in the Company’s netassets arising from transactions, events and circumstances not related to theCompany’s shareholders and includes items that would not normally be includedin net earnings or losses such as unrealized gains or losses onavailable-for-sale investments. CICA 3251, “Equity”, establishes standards forthe presentation of equity and changes in equity as a result of the new requirementsin CICA 1530.

 

***Liquidity and CapitalResources***

 

The capital requirements of the Company have historically been met byequity proceeds. The Company’s continuing operations as intended are dependenton management’s ability to raise required funding through future equityissuances, debt, asset sales or a combination thereof *(refer toRisk Factors below)*.

 

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As at June 30, 2007, the Company had a working capital balance of$1,200,762 compared to a working capital balance of $7,982,442 at June 30, 2006.The decrease in working capital is due to expenditures incurred on advancingthe Galeno project. Working capital items at June 30, 2007 consist of cash of$7,056,669, receivables of $35,753, prepaid expenses of $87,404, accountspayable of $4,400,409 and accrued liabilities of $1,578,655.

 

Working capital is defined as current assets minus current liabilities.Working capital calculations or changes are not measures of financialperformance, nor do they have standardized meanings, under Canadian GAAP. Readersare cautioned that this calculation may differ among companies and analysts andtherefore may not be directly comparable.

 

The Company has no long-term debt obligations or off-balance sheetarrangements.

 

The Company requires additional financing to pay its currentliabilities, complete the FS on the Galeno project, meet the Company’sadministrative overhead for the ensuing twelve months and to repay the creditfacility for amounts drawn down. The Company will also require substantialadditional capital to continue the development on the Galeno project and toadvance the further definition of mineral reserves on the project (*refer to Risk Factors below*).

 

Subsequent to the year end, in August, 2007, the Company arranged for acredit facility of up to US$5,000,000 from a director. The credit facility isunsecured and is available for up to eight months. The funds will be drawn downas needed and will be used to fund expenditures on the Galeno project and forgeneral working capital purposes. A total of US $1,800,000 has been drawndown on the facility.

 

In September, 2007 the Company entered into agreements for a privateplacement of up to 1,759,452 common shares at a price of $9.10 per share forgross proceeds of approximately $16 million. The net proceeds from thefinancing will be used to fund the completion of the FS, acquire certainsurface rights on the Galeno project, make the payment on theTiranosaurio 9 claims fraction, repay the drawdown on the credit facilityand for exploration programs and corporate working capital purposes.

 

***Subsequent Events***

 

In July, 2007 the Company signed a formalagreement to acquire a small claim fraction located on the margin of the Galenoand Molino concessions in consideration of a cash payment of US $2 million and175,000 common shares, to be paid and issued upon the completion of thetransfer of title to the Company.

 

In July, 2007 the Company issued 5,000 commonshares for proceeds of $200 pursuant to the exercise of stock options.

 

In July, 2007 the Company entered intoagreements with its directors and officers pursuant to which retention orcompensation payments, in the aggregate of $1,645,000, would be payable uponthe termination of services provided by these individuals to the Company in theevent of a change of control of the Company.

 

In August, 2007 the Company entered into anunsecured bridge financing facility for up to US $5,000,000 from adirector of the Company. The facility will be available to the Company for upto eight months and may be drawn down as needed. Interest at the rate of 10%will be payable on amounts advanced under the facility. In addition, theCompany will pay a standby fee of 2% of the facility and a drawdown fee of 3%of the amounts advanced. An initial US $1.8 

 

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million was drawn down on August 29, 2007 topay for exploration expenditures on the Galeno Project and for corporateworking capital purposes.

 

In September, 2007 the Company entered intoagreements for a private placement financing for gross proceeds ofapproximately $16 million (refer to Liquidity and Capital Resources foradditional disclosure on the financing). Finders fees will be payable on aportion of the financing.

 

***Outlook***

 

Northern Peru intends to advance the Galenoproject by completing a feasibility study with a view to making a constructiondecision shortly thereafter.

 

With the proceeds from the $16 millionfinancing (refer to Liquidity and Capital Resources), the Companybelieves it has sufficient funds to advance the Galeno project through the feasibility stage, while at thesame time exploring the Sartenes prospect and Hilorico deposit. With a positivePFS in-hand and the FS underway, the Company intends to explore all itsoptions with respect to delivering shareholder value in this strong metalsprice cycle.

 

***Share Capital***

 

As at June 30, 2007, theCompany had:

 

•  29,314,442 issued andoutstanding common shares

•  options outstanding for theacquisition of 1,813,000 common shares having a weighted average exercise priceof $2.17 per share.

 

Subsequent to June 30, 2007,the Company issued 5,000 common shares pursuant to the exercise of options. Therefore,as at the date of this MD&A, the Company had 29,319,442 issued andoutstanding commons shares and 1,808,000 options outstanding.

 

***Related Party Transactions***

 

The Company shares general and administrativeexpenses on a pro-rata basis with three other companies with certain directorsin common.  These expenses include $9,493(2006 - $9,885, 2005 - $1,342) for rental of office premises and $39,180 (2006- $20,172, 2005 - $1,454) for management fees. Included in accounts payable isan amount of $27,729 (2006 - $48,572) owed to one of the companies for sharedexpenses.

 

During March and April, 2007 the Companyreceived loans in the aggregate of US $7,120,000 from a director in orderto pay for acquisition costs on the Galeno property and to assist in operations.The loans were repaid in full in May, 2007 with interest in the amount ofC $60,082.

 

Subsequent to June 30, 2007 the Company enteredinto an unsecured bridge financing facility for up to US $5,000,000 from adirector of the Company (refer to Subsequent Events for additional disclosure).

 

***Internal Controls Over Financial Reporting***

 

Management has designed, established and ismaintaining a system of internal control over financial reporting to providereasonable assurance that the financial information prepared by the Company forexternal purposes is reliable and has been recorded, processed and reported inan 

 

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accurate and timely manner and in accordance withCanadian generally accepted accounting principles. The Company’s system ofinternal control is designed to address identified risks that threaten thereliability of its external financial reporting. However, due to the inherentlimitations in any system of internal control, material misstatements may notbe prevented or detected on a timely basis.

 

During fiscal 2007, there were no changes in theCompany’s internal control over financial reporting that occurred that hadmaterially affected or is reasonably likely to materially affect its internalcontrol over financial reporting.

 

***Disclosure Controls and Procedures***

 

Management is responsible for establishing andmaintaining disclosure controls and procedures and internal control overfinancial reporting for the Company. Based on an evaluation of the Company’sdisclosure controls and procedures as of June 30, 2007 and to the date of thisMD&A, management believes such controls and procedures are effective inproviding reasonable assurance that material items requiring disclosure areidentified and reported in a timely manner.

 

***Risks and Uncertainties***

** **

The Company’s principal activity is mineralexploration and development. Companies in this industry are subject to many andvaried kinds of risks, including but not limited to, environmental, fluctuatingmetal prices, social, political, financial and economics. Additionally, fewexploration projects successfully achieve development due to factors thatcannot be predicted or foreseen. While risk management cannot eliminate theimpact of all potential risks, the Company strives to manage such risks to theextent possible and practicable.

 

The risks and uncertaintiesdescribed in this section are considered by management to be the most importantin the context of the Company’s business. The risks and uncertainties below arenot inclusive of all the risks and uncertainties the Company may be subject toand other risks may apply. *(For a more comprehensivediscussion of risk factors, the reader is referred to the Company’s AnnualInformation Form for the fiscal year ended June 30, 2007, which is available onwww.sedar.com).*

 

The Company’s mineralproperties are located in Peru and may be exposed to various and unpredictablelevels of political, social, economic and other risks and uncertainties. TheCompany conducts operations through foreign subsidiaries which hold the rightsto the mineral properties. Operations may be affected in varying degrees bygovernment regulations with respect to, but not limited to, expropriation ofproperty, maintenance of claims, environmental legislation, land use and landclaims. Failure to comply with applicable laws, regulations and local practicesrelating to mineral right applications and tenure could result in loss,reduction or expropriation of entitlements. In addition, any limitation imposedby a foreign government on the transfer of cash or other assets between theparent company and its foreign subsidiaries could restrict the Company’sability to fund its operations efficiently.

 

The Company’s exploration activities aresubject to a high degree of risk due to factors that, in some cases, cannot beforeseen or anticipated. The operations of the Company may be disrupted by avariety of risks and hazards which may be beyond the control of the Company. Theserisks include, but are not limited to, labour disruptions, the inability toobtain adequate sources of power, water, labour and suitable or adequatemachinery and equipment. In addition, the Company may be unable to acquire orobtain such things as surface rights which may be critical for the continuedadvancement of exploration activities on its mineral properties.

 

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The property interests held bythe Company are in the exploration stages only, are without known bodies ofcommercial mineralization and have no ongoing mining operations. Mineralexploration involves a high degree of risk and few properties which areexplored are ultimately developed into producing mines. Exploration of theCompany’s mineral properties may not result in any discoveries of commercialbodies of mineralization. If the Company’s efforts do not result in anydiscovery of commercial mineralization, the Company will be forced to look forother exploration projects or cease operations. 

 

Even if the Company’s mineral properties areproven to host economic reserves of copper or other precious or non-preciousmetals, factors such as those described above and (or) governmentalexpropriation or regulation may prevent or restrict mining of any such deposits.Exploration and mining activities may be affected in varying degrees bygovernment policies and regulations relating to the mining industry. Anychanges in regulations or shifts in political conditions are beyond the controlof the Company and may adversely affect its business.

 

In addition to complying with applicable lawsand regulations that govern the Company’s foreign operations, the Company mustalso obtain certain permits for its exploration activities. There can be noassurance that all permits that the Company may require for exploration andsubsequent development of its mineral properties will be obtainable onreasonable terms or on a timely basis.

 

The Company is subject to the laws and regulations relating toenvironmental matters in all jurisdictions in which it operates, includingprovisions relating to property reclamation, discharge of hazardous materialand other matters. The Company may also be held liable should environmentalproblems be discovered that were caused by former owners and operators of itsproperties and properties in which it has previously had an interest. TheCompany conducts its mineral exploration activities in compliance withapplicable environmental protection legislation. The Company is not aware ofany existing environmental problems related to any of its current propertiesthat may result in material liability to the Company.

 

Although the Company has takensteps to verify the title to mineral properties in which it has an interest, inaccordance with industry standards for the current stage of exploration of suchproperties, these procedures do not guarantee the Company’s title. Propertytitle may be subject to unregistered prior agreements or transfers and titlemay be affected by undetected defects.

 

The Company has no significantsource of operating cash flow and no revenues from operations. None of theCompany’s mineral properties currently have proven reserves. The Company haslimited financial resources. Substantial expenditures are required to be madeby the Company to establish ore reserves. The Company relies primarily on the saleof equity to fund its operations. There is no guarantee that it will be able toobtain adequate financing in the future or that such financing will beadvantageous to the Company. Additional funds raised by the Company through theissuance of equity, debt or convertible securities will cause the Company’scurrent stockholders to experience dilution. Such securities may grant rights,preferences or privileges senior to those of the Company’s common stockholders.

 

The Company’s ability to achieve profitabilityand positive cash flow from mining operations is dependent upon the Company’sability to raise required funding through future equity issuances, debt, assetsales or a combination thereof.

 

Based upon current plans, the Company expectsto incur operating losses in future periods due to continuing expensesassociated with the holding and exploration of the Company’s mineral 

 

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properties. The Company may not be successfulin generating revenues in the future. Failure to generate revenues or raisecapital could cause the Company to cease operations.

 

The Company does not have any contractualrestrictions on its ability to incur debt and, accordingly, the Company couldincur significant amounts of indebtedness to finance its operations. Any suchindebtedness could contain covenants, which would restrict the Company’soperations. The Company does not plan on entering into any debt obligations inthe next twelve months.

 

The Company has only a limited operatinghistory on which to base an evaluation of the Company’s current business andprospects, each of which should be considered in light of the risks, expensesand problems frequently encountered in the early stages of development of allcompanies. The results of this particular period should not be relied upon asan indication of future performance.

 

The Company’s expenditures are predominantlyin U.S. dollars and any future equity financing raised is expected to bepredominantly in Canadian dollars. The Company is exposed to financial riskarising from fluctuations in the exchange rates between the U.S. and Canadiandollar, and the degree of volatility of these rates. The Company does not usederivative instruments to reduce its exposure to foreign currency risks.

 

TheCompany presently has limited insurance covering its assets and operations anddoes not presently intend to increase such insurance. As a result of havinglimited insurance, the Company could incur significant costs that could have amaterially adverse effect upon its financial condition and even cause theCompany to cease operations.

 

TheCompany’s future performance is dependent on key personnel. The loss of theservices of any of the Company’s executives or directors could have a materialadverse effect on the Company’s business.

 

*News releases and additional information aboutthe Company, including its Annual Information Form, may be found onwww.sedar.com and on the Company’s website at www.northernperu.com.*

* *

*16*

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**Cautionary Note to United States Investors**

 

All resource estimates incorporated by reference in this Annual Reporton Form 40-F have been prepared in accordance with Canadian National Instrument43-101 and the Canadian Institute of Mining and Metallurgy ClassificationSystem. These standards differ significantly from the requirements of theSecurities and Exchange Commission (the “Commission”), and resource informationincorporated by reference herein may not be comparable to similar informationconcerning U.S. companies.

 

Without limiting the foregoing, this Annual Report on Form 40-F,including the documents incorporated by reference herein, uses the terms “measured”,“indicated” and “inferred” resources. United States investors are advised that,while such terms are recognized and required by Canadian securities laws, theCommission does not recognize them. Under United States standards,mineralization may not be classified as a “reserve” unless the determinationhas been made that the mineralization could be economically and legallyproduced or extracted at the time the reserve determination is made. UnitedStates investors are cautioned not to assume that all or any part of measuredor indicated resources will ever be converted into reserves. Further, “inferredresources” have a great amount of uncertainty as to their existence and as towhether they can ever be mined legally or economically. It cannot be assumedthat all or any part of the “inferred resources” will ever be upgraded to ahigher category. Therefore, United States investors are also cautioned not toassume that all or any part of the inferred resources exist, or that they canever be mined legally or economically. Accordingly, information concerningdescriptions of mineralization and resources contained in this Annual Report onForm 40-F or in the documents incorporated by reference, may not be comparableto information made public by United States companies subject to the reportingand disclosure requirements of the Commission.

 

**A.****            Disclosure Controlsand Procedures**

 

As of June 30,2007, the end of the period covered by this report, Northern Peru Copper Corp.(the “Company” or the “Registrant”) carried out an evaluation, under thesupervision and with the participation of the Registrant’s management,including the Registrant’s Chief Executive Officer and Chief Financial Officer,of the effectiveness of the design and operation of the Registrant’s disclosurecontrols and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of theExchange Act. Based on that evaluation, the Chief Executive Officer and ChiefFinancial Officer have concluded that, as of June 30, 2007, the Registrant’sdisclosure controls and procedures were effective to give reasonable assurancethat the information required to be disclosed by the Registrant in reports thatit files or submits under the Act is (i) recorded, processed, summarized andreported, within the time periods specified in the Commission’s rules andforms, and (ii) accumulated and communicated to management, including itsprincipal executive and principal financial officers, or persons performingsimilar functions, as appropriate to allow timely decisions regarding requireddisclosure.

 

**B.****           ****Management’s Annual Report on Internal Control Over Financial Reporting**

 

This annual report does not include a report ofmanagement’s assessment regarding internal control over financial reporting dueto a transition period established by rules of the Securities and ExchangeCommission for newly public companies.

 

**C.****           ****Attestation Report of the Independent Registered Public Accounting Firm**

 

This annual report does not include an attestationreport of the company’s registered public accounting firm due to a transitionperiod established by rules of the Securities and Exchange Commission for newlypublic companies.

 

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**D.****           ****Changes in Internal Control Over Financial Reporting**

 

There was no change in the Registrant’s internalcontrol over financial reporting that occurred during the period covered bythis report that has materially affected, or is reasonably likely to materiallyaffect, its internal control over financial reporting.

 

**E.****             Notice of PensionFund Blackout Period**

 

The Registrantwas not required by Rule 104 of Regulation BTR to send any notice to any of itsdirectors or executive officers during the fiscal year ended June 30, 2007.

 

**F.****             Audit CommitteeFinancial Expert**

 

The Registrant’sboard of directors has determined that Donald Shumka, an individual serving onthe audit committee of the Registrant’s board of directors, is an auditcommittee financial expert, as that term is defined in General InstructionB(8)(a) of Form 40-F. The Registrant’s board of directors has also determinedthat Ross Cory, John Wright and Donald Shumka, the individuals serving on theaudit committee of the Registrant’s board of directors, are independent, asthat term is defined under the rules and regulations of the American StockExchange.

 

The Securities and Exchange Commission hasindicated that the designation of a person as an audit committee financialexpert does not make such person an “expert” for any purpose, impose anyduties, obligations or liabilities on such person that are greater than thoseimposed on members of the audit committee and the board of directors who do notcarry this designation or affect the duties, obligations or liability of anyother member of the audit committee or board of directors.

 

**G.****            Codeof Ethical Conduct**

 

The Registrant has adopted acode of ethical conduct (the “Code”) that applies to all directors, officersand employees. A copy of the Code may be obtained atwww.northernperu.com. TheRegistrant will provide a copy of the Code without charge to any person thatrequests a copy by contacting the Corporate Secretary, Robert Pirooz, at theaddress on the cover of this Form 40-F.

 

**H.****            PrincipalAccountant Fees and Services and Audit Committee Pre-Approval Policies**

 

Informationabout the Registrant’s principal accountant fees and services and a descriptionof the Registrant’s pre-approval policies and procedures is included under theheadings “Audit Committee and External Auditor Services - External AuditorService Fees” and  “Audit Committee andExternal Auditor Services – Pre-Approval Policies and Procedures” of theRegistrant’s Annual Information Form, filed as part of this Annual Report on Form 40-F.

 

**I.****              Off-BalanceSheet Arrangements**

 

The Registrantis not a party to any off-balance sheet arrangements that have or arereasonably likely to have a current or future effect on its financial condition,changes in financial condition, revenues or expenses, results of operations,liquidity, capital expenditures or capital resources that is material toinvestors.

 

**J.****             TabularDisclosure of Contractual Obligations**

 

The Registrant does not have any contractualobligations and therefore this annual report does not include a tabulardisclosure of contracted obligations.

 

**K.****            CriticalAccounting Policies**

 

A discussionof the Registrant’s critical accounting policies can be found in its Management’sDiscussion and Analysis of Financial Condition and Results of Operations forthe year ended June 30, 2007 under the heading “Critical Accounting Policiesand Management Estimates” filed with the Securities and Exchange Commission asDocument 3 herein.

 

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**L.            Identification of the AuditCommittee**

 

The Registrant has a separately-designated standingaudit committee established in accordance with Section 3(a)(58)(A) of theExchange Act. The members of the Audit Committee are Ross Cory, John Wright and Donald Shumka. Further informationabout the Registrant’s audit committee can be found under the heading “AuditCommittee” of the Registrant’s Annual Information Form, filed as part of this Annual Report on Form 40-F.

 

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**UNDERTAKING AND CONSENT TO SERVICE OF PROCESS**

 

**A.****           ****Undertaking**

 

The Registrant undertakes tomake available, in person or by telephone, representatives to respond toinquiries made by the Commission staff, and to furnish promptly, when requestedto do so by the Commission staff, information relating to: the securities inrelation to which the obligation to file an annual report on Form 40-F arises;or transactions in said securities.

 

**B.****           ****Consent to Service of Process**

 

The Registrant filed withthe Commission a Form F-X together with this Form 40-F.

 

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**SIGNATURE**

 

Pursuant to the requirementsof the Exchange Act, the Registrant certifies that it meets all of therequirements for filing on Form 40-F and has duly caused this annual report tobe signed on its behalf by the undersigned, thereto duly authorized.

 

 
|                       | **NORTHERN  PERU COPPER CORP.** |
|----------------------------|---------------------------------|
|                       |                            |   |
|                       |                            |   |
| Dated:  September 27, 2007 | By:                             |   /s/ Marshall  Koval |
|                       | By:                             | Marshall Koval |
|                       | Title:                          | President, Chief Executive  Officer |

 

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**EXHIBIT INDEX**

 
| **Number** | ** ** | **Document**                                                                             |
|------------|------------|------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                               |
| 99.1       |       | Consent of Grant Thornton  LLP                                                           |
| 99.2       |       | Certifications of CEO and  CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 99.3       |       | Certification of CEO and  CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  |
| 99.4       |       | Consent of Raymond R.  Hyyppa, PE                                                        |
| 99.5       |       | Consent of Bruce M. Davis,  FausIMM, Ph.D                                                |
| 99.6       |       | Consent of Robert Sim,  P.Geo.                                                           |
| 99.7       |       | Consent of Scott C. Elfen,  PE                                                           |
| 99.8       |       | Consent of William L.  Rose, PE                                                          |

 

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