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UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended December 31, 2010

OR

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

For the transition period from ____________to ____________

Commission file number 001-35043

GREAT PANTHER SILVER
LIMITED(Formerly Great Panther Resources Limited)

(Exact name of Registrant as specified in its charter)

Not Applicable(Translation of Registrant's
Name into English)

British Columbia, Canada(Jurisdiction of
incorporation or organization)

2100-1177 West Hastings Street Vancouver, British
Columbia, Canada V6E 2K3(Address of principal executive offices)

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

|Not Applicable | Not Applicable                           
|-------------- | -----------------------------------------
|Title of Class | Name of Each Exchange on Which Registered

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

Common Shares Without Par Value(Title of
Class)

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

Not ApplicableTitle of Class

Indicate the number of outstanding shares of each of the
Registrant's classes of capital or common stock as of the close of the period
covered by the annual report.

There were 119,913,766 common shares, without par value, issued
and outstanding as of December 31, 2010.

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

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

Note  Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.

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

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one):

|Large accelerated filer [ ] | Accelerated filer [X] | Non-accelerated filer [ ]
|--------------------------- | --------------------- | -------------------------

Indicate by check mark which financial statement item the
registrant has elected to follow. [X] Item 17 [ ] Item 18

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] YES [X] NO

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. [ ] YES [ ] NO

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NOTE TO UNITED STATES READERS

DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING
PRACTICES

The Company is permitted, under the multi-jurisdictional
disclosure system adopted by the United States Securities and Exchange
Commission (the SEC), to prepare this annual report in accordance with
Canadian disclosure requirements, which differ from those of the United States.
The Company prepares its financial statements in accordance with Canadian
generally accepted accounting practices (GAAP), and they are subject to
Canadian auditing and auditor independence standards. They are not comparable to
financial statements of United States companies. Significant measurement
differences between Canadian GAAP and United States GAAP are described in Note
22 of the audited consolidated financial statements of the Company.

RESOURCE AND RESERVE ESTIMATES

Certain terms contained in this Form 20-F have been prepared in
accordance with the requirements of the securities laws in effect in Canada,
which differ from the requirements of United States securities laws. The terms
mineral reserve, proven mineral reserve and probable mineral reserve are
Canadian mining terms as defined in accordance with Canadian National Instrument
43-101  Standards of Disclosure for Mineral Projects (NI 43-101) and the
Canadian Institute of Mining, Metallurgy and Petroleum (the CIM) - CIM
Definition Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council, as amended. These definitions differ from the definitions in SEC
Industry Guide 7 under the United States Securities Act of 1993, as amended (the
Securities Act). Under SEC Industry Guide 7 standards, a final or bankable
feasibility study is required to report reserves, the three-year historical
average price is used in any reserve or cash flow analysis to designate reserves
and the primary environmental analysis or report must be filed with the
appropriate governmental authority.

In addition, the terms mineral resource, measured mineral
resource, indicated mineral resource and inferred mineral resource are
defined in and required to be disclosed by NI 43-101; however, these terms are
not defined terms under SEC Industry Guide 7 and are normally not permitted to
be used in reports and registration statements filed with the SEC. Investors are
cautioned not to assume that any part or all of mineral deposits in these
categories will ever be converted into reserves. Inferred mineral resources
have a great amount of uncertainty as to their existence, and great uncertainty
as to their economic and legal feasibility. It cannot be assumed that all or any
part of an inferred mineral resource will ever be upgraded to a higher category.
Under Canadian rules, estimates of inferred mineral resources may not form the
basis of feasibility or pre-feasibility studies, except in rare cases. Investors
are cautioned not to assume that all or any part of an inferred mineral resource
exists or is economically or legally mineable. Disclosure of contained ounces
in a resource is permitted disclosure under Canadian regulations; however, the
SEC normally only permits issuers to report mineralization that does not
constitute reserves by SEC Industry Guide 7 standards as in place tonnage and
grade without reference to unit measures.

Accordingly, information contained in this annual report and
the documents incorporated by reference herein contain descriptions of our
mineral deposits that may not be comparable to similar information made public
by U.S. companies subject to the reporting and disclosure requirements under the
United States federal securities laws and the rules and regulations thereunder.

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GLOSSARY OF TERMS

The following glossary, which is not exhaustive, should be used
only as an adjunct to a thorough reading of the entire document of which it
forms a part.

adit: A horizontal or close-to-horizontal tunnel,
man-made for mining purposes.

Ag: The chemical symbol for silver on the Periodic
Table.

andesite: A fine-grained brown or greyish intermediate
volcanic rock.

Au: The chemical symbol for gold on the Periodic Table.

breccia: A course-grained rock, composed of angular,
broken rock fragments held together by a mineral cement or a fine-grained
matrix.

chloritization: A form of alteration of a rock involving
the replacement by, conversion into, or introduction of chloride.

crosscuts: Mine openings or passageways that intersect a
vein or ore bearing structure at an angle.

epithermal: Applied to hydrothermal deposits formed at
low temperature and pressure.

Feasibility Study: A detailed study of a deposit in
which all geological, engineering, operating, economic and other relevant
factors are engineered in sufficient detail that it could reasonably serve as
the basis for a final decision by a financial institution to finance the
development of the deposit for mineral production.

felsic: Applied to an igneous rock having abundant
light-colored materials.

hectare: A metric unit of land measure equal to 10,000
square metres or 2.471 acres.

hydrothermal: Relating to hot fluids circulating in the
earth's crust.

Indicated Mineral Resource:As defined by the Canadian
Institute of Mining, Metallurgy, and Petroleum, an Indicated Mineral Resource is
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.
i

Inferred Mineral Resource:As defined by the Canadian
Institute of Mining, Metallurgy, and Petroleum, an 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.ii

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Measured Mineral Resource: As defined by the Canadian
Institute of Mining, Metallurgy, and Petroleum Standards on Mineral Resources
and Mineral Reserves, a Measured Mineral Resource is part of a Mineral Resource
for which quantity, grade or quality, densities, shape and physical
characteristics are so well established that they can be estimated with
confidence sufficient to allow the appropriate application of technical and
economic parameters, to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on a detailed and
reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits,
workings, and drill holes that are spaced closely enough to confirm both
geological and grade continuity.

mineral: An inorganic substance having usually a
definite chemical composition and, if formed under favourable conditions, having
a certain characteristic atomic structure which is expressed in its crystalline
form and other physical properties.

Mineral Resource:As defined by the Canadian Institute
of Mining, Metallurgy, and Petroleum, a Mineral Resource is a concentration or
occurrence of natural, solid, inorganic, or fossilized organic material in or on
the Earths crust in such form and quantity and of such 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:As defined by the Canadian Institute of
Mining, Metallurgy, and Petroleum, a 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 the material is mined.

mineral claim: The portion of mining ground held under
law by a claimant.

mineralization: Implication that the rocks contain
sulphide minerals and that these could be related to ore.

ore: That part of a mineral deposit which could be
economically and legally extracted.

Probable Mineral Reserve:As defined by the Canadian
Institute of Mining, Metallurgy, and Petroleum, a Probable Mineral Reserve is
the economically mineable part of an Indicated, and in some circumstances a
Measured, 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.

Proven Mineral Reserve:As defined by the Canadian
Institute of Mining, Metallurgy, and Petroleum, a Proven Mineral Reserve, is the
economically mineable part of a Measured 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 is
justified.

quartz: A common rock forming mineral consisting of
silicon and oxygen.

rhyolite: A fine-grained volcanic (intrusive) rock of
granitic composition.

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sulfidation: The reaction of a metal or alloy with a
sulfur-containing species to produce a sulfur compound that forms on or beneath
the surface of the metal or alloy.

stockwork: A metalliferous deposit characterized by the
impregnation of the mass of rock with many small veins or nests irregularly
grouped.

vein: A zone or belt of mineralized rock lying within
boundaries clearly separating it from neighbouring rock. A mineralized zone has,
more or less, a regular development in length, width and depth to give it a
tabular form and is commonly inclined at a considerable angle to the horizontal.
The term "lode" is commonly used synonymously for vein.

PART I

This annual report contains forward-looking statements as that
term is defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors" that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

As used in this annual report, the terms "we", "us", "our,
the Company and "Great Panther" mean Great Panther Silver Limited (formerly
Great Panther Resources Limited), and our subsidiaries, Minera Mexicana el
Rosario, S.A. de C.V., Metalicos de Durango, S.A. de C.V., and/or Minera de
Villa Seca, S.A. de C.V., unless otherwise indicated.

Unless otherwise indicated, all dollar amounts referred to
herein are in Canadian dollars.

|ITEM 1 | Identity of Directors, Senior Management and
      Advisers
|------ | -----------------------------------------------------------

|A. | Directors and Senior Management
|-- | -------------------------------

This Form 20-F is being filed as an annual report under the
Exchange Act, and, as such, there is no requirement to provide any information
under this item.

|B. | Advisers
|-- | --------

This Form 20-F is being filed as an annual report under the
Exchange Act, and, as such, there is no requirement to provide any information
under this item.

|C. | Auditors
|-- | --------

This Form 20-F is being filed as an annual report under the
Exchange Act, and, as such, there is no requirement to provide any information
under this item.

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|ITEM 2 | Offer Statistics and Expected Timetable
|------ | ---------------------------------------

Not applicable.

|ITEM 3 | Key Information
|------ | ---------------

|A. | Selected Financial Data
|-- | -----------------------

The following tables summarize certain of our key selected
financial data. This information should be read in conjunction with the more
detailed financial statements included in this Annual Report.

Selected Financial Data(Stated in Canadian
Dollars unless otherwise noted - Calculated in accordance with Canadian GAAP)

Fiscal Year Ended December 31 (Audited)

Expressed in (000s) of Canadian Dollars

|Canadian GAAP                                                                      | 2010        | 2009        | 2008       | 2007       | 2006      
|---------------------------------------------------------------------------------- | ----------- | ----------- | ---------- | ---------- | ----------
|Sales or Operating Revenue                                                         | 42,206      | 31,732      | 22,445     | 15,523     | 6,333     
|Income (Loss) for the year                                                         | 4,970       | (867)       | (13,761)   | (19,701)   | (15,084)  
|Income (loss) per Common Share  basic                                             | 0.04        | (0.01)      | (0.17)     | (0.27)     | (0.25)    
|Income (loss) per Common Share diluted                                            | 0.04        | (0.01)      | (0.17)     | (0.27)     | (0.25)    
|Total Assets                                                                       | 45,585      | 37,174      | 22,311     | 31,053     | 32,132    
|Capital Stock                                                                      | 83,470      | 75,910      | 57,865     | 56,988     | 46,393    
|Number of Common Shares (adjusted to reflect consolidation
      of common shares) | 119,913,766 | 111,239,631 | 81,654,521 | 80,744,352 | 69,797,348
|Long-Term Debt 1                                                                   | 4,739       | 4,460       | 5,545      | 4,117      | 2,451     
|Cash Dividends per Common Share                                                    | Nil         | Nil         | Nil        | Nil        | Nil       

1 Excludes asset retirement obligations and future
income tax liability.

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Selected Financial Data(Stated in
Canadian Dollars Unless Otherwise Noted - Calculated in accordance with US GAAP)

Fiscal Year Ended December 31 (Audited)

Expressed in (000s) of Canadian Dollars

|United States GAAP                                                                 | 2010        | 2009        | 2008       | 2007       | 2006      
|---------------------------------------------------------------------------------- | ----------- | ----------- | ---------- | ---------- | ----------
|Sales or Operating Revenue                                                         | 42,206      | 31,732      | 22,445     | 15,523     | 6,333     
|Income (loss) for the year                                                         | 5,264       | (2,271)     | (13,138)   | (19,323)   | (14,935)  
|Income (loss) per Common Share  basic                                             | 0.05        | (0.03)      | (0.16)     | (0.27)     | (0.25)    
|Income (loss) per Common Share  diluted                                           | 0.04        | (0.03)      | (0.16)     | (0.27)     | (0.25)    
|Total Assets                                                                       | 45,585      | 37,174      | 22,311     | 31,053     | 32,132    
|Capital Stock                                                                      | 87,185      | 79,626      | 64,077     | 63,200     | 52,604    
|Number of Common Shares (adjusted to reflect consolidation
      of common shares) | 119,913,766 | 111,239,631 | 81,654,521 | 80,744,352 | 69,797,348
|Long-Term Debt1                                                                    | 4,996       | 5,154       | 6,963      | 6,159      | 3,307     
|Cash Dividends per Common Share                                                    | Nil         | Nil         | Nil        | Nil        | Nil       

1 Excludes asset retirement obligations and future
income tax liability.

Disclosure of Exchange Rate History

On March 11, 2011, the exchange rate in effect for Canadian
dollars exchanged for United States dollars, expressed in terms of Canadian
dollars, and based on the noon buying rates in New York City, for cable
transfers in Canadian dollars, as certified for customs purposes by the Federal
Reserve Bank of New York was $0.9732.

For the past five fiscal years ended December 31, 2010 the
following average exchange rates were in effect, and for each of the previous
six months, the following high and low exchange rates were in effect, for
Canadian dollars exchanged for United States dollars and expressed in terms of
Canadian dollars:

|Year/Month End    | Average | Low/High      
|----------------- | ------- | --------------
|December 31, 2006 | $1.1340 | not applicable
|December 31, 2007 | $1.0734 | not applicable
|December 31, 2008 | $1.0660 | not applicable

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|Year/Month End     | Average        | Low/High       
|------------------ | -------------- | ---------------
|December 31, 2009  | $1.1412        | not applicable 
|December 31, 2010  | $1.0298        | not applicable 
|                   |                |                
|September 30, 2010 | not applicable | $1.0219/$1.0520
|October 31, 2010   | not applicable | $1.0028/$1.0321
|November 30, 2010  | not applicable | $1.0001/$1.0266
|December 31, 2010  | not applicable | $1.0004/$1.0176
|January 31, 2011   | not applicable | $0.9864/$1.0020
|February 28, 2011  | not applicable | $0.9737/$0.9955

|B. | Capitalization and Indebtedness
|-- | -------------------------------

Not Applicable

|C. | Reasons for the Offer and Use of
      Proceeds
|-- | -----------------------------------------------

Not applicable

|D. | Risk Factors
|-- | ------------

Risks Associated with Mining

Our reserve and resource estimates are based on
interpretation and assumptions and may yield less mineral production under
actual conditions than is currently estimated.

In making determinations about whether to advance any of our
projects to development, we must rely upon estimated calculations as to the
mineral reserves and grades of mineralization on our properties. Until ore is
actually mined and processed, mineral reserves and grades of mineralization must
be considered as estimates only. These estimates are imprecise and depend upon
geological interpretation and statistical inferences drawn from drilling and
sampling which may prove to be unreliable. We cannot assure you that:

- Reserve, resource or other mineralization estimates will be accurate; or
- Mineralization can be mined or processed profitably.

Any material changes in mineral reserve estimates and grades of
mineralization will affect the economic viability of placing a property into
production and a propertys return on capital. Our reserve and resource
estimates have been determined and valued based on assumed future prices,
cut-off grades and operating costs that may prove to be inaccurate. Extended
declines in market prices for silver, gold, zinc and lead may render portions of
our mineralization uneconomic and result in reduced reported mineral reserves.

Any material reductions in estimates of mineralization, or of
our ability to extract this mineralization, could have a material adverse effect
on our results of operations or financial condition. We cannot assure you that
mineral recovery rates achieved in small scale tests will be duplicated in large
scale tests under on-site conditions or in production scale.

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Mineral operations are subject to government regulations
which could have the effect of reducing or preventing us from exploiting any
possible mineral reserves on our properties.

Mining and exploration activities are subject to national and
local laws and regulations governing prospects, taxes, labour standards,
occupational health, land use, environmental protection, mine safety and others
which currently or in the future may have a substantial adverse impact on our
company. In order to comply with applicable laws, we may be required to make
capital expenditures until a particular problem is remedied. Existing and
possible future environmental legislation, regulation and action could cause
additional expense, capital expenditures, restriction and delays in the
activities of our company, the extent of which cannot be reasonably predicted.
Violators may be required to compensate those suffering loss or damage by reason
of our mining activities and may be fined if convicted of an offence under such
legislation.

Mining and mineral exploration has substantial operational
risks, which could prevent us from achieving profitable operations.

Mining and mineral exploration involves many risks, which even
a combination of experience, knowledge and careful evaluation may not be able to
overcome. Operations in which we have an interest will be subject to all of the
hazards and risks normally incidental to exploration, development and production
of base, precious and other metals, any of which could result in damage to or
destruction of mines and other producing facilities, damage to life and
property, environmental damage and possible legal liability for any or all
damage. The nature of these risks is such that liabilities could exceed policy
limits of our insurance coverage, in which case we could incur significant costs
that could prevent us from becoming profitable. Most exploration projects do not
result in the discovery of commercially mineable ore deposits and no assurance
can be given that any anticipated level of recovery of ore reserves will be
realized or that any identified mineral deposit will ever qualify as a
commercially viable ore body which can be legally and economically exploited.

Our projects are located in Mexico where mining and
exploration activities may be affected in varying degrees by political and
government regulations, which could have a negative impact on our ability to
continue our operations.

Mining and exploration activities in Mexico may be affected in
varying degrees by political instabilities and government regulations relating
to the mining industry. Any changes in regulations or shifts in political
conditions are beyond our control and may adversely affect our business. Our
operations may also be affected in varying degrees by government regulations
with respect to restrictions on production, price controls, export controls,
income taxes, expropriations of property, environmental legislation and mine
safety. The status of Mexico as a developing country may make it more difficult
for us to obtain any required financing for our projects. The effect of all
these factors cannot be accurately predicted. Notwithstanding the progress
achieved in restructuring Mexican political institutions and revitalizing its
economy, the present administration, or any successor government, may not be
able to sustain the progress achieved. We do not carry political risk insurance.

Our operations may be subject to environmental regulations
which may result in the imposition of fines and penalties.

Our operations may be subject to environmental regulations
promulgated by government agencies from time to time. There is no assurance that
environmental regulations will not change in a manner that could have an adverse
effect on our company's financial condition, liquidity or results of
operations.

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Environmental legislation is constantly expanding and evolving
in ways that impose stricter standards and more rigorous enforcement, with
higher fines and more severe penalties for non-compliance, and increased
scrutiny of proposed projects. There is an increased level of responsibility for
companies, and trends towards criminal liability for officers and directors for
violations of environmental laws, whether inadvertent or not. The cost of
compliance with changes in governmental regulations has a potential to reduce
the profitability of our operations.

While we maintain appropriate insurance for liability and
property damage, we may become subject to liability for hazards that cannot be
insured against, which if such liabilities arise, could reduce or eliminate
profitability for our company.

Our operations may involve the use of dangerous and hazardous
substances. While extensive measures are taken to prevent discharges of
pollutants in the ground water and the environment, and it is anticipated that
we will maintain appropriate insurance for liability and property damage in
connection with our business, we may become subject to liability for hazards
that cannot be insured against or which we may elect not to insure ourselves
against due to high premium costs or other reasons. Should such liabilities
arise, they could reduce or eliminate the profitability of us, resulting in a
decline in the value of our securities. In the course of mining and exploration
of our mineral properties, certain risks and, in particular, unexpected or
unusual geological operating conditions including rock bursts, cave-ins, fires,
flooding and earthquakes, may occur. It is not always possible to fully insure
against such risks and we may decide not to take out insurance against such
risks as a result of high premiums or other reasons. Should such liabilities
arise, they could reduce or eliminate any future profitability and result in
increasing costs and a decline in the value of our securities.

There can be no assurance that title to any property
interest acquired by us or our subsidiary is secured.

Although we have taken reasonable precaution to ensure that
legal title to our properties is properly documented, there can be no assurance
that our company's, or our subsidiaries, property interests may not be
challenged or impugned. Such property interests may be subject to prior
unregistered agreements or transfers or other land claims, and title may be
affected by undetected defects and adverse laws and regulations.

Our properties are in the production, development and
exploration stages; however, they have not all been proven commercially viable
at this time and there is no assurance that commercially viable quantities of
ore will continue to be discovered.

Our mineral properties are in the early production,
development, and/or exploration stages and are not all commercially viable at
this time. Despite extensive exploration work on our mineral properties and a
long history of continuous production at both the Topia and Guanajuato mines, no
known bodies of commercial ore or economic deposits have been established to the
satisfaction of National Instrument 43-101. Mineral exploration involves a high
degree of risk. There is no assurance that commercially viable quantities of ore
will be discovered at our exploration sites, or that our exploration properties
will be brought into commercial production. If we are not able to continue to
locate sufficient quantities of commercially viable ore and bring our
exploration properties into commercial production, we may not be able to
continue operations and, as a result, our shareholders may lose any investment
in our company.

We are subject to environmental protection legislation with
which we must comply or suffer sanctions from regulatory authorities.

If the results of our geological exploration program indicate
commercially exploitable reserves and we decide to pursue commercial production
of our mineral claims, we may be subject to an environmental review process under environmental assessment legislation.
Compliance with an environmental review process may be costly and may delay
commercial production. Furthermore, there is the possibility that we would not
be able to proceed with commercial production upon completion of the
environmental review process if government authorities do not approve our mine
or if the costs of compliance with government regulation adversely affect the
commercial viability of the proposed mine.

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Mineral prices are subject to dramatic and unpredictable
fluctuations.

The market price of precious metals and other minerals is
volatile and cannot be controlled. If the price of precious metals and other
minerals should drop significantly, the economic prospects of the projects in
which we have an interest could be significantly reduced or rendered uneconomic.
There is no assurance that, even if commercial quantities of ore are discovered,
a profitable market may exist for the sale of same. Factors beyond our control
may affect the marketability of any minerals discovered. Mineral prices have
fluctuated widely, particularly in recent years. The marketability of minerals
is also affected by numerous other factors beyond our control, including
government regulations relating to royalties, allowable production and importing
and exporting of minerals, the effect of which cannot be accurately predicted.

During the year, the Company entered into put and call option
contracts for lead and zinc to hedge against metal price variations. The
contacts are derivative financial instruments that are measured at fair value at
each reporting period with gains or losses recognized in net income in the
period in which it arises.

We cannot assure you that we will successfully acquire
additional commercially mineable mineral rights.

Most exploration projects do not result in the discovery of
commercially mineable ore deposits and no assurance can be given that any
anticipated level of recovery of ore reserves will be realized or that any
identified mineral deposit will ever qualify as a commercially mineable (or
viable) ore body which can be legally and economically exploited. Estimates of
reserves, resources, mineral deposits and production costs can also be affected
by such factors as environmental permitting regulations and requirements,
weather, environmental factors, unforeseen technical difficulties, unusual or
unexpected geological formations and work interruptions.

Material changes in ore reserves, grades, stripping ratios or
recovery rates may affect the economic viability of any project. Our future
growth and productivity will depend, in part, on our ability to identify and
acquire additional commercially mineable mineral rights, and on the costs and
results of continued exploration and potential development programs. Mineral
exploration is highly speculative in nature and is frequently non-productive.
Substantial expenditures are required to:

- Establish ore reserves through drilling and metallurgical and other testing
  techniques;
- Determine metal content and metallurgical recovery processes to extract
  metal from the ore; and
- Construct, renovate or expand mining and processing facilities.

In addition, if we discover ore, it would take several years
from the initial phases of exploration until production is possible. During this
time, the economic feasibility of production may change. As a result of these
uncertainties, there can be no assurance that we will successfully acquire
additional commercially mineable (or viable) mineral rights.

---

- 13 -

Risks Associated with our Business

Fluctuation in foreign currency exchange rates may affect
our results.

The Company maintains its bank accounts in Canadian dollars,
U.S. dollars and Mexican Pesos. The Company expects its revenue will continue to
be in U.S. dollars while certain of its costs are incurred in Canadian dollars
and Mexican Pesos. An appreciation in the Mexican Peso against the Canadian or
U.S. dollar will increase the costs of carrying on operations. A decrease in the
U.S. dollar against the Canadian dollar will result in a loss to the Company to
the extent that the Company holds funds in U.S. dollars.

Variations in the market prices of metals may affect our
ability to raise funding to continue exploration, development and mining of our
properties. In addition, any significant fluctuations in metal prices will
impact on our decision to accelerate or reduce our exploration activities.

Factors beyond our control may affect the marketability of any
substances discovered. The prices of various metals have experienced significant
movement over the last three years, and are affected by numerous factors beyond
our control, including international economic and political trends, expectations
of inflation, currency exchange fluctuations, interest rates and global or
regional consumption patterns, speculative activities and increased production
due to improved mining and production methods. The supply of and demand for
metals are affected by various factors, including political events, economic
conditions and production costs in major mineral producing regions. Variations
in the market prices of metals may affect our ability to raise funding to
continue exploration of our properties. In addition, any significant
fluctuations in metal prices will impact on our decision to accelerate or reduce
our exploration activities.

We are dependent on the services of certain key officers,
and the loss of these certain key personnel may have a material adverse effect
on our company.

While engaged in the business of mining and exploring mineral
properties in Mexico, the nature of our business, our ability to continue our
exploration of potential projects, and to develop a competitive edge in the
marketplace, depends, in large part, on our ability to attract and maintain
qualified key management personnel. Competition for such personnel is intense,
and we may not be able to attract and retain such personnel. Our growth has
depended, and in the future will continue to depend, on the efforts of our key
management personnel such as Robert A. Archer, our President, CEO and a
director, Kaare G. Foy, Executive Chairman and a director, Charles Brown, our
Chief Operating Officer and Raakel Iskanius, our Chief Financial Officer. The
loss of any of these people would have a material adverse effect on us.
Currently, we have contracts with these key employees. We do not have key-man
life insurance.

Conflicts of interest may arise as a result of our directors
and officers being directors and officers of other natural resource companies.

Certain of our directors and officers may continue to be
involved in a wide range of business activities through their direct and their
indirect participation in corporations, partnerships or joint ventures.
Situations may arise in connection with potential acquisitions and investments
where the other interests of these director and officers may conflict with the
interests of our company. Our directors and officers with conflicts of interest
will be subject to and will follow the procedures set out in the applicable
corporate legislation.

---

- 14 -

Risks Relating to an Investment in our Securities

The trading price of our common shares on the Toronto Stock
Exchange (TSX) and the NYSE Amex has been and may continue to be subject to wide
fluctuations.

Trading prices of our shares may fluctuate in response to a
number of factors, many of which are beyond our control. In addition, the stock
market in general, and the market for gold and silver exploration companies in
particular, has experienced extreme price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of such
companies. These broad market and industry factors may adversely affect the
market price of our shares, regardless of our operating performance.

In the past, following periods of volatility in the market
price of a company's securities, securities class-action litigation has often
been instituted. Such litigation, if instituted, could result in substantial
costs and a diversion of management's attention and resources.

Our By-laws indemnify our officers and directors against all
costs, charges and expenses incurred by them.

Our By-laws contain provisions limiting the liability of our
officers and directors for all acts, receipts, neglects or defaults of
themselves and all of our other officers or directors for any other loss, damage
or expense incurred by our company which shall happen in the execution of the
duties of such officers or directors, as do indemnification agreements between
us and our directors and officers. Such limitations on liability may reduce the
likelihood of derivative litigation against our officers and directors and may
discourage or deter our shareholders from suing our officers and directors based
upon breaches of their duties to our company, though such an action, if
successful, might otherwise benefit our company and our shareholders.

Investors' interests in our company will be diluted and
investors may suffer dilution in their net book value per share if we issue
incentive stock options to our employees, directors, officers and consultants.

We have granted, and in the future may grant, to directors,
officers, insiders, and employees, options to purchase our common shares as
non-cash incentives to those persons. Such options have been and may in future,
be granted at exercise prices equal to market prices, or at prices as allowable
under the policies of the TSX. The issuance of additional shares will cause our
existing shareholders to experience dilution of their ownership interests.

Investors' interests in our company will be diluted and
investors may suffer dilution in their net book value per share if we issue
additional shares or raise funds through the sale of equity securities.

Depending on the outcome of our exploration programs and mining
operations, we may issue additional shares to finance additional programs and
mining operations or to acquire additional properties. In the event that we are
required to issue additional shares or decide to enter into joint ventures with
other parties in order to raise financing through the sale of equity securities,
investors' interests in our company will be diluted and investors may suffer
dilution in their net book value per share depending on the price at which such
securities are sold. As at December 31, 2010, there are also outstanding common
share purchase warrants and options exercisable into 11,495,146 common shares
which, if exercised, would represent approximately 8.7% of our issued and
outstanding shares. If all of these shares are exercised and issued, such
issuance also will cause a reduction in the proportionate ownership and voting
power of all other shareholders. The dilution may result in a decline in the
market price of our shares.

---

- 15 -

U.S. investors may not be able to enforce their civil
liabilities against us or our directors, controlling persons and officers.

It may be difficult to bring and enforce suits against us. We
were incorporated under the Company Act (British Columbia) and continued
in the Yukon Territory under theBusiness Corporations Act(Yukon), and
then continued to British Columbia under the Business Corporations Act
(British Columbia) on July 9, 2004. All of our directors and officers are
residents of countries other than the United States and all of our assets are
located outside of the United States. Consequently, it may be difficult for
United States investors to affect service of process in the United States upon
those directors or officers who are not residents of the United States, or to
realize in the United States upon judgments of United States courts predicated
upon civil liabilities under the United States Securities Exchange Act of 1934,
as amended. There is substantial doubt whether an original action could be
brought successfully in Canada against any of such persons or us predicated
solely upon such civil liabilities.

Trading of our stock may be restricted by the SEC's "Penny
Stock" regulations which may limit a stockholder's ability to buy and sell our
stock.

The U.S. Securities and Exchange Commission has adopted
regulations which generally define "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established
customers and "accredited investors". The term "accredited investor" refers
generally to institutions with assets in excess of $5 million or individuals
with a net worth in excess of $1.0 million or annual income exceeding $0.2
million or $0.3 million jointly with their spouse. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document in a form
prepared by the SEC which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.

U.S. investors could suffer adverse tax consequences if we
are characterized as a passive foreign investment company.

We may be treated as a passive foreign investment company, or
PFIC, for United States federal income tax purposes during the 2010 tax year or
in subsequent years. We may be deemed a PFIC because previous financings
combined with proceeds of future financings may produce, or be deemed to be held
to produce, passive income. Additionally, U.S. citizens should review the
section entitled "Taxation-U.S. Federal Income Taxation - Passive Foreign
Investment Companies" contained in this annual report for a more detailed
description of the PFIC rules and how those rules may affect their ownership of
our capital shares.

---

- 16 -

If we are or become a PFIC, many of the U.S. shareholders will
be subject to the following adverse tax consequences:

- They will be taxed at the highest ordinary income tax rates in effect
  during their holding period on certain distributions on our capital shares,
  and gains from the sale or other disposition of our capital shares;
- They will be required to pay interest on taxes allocable to prior periods;
  and
- The tax basis of our capital shares will not be increased to fair market
  value at the date of their date.

We do not expect to declare or pay any dividends.

We have not declared or paid any dividends on our common stock
since our inception, and we do not anticipate paying any such dividends for the
foreseeable future.

|ITEM 4 | Information on the Company
|------ | --------------------------

|A. | History and Development of Great
      Panther
|-- | ----------------------------------------------

We were originally incorporated under the Company Act
(British Columbia) in 1965 under the name Lodestar Mines Ltd. Since that time,
we have had the following name changes:

- in 1980, to Lodestar Energy Inc.
- in 1985, to Controlled Environmental Farming International Ltd.
- in 1987, to International Controlled Investments Inc.
- in 1991, to New Age Ventures Inc.
- in January 1998, to Great Panther Inc.
- in October 2003, to Great Panther Resources Limited.
- on January 1, 2010, to Great Panther Silver Limited.

On March 22, 1996 we continued under the Business
Corporation Act (Yukon). On July 9, 2004, we continued to British Columbia
under the Business Corporation Act (British Columbia).

We have offices located at Suites 350 and 2100, 1177 West
Hastings Street, Vancouver, British Columbia, V6E 2K3, Canada. Our telephone
number is 604-608-1766, and our facsimile number is 604-608-1744.

Our company is currently a reporting issuer under the
securities laws of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario,
New Brunswick, Newfoundland Labrador, Nova Scotia and Prince Edward Island.

On June 18, 1980, our common shares were listed on the TSX
Venture Exchange (formerly known as the CDNX, and the Vancouver Stock Exchange).
Our trading symbol is "GPR", and until February 27, 2005, we were classified by
the TSX Venture Exchange as a Tier 2 company.

---

- 17 -

On October 2, 2003, we consolidated our common shares whereby
every ten common shares before consolidation became one common share after
consolidation.

On February 28, 2006, the TSX Venture Exchange elevated our
classification from a Tier 2 company to a Tier 1 company.

On November 14, 2006, our common shares began trading on the
TSX with the trading symbol GPR. Subsequently, we were de-listed from the
TSX Venture Exchange.

On January 1, 2010 we changed the Company's name from Great
Panther Resources Limited to Great Panther Silver Limited. There was no change
to the Company's capital structure or its symbol and the common shares continue
to trade on the main board of the Toronto Stock Exchange (TSX) under the
symbol GPR.

On February 8, 2011, our common shares were listed on the New
York Stock Exchange NYSE Amex, our trading symbol is "GPL". The Company has
retained its listing on the TSX in Canada under the trading symbol GPR.

Topia Mine

Effective February 18, 2004, we entered into the Topia Option
Agreement, which granted us the right and option, for a term of one year, to
purchase 100% of the ownership rights in and to all the fixed assets, machinery,
equipment (includes the mill, buildings, offices, houses and quarters for the
workers) and Topia Mining Concessions located in the Municipality of Topia,
State of Durango, Mexico from Cia Minera des Canelas y Topia, as optionor, by
making cash payments totalling US $1,737,084 as follows:

| | (a) | US $100,000 within 10 days of the date of registration at
      the Mining registry of the option agreement;                                                                                                                                             
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                          
| | (b) | US $150,000 within 5 days of the date the Company
      notifies the optionor of its decision to exercise the option;                                                                                                                                    
| |     |                                                                                                                                                                                                                                                          
| | (c) | US $540,165 on the date of signing of the purchase
      agreement (June 30, 2005);                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                          
| | (d) | Three annual payments of US $300,000, US $300,000 and US
      $346,919 each of the first, second and third year, respectively,
      commencing 18 months after the date the Company notifies the optionor of
      its decision to exercise the option.

All payments due to the optionor were made as of December 31,
2007.

In addition to the payments to the optionor, we agreed to
assume the debt encumbering the property, totalling US $814,594 upon signing of
the purchase agreement. The debt owing was secured by the Topia Mine assets. The
balance of the debt was repayable out of production from concentrate sales as a
10% net smelter return (NSR). After the debt was repaid, there was no further
NSR. As of December 31, 2007, the remaining debt balance was fully paid and
there were no outstanding conditions to retain title to the property. The
Company has surface rights for the land on which the plant sits and mineral
rights for the rest of the property.

As at December 31, 2010, there are no NSR royalties, or other
royalties payable, and there are no work commitments.

---

- 18 -

On March 8, 2006, the Company purchased a 100% interest in the
Arcoiris concession. The agreement required cash payments of US$20,000 (paid)
upon signing of the purchase agreement and additional staggered payments
totalling US$280,000 (paid). The Arcoiris concession is a strategic claim that
is contiguous with the existing Topia Mine Property. The 100 hectare concession
contains portions of the strike extension and down-dip projection of the Dos
Amigos Vein that the Company has already started developing on its own ground.

On December 16, 2009, the Company acquired a 100% interest in
the "La Prieta" concession for US$330,000. US$300,000 was paid in 2009 and
US$30,000 was paid March 31, 2010. The 94-hectare claim hosts two previously
mined silver-gold-lead-zinc-quartz vein structures and is situated approximately
two kilometres south of the principal veins presently being mined by the
Company, and within the Company's overall land package. As such, it is within
easy hauling distance to the Companys plant in Topia.

Guanajuato Mine

On October 25, 2005, we signed a formal purchase agreement with
the Sociedad Cooperativa Minero Metalúrgica Santa Fe de Guanajuato to purchase
100% of the ownership rights in a group of producing silver-gold mines in the
Guanajuato Mining District. The total purchase price was US$7,250,000, which
included 1,107 hectares in two main properties, the 1,200 tonne-per-day plant,
workshops and administration facilities, complete mining infrastructure, mining
equipment, and certain surface rights. At December 31, 2005 we paid
US$3,625,000. In 2006, we paid the remaining balance of US$3,625,000.

On May 15, 2006, we announced the purchase of 3.88 hectares of
real estate adjacent to the plant at our Guanajuato Silver-Gold Mine Complex.
The land was purchased from the Sociedad Cooperativa Minero Metalúrgica Santa Fe
de Guanajuato, the same Cooperative from which the mines were purchased in 2006,
for a total of US$690,425. A payment of US$201,825 was made at the time of the
signing of the purchase agreement and the remaining balance of US$488,600 was
paid in the second half of 2006. The Company has clear title to the property.
The decision to buy the extra land was taken in order to facilitate any future
expansion of the plant facilities and to protect the plant site from any
possible development nearby.

On December 27, 2007, the Company purchased an additional
0.2804 hectares of land immediately adjacent to the plant and below our tailings
dam at the Guanajuato Mine Complex. The land was purchased from the Sociedad
Cooperativa Minero Metalúrgica Santa Fe de Guanajuato, the same Cooperative from
which the mines were purchased in 2006, for a total of US$320,530. Payments were
made in two instalments, US$45,790 and US$274,740, on March 31, 2008 and June
30, 2008, respectively. The land was primarily purchased in order to protect the
area from any possible development. The Company has received clear title to the
new property.

As at December 31, 2010, there are no outstanding conditions to
retain title to the property. The Company has mineral and some surface rights.

Mapimi Project

On September 11, 2006, the Company signed an option agreement
to purchase 100% of the ownership rights to seventeen mining concessions
collectively known as the Mapimi Project (formerly Km 66) in eastern Durango
State, Mexico. In consideration for the right and purchase option the Company
was to make staged payments totalling US$3.0 million and issue 500,000 common
shares over a four-year period. The vendors retain a 3% NSR of which, each 0.5%,
up to a maximum of 2%, can be purchased by the Company for US$0.5 million.

---

- 19 -

On September 16, 2009, the Company announced the termination of
its option on the Mapimi project as management determined that it was
uneconomical to continue with the project and it was better use of the Companys
funds to focus its efforts on expanding the production and resources at its
existing mines.

As at the date of termination, US$0.8 million had been paid and
500,000 common shares had been issued.

San Antonio Project

Effective February 11, 2004, we entered into the Santo Nino
Option Agreement, which granted us the right and option, for a period of three
years, to purchase 100% of the ownership rights in and to the Santo Nino Mining
Concession located in the Guadalupe y Calvo Mining District, State of Chihuahua,
Mexico from Mr. Alfredo Rodriguez Chávez, as optionor, by making staged cash
payments totalling US $165,000. All of the payments were made as of December 31,
2007.

On February 2, 2007, we signed an option agreement with Altair
Ventures Inc. (Altair). Terms of the agreement allowed Altair to acquire a 70%
interest in the four mining claims named San Antonio, Iran, Chirpa, and
Santo Nino, by making staggered cash payments of US$0.2 million, issuing a
total of 0.2 million Altair common shares to Great Panther and incurring a
minimum of US$1 million of exploration expenditures over a three-year period. As
at December 31, 2009, US$0.06 million and 0.2 million shares of Altair have been
received in accordance with the agreement.

On February 1, 2010, Altair forfeited its option. The Company
agreed to accept 1,117,866 common shares of Altair at a deemed issue price of
$0.15 per share as full payment of Altairs indebtedness to the Company at
January 31, 2010.

On December 21, 2010, the Company relinquished its rights to
the San Antonio and Santo Nino mining concessions and wrote down the $0.07
million carrying value of the property.

|B. | Business Overview
|-- | -----------------

Great Panther Silver Limited is a profitable, primary silver
mining and exploration company listed on the Toronto Stock Exchange (TSX),
trading under the symbol GPR and on the New York Stock Exchange (NYSE) Amex,
trading under the symbol GPL. The Companys current activities are focused on
the mining of precious and base metals from its wholly-owned properties in
Mexico. In addition, Great Panther is also pursuing acquisition opportunities
throughout Latin America to add a third mine to its portfolio of properties.

We have two primary mining properties: (1) Topia Mine and (2)
Guanajuato Mine. We had two primary exploration properties (none at the date of
this report): (1) Mapimi (option agreement terminated in September 2009) and (2)
San Antonio (claims relinquished on December 21, 2010).

Primary Mining Properties

(1) Topia Mine

The property is located in northwest Durango State and consists
of four groups of mining concessions covering a total area of 6,399 hectares.
All are 100% owned by our Mexican subsidiary, Minera Mexicana el Rosario, S.A.
de C.V.

The property covers most of the Topia Mining District where
mineralization consists of epithermal silver-gold-lead-zinc veins hosted in
andesitic volcanic rocks. More than a dozen sub-parallel veins are known to exist at Topia and some extend for more than 4 kilometres
along strike. Vein widths are typically narrow, 0.2 to 1.0 metre.

---

- 20 -

Great Panther purchased the mine in 2005 and commenced mining
in January 2006. In March 2006, we reached a significant milestone in becoming a
primary silver producer with our first shipment of concentrates from operations.
Production was ramped up steadily until reaching approximately 3,000 tonnes per
month in late 2007. Custom milling for a local miner helps utilize the plants
capacity which operates at approximately 170 tonnes per day. The owner of the
local mine has recently developed a new mining area and has confirmed deliveries
to the Topia mine for the foreseeable future.

The Topia concentrator typically operates 5.67 days per week
and 50 weeks per year. There is no work scheduled on a Sunday and 8 hours per
week is scheduled for preventative maintenance.

Exploratory development work continues on many high grade veins
at Topia with priority on the San Gregorio, Rosario, Recompensa, Cantarranas and
Don Benito veins. Stoping has been initiated at Argentina, Level 2, where good
grades and better widths are already resulting in an increase in production.

Exploration spending at Topia is projected to total
approximately $3 million over the next two years. New underground mine
development, much of which will support exploration and resource development, is
anticipated to reach more than 5.5 kilometres at Topia. An estimated total of
20,000 metres of exploration drilling during 2010  2012 will concentrate on
defining resources, looking for vein extensions and testing new targets. In
2011, planned surface exploration diamond drilling totals 9,000 metres.

Production

Over the past two years, Topia has transformed its operations
with very positive results. Ore quality and metal production continues to excel
at a much lower cost per ounce of silver as the focus has shifted to production
stoping, with exploratory development limited to higher grade mining areas,
while the plant metallurgical performance has continued to improve.

Metal production for the year was 515,101 oz Ag, 597 oz Au,
1,092 tonnes Pb, and 1,358 tonnes Zn, or 822,247 Ag eq oz, which is a 24%
increase compared to the same period in 2009.

---

- 21 -

A summary of production at Topia for 2010 is as follows:

|                                           |  | FY10-Q1 |  |  | FY10-Q2 |  |  | FY10-Q3 |  |  | FY10-Q4 |  |  | TOTAL   | 
|------------------------------------------ |  | ------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | ------- | 
|                                           |  |         |  |  |         |  |  |         |  |  |         |  |  |         | 
|Tonnes milled                              |  | 9,745   |  |  | 9,176   |  |  | 10,278  |  |  | 9,081   |  |  | 38,280  | 
|Silver ounces                              |  | 132,102 |  |  | 121,758 |  |  | 131,591 |  |  | 129,650 |  |  | 515,101 | 
|Gold ounces                                |  | 145     |  |  | 185     |  |  | 159     |  |  | 108     |  |  | 597     | 
|Lead tonnes                                |  | 290     |  |  | 297     |  |  | 271     |  |  | 234     |  |  | 1,092   | 
|Zinc tonnes                                |  | 345     |  |  | 357     |  |  | 352     |  |  | 304     |  |  | 1,358   | 
|Silver equivalent
      ounces (Ag eq oz)1 |  | 211,128 |  |  | 205,350 |  |  | 210,171 |  |  | 195,598 |  |  | 822,247 | 

|1 | For 2010, silver equivalent ounces for each metal were
      established using commodity prices of: US$1,000 per oz, US$16 per oz,
      US$0.80 per lb, and US$0.80 per lb; for gold, silver, lead & zinc,
      respectively, and applied to the recovered metal content of the
      concentrates that were produced by the two operations. Average recoveries
      of 91.5% for Ag, 79.8% for Au, 93.9% for Pb, and 91.6% for Zn were
      realized which resulted in the production of 515,101 oz Ag, 597 oz Au,
      1,092 tonnes Pb, and 1,358 tonnes Zn for a silver equivalent production of
      822,248 ounces.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The plant performance at Topia remained solid in 2010 with
metal recoveries of 91.5% for Ag, 79.8% for Au, 93.9% for Pb, and 91.6% for Zn
compared to 89.7% for Ag, 83.0% for Au, 92.9% for Pb and 87.9% for Zn in 2009.
The plant processed 38,280 tonnes from the Company's mines in 2010 compared to
30,045 tonnes in 2009. In addition, 10,259 tonnes were custom milled in 2010 for
a local miner, thereby increasing revenue and reducing unit costs. Several
modifications were made at the end of 2010, including additional new flotation
cells for the zinc and lead concentrate circuits, which will enable plant
throughput to be increased in 2011 by 22%, from 180 to 220 tonnes per day.

Mine development continued to extend known areas and provide
access to new mining areas. Mining of the San Gregorio and El Rosario veins
progressed well, contributing almost 40% of the silver production. Ramp
development at Argentina continued and is now fully mechanized with an
electric-hydraulic drill jumbo, a new 2-yard underground loader and a 7-tonne
capacity haulage truck. Access to the third level is expected in the second
quarter of 2011.

The surface exploratory drilling program, completed in the
third quarter of 2010, was extremely successful and will guide mine development
to continue to expand silver production from the San Gregorio, Recompensa, and
Cantarranas (Hormiguera mine) veins plus enable new production to be added from
other veins where no mining is currently taking place. Drilling on the La Prieta
property proved the potential for this to be an additional mine for the Topia
operations, with high silver values in the three drill holes of up to 2,500g/t
over 0.25 metres. The program also returned several significant intercepts from
other veins that are not currently being mined, including the Higuera vein
(close to the San Gregorio vein), and the western portion of the Oliva vein
(close to the Recompensa vein).

In addition, mine development on the Cantarranas vein at the
Hormiguera mine has encountered 161 metres of strike length with an average
width of 0.19 metres grading 1,403g/t silver, 0.88g/t gold, 2.02% lead, and
7.76% zinc. At Mina 7, on the San Gregorio vein, development is ongoing
eastward, with 90 metres of strike length on the vein, with an average width of
0.43 metres grading 1,436g/t silver, 0.53g/t gold, 7.26% lead, and 12.23% zinc.
Sub-level development and stoping is ongoing in both areas.

Mineral resource estimations were completed on all viable areas
with the completion of the surface drilling and reported in March 2011. Added
mineral resources will play an important role in the Companys plans to increase
production at Topia by 20% per year from 2010 to 2012.

---

- 22 -

The Company issued an update on March 7, 2011 to the ongoing
mineral resource development at the Topia mine. The 2011 mineral resource
estimate increased measured and indicated mineral resources to 7.44 million
silver equivalent ounces, a 36.3% increase over the 2009 resource estimate, and
inferred resources to 11.91 million silver equivalent ounces, a 109.3% increase
over the previous estimate.

Principal Capital Expenditures

During 2010, the Company expended $2.8 million on mine
development and capital expenditures at Topia. Subsequent to the equity
financing in late 2009, the Company purchased six underground loaders of various
sizes, one drill jumbo and one eight ton truck, to accelerate its growth
strategy and achieve mining efficiencies.

(2) Guanajuato Mine

The Guanajuato silver-gold mine complex in Guanajuato, Mexico
consists of three principal mines, the Valenciana, Cata and Rayas. These mines
occupy the heart of the 25-kilometre long Veta Madre (Mother Lode) structure
that controls the majority of the silver-gold mineralization in the Guanajuato
Mine District. These mines are amongst the most historic and best known in
Mexico as silver was discovered in the area in 1548 and estimates of historical
production range from 700 million to 1.5 billion ounces of silver, and 4 to 7
million ounces of gold.

Great Panther purchased the mines in 2005, after many years of
under-capitalization, and immediately set out to prove up new resources,
rehabilitate the mines and refurbish the plant. Production commenced in June of
2006 and has increased steadily since that time. The plant is presently
processing approximately 12,000 tonnes per month but has a capacity to more than
double that.

From the fourth quarter of 2005 to the end of 2010, the surface
diamond drilling program at Guanajuato was highly successful in identifying and
delineating new zones of silver-gold mineralization. These discoveries highlight
the lack of previous exploration on the property and the potential for new zones
to be found throughout the mine. The easy access to these zones from existing
underground workings and the utilization of existing infrastructure means that
these zones can be developed quickly and cost-effectively.

Production stoping of the gold-rich Santa Margarita vein
progressed well although overall gold production was down slightly compared to
the previous quarter.

Production from the Los Pozos area on the 310 and 345 metre
levels continued to increase and accounted for more than 50% of the total silver
production at the mine. Access development to a third production stoping area at
the 380 metre level was completed in the fourth quarter of 2010 and exploratory
development was underway in December.

Revisions to the mine planning for Cata Clavo production have
been made and ramp development to access all veins on the 520 metre level, as
well as lateral development on the richer Alto 1(a) and Alto 2 zones, is
underway. Output from Cata is expected to be restored to previous levels as ore
grades improve. A new, 18-tonne capacity, underground haulage truck has been
received and is being utilized to haul ore from the deeper sections at Cata.

Exploratory core drilling of the Guanajuatito North Zone below
the 80 metre level has indicated mineralization continuing to depth and an
access ramp has been driven to intersect the vein on the 120 metre level. The
vein will be explored in more detail in the first quarter of 2011, in
preparation for an additional stoping area.

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- 23 -

Underground exploratory core drilling of the 1414 stope area
between the Valenciana and Cata mine areas at the 320 metre level is underway.
While this is being drilled, development along the 320 level will advance
sufficiently to start the deep drilling under the main Valenciana Mine. The deep
drilling will commence in the second quarter of 2011 and will test the Veta
Madre structures in the Valenciana area below the 390 level, and along a 600
metre strike length.

A program of geological mapping and rock sampling completed in
2010 by the Company indicates that the three known structures on the San Ignacio
property are up to 4 kilometres long and contain irregular silica breccia
veins hosting gold and silver mineralization. The results from the surface
program were sufficiently encouraging that the Company undertook a short Phase I
drill program in Q4 2010 to test the Melladito and Nombre de Dios vein
structures at depth. This program was successful in making what the Company
considers to be a new discovery of significant silver-gold mineralization.

In light of the success of the 2010 drilling at San Ignacio,
Great Panther's Board of Directors has approved a new 2011 budget of $2.8
million for the exploration of the San Ignacio property. As soon as the
appropriate permits are in place, an expanded drilling program will commence.
Potential sites to establish a portal for an underground ramp are also being
evaluated. Due to the proximity of the San Ignacio property to the Company's
main Guanajuato operation, any mineralization intersected in the course of
underground exploration and development can be trucked to the plant for
processing. As such, cash flow provided by the additional tonnage can be used to
offset the cost of the exploration and development program.

Production

Fourth quarter metal production from the Guanajuato mine
totalled 255,372 oz silver as well as 1,835 oz gold, or 370,062 Ag eq oz, from
processing 39,061 tonnes of ore with an average grade of 228g/t silver and
1.60g/t gold. This compares to the fourth quarter of 2009, when ore grades were
a record 271g/t silver and 2.14g/t gold. Plant throughput in the fourth quarter
of 2010 was 2% lower and plant silver and gold recoveries were higher by 7.9%
and 5.4%, respectively. However ore silver and gold grades were down by 16% and
25%, respectively. This resulted in an 11% decrease in silver production and a
22% decrease in gold production.

Metal production for the year was 1,019,856 oz Ag and 6,619 oz
Au, or 1,433,555 Ag eq oz. Compared to 2009, plant throughput was up by 4% to
144,113 tonnes in 2010 from 138,516 tonnes in 2009 and plant silver and gold
recoveries were up by 6% and 5%, respectively. However silver and gold ore
grades were down by 9% and 10%, respectively. Silver production was unchanged,
while gold production was down by 2%.

The Guanajuato plant achieved record gold recovery and
excellent silver recovery in the fourth quarter of 2010 of 91.1% and 89.1%,
respectively, and, for the year, record metal recoveries were achieved,
improving from 84.8% to 88.7%, for gold, and from 83.3% to 88.4%, for silver.
On-going improvements have been made to the plant operations and will continue
in 2011. Five new, 5-cubic metre flotation cells were ordered from Outotec for
delivery by the second quarter of 2011. In addition, new Krebs cyclones will
replace the last of three screw classifiers to further improve the control of
the grinding circuit.

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- 24 -

A summary of production at Guanajuato for 2010 is as follows:

|                                           |  | FY10-Q1 |  |  | FY10-Q2 |  |  | FY10-Q3 |  |  | FY10-Q4 |  |  | TOTAL     | 
|------------------------------------------ |  | ------- |  |  | ------- |  |  | ------- |  |  | ------- |  |  | --------- | 
|Tonnes milled                              |  | 34,912  |  |  | 34,379  |  |  | 35,761  |  |  | 39,061  |  |  | 144,113   | 
|Silver ounces                              |  | 225,030 |  |  | 288,825 |  |  | 250,629 |  |  | 255,372 |  |  | 1,019,856 | 
|Gold ounces                                |  | 1,453   |  |  | 1,289   |  |  | 2,042   |  |  | 1,835   |  |  | 6,619     | 
|Silver equivalent
      ounces (Ag eq oz)1 |  | 315,820 |  |  | 369,390 |  |  | 378,283 |  |  | 370,062 |  |  | 1,433,555 | 

|1 | For 2010, silver equivalent ounces for each metal were
      established using commodity prices of: US$1,000 per oz, US$16 per oz, for
      gold and silver respectively, and applied to the recovered metal content
      of the concentrates that were produced by the two operations. Average
      recoveries of 88.4% for Ag and 88.7% for Au were realized which resulted
      in the production of 1,019,856 oz Ag and 6,619 oz Au for a silver
      equivalent production of 1,433,555 ounces.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the quarter, the NI 43-101 compliant Measured and
Indicated mineral resource estimate for Guanajuato was updated and the first
mineral reserve statement was released. The Measured and Indicated resources
were estimated at 5.45 million Ag eq oz, the Inferred resources at 2.68 million
Ag eq oz, and the Proven and Probable mineral reserves (derived from the
Measured and Indicated resources) were estimated at 0.32 million tonnes with an
average grade of 282g/t silver and 2.19g/t gold. Significantly, the mineral
reserve grade compares very favourably with the average grades for 2010 and will
lead to improved output from Guanajuato in 2011 and 2012.

Principal Capital Expenditures

During fiscal 2010, the Company expended $1.2 million on mine
development and $4.9 million on capital expenditures. The Company purchased
equipment to improve mine efficiency and thereby increase production. Purchased
equipment included scissor lifts, scoop trams, and underground trucks.

Geological Justification of the Exploration Project

Geological exploration at the Guanajuato mine project is
justified broadly based on the following. After a complete review of over 65
years of accumulated geological mapping, detailed sampling, and drilling by the
former operator, the Companys geological team outlined numerous areas in late
2005 for further detailed exploration either by surface or underground core
drilling, detailed geological mapping and re-sampling. Key areas that were and
continue to be explored are listed below. Core drilling related to immediate
mine planning/exploitation is not considered in this review.

San Vicente and Animas: The 2005 review of historic data
revealed that underground sampling with economically significant results had not
been exploited. As this ore was readily accessible from surface, it was the
first area to undergo geological mapping and re-sampling during 2005 and 2006.
In 2006, a surface core drilling program intersected economically significant
results leading to re-commencement of underground exploitation in 2007.
Continued exploitation in the San Vicente and Animas areas proved to be
uneconomic due to low metal prices and low metal grades and the areas were
closed in mid-2008.

Guanajuatito: The 2005 review of historic data revealed
that underground sampling and surface core drilling with economically
significant results had not been exploited. As such, the underground workings
were re-mapped, and sampled to confirm previous results. On surface, a core
drilling program was conducted in late 2005 and 2006. Based on the favourable
results, mining and mine development recommenced in 2007 and has been extended
down from the plus 20 metre level to the 80 metre level. The geology department at the Guanajuato Mine continues exploration
activities with daily sampling, geological mapping of development headings and
underground core drilling. Exploratory core drilling of the Guanajuatito North
Zone below the 80 metre level has indicated mineralization continuing to depth
and an access ramp has been driven to intersect the vein on the 120 metre level.
The vein will be explored in more detail in the first quarter of 2011, in
preparation for an additional stoping area.

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- 25 -

Promontorio: The 2005 review of historic data revealed
that some areas with economically significant results from underground sampling
had not been exploited. Surface geological mapping and rock sampling were
completed in 2005. Surface core drilling in 2006 intersected economically
significant mineralization and was followed up in 2007 with more detailed core
drilling. Mine development and exploitation into the Promontorio area commenced
in early 2008 from one underground level (35 metre level) accessed from the San
Vicente area. In 2010, the 75 level was being refurbished for the exploitation
of the Veta Madre between the 75 and 35 levels.

Valenciana: The 2005 review of historic data revealed
that underground sampling and underground core drilling with economically
significant results had not been exploited. A small program of underground
geological mapping and sampling in 2006 confirmed the 2005 historic review. Of
particular note is that multiple veins were mapped and extremely high grade
silver-gold values were noted on the margins of old Spanish stopes. Due to
logistical limitations in re-establishing services into Valenciana, detailed
underground geological mapping and sampling was delayed until August 2008.
Rehabilitation of the 320 metre level is underway. While this is being drilled,
development along the 320 level will advance sufficiently to start the deep
drilling under the main Valenciana mine. The deep drilling will commence in the
second quarter of 2011 and will test the Veta Madre structures in the Valenciana
area below the 390 level, and along a 600 metre strike length.

Maravillas: The 2005 review of historic data revealed
that underground development above the 2,000 metre elevation was minimal with no
evidence of surface drilling. This gap in exploration along the Veta Madre,
along the west flank of the old Spanish Cata orebody workings, was seen as an
excellent opportunity to potentially drill off a shallow section of economically
significant mineralization. Six core holes were completed in 2007 with two
containing significant silver-gold mineralization in the Veta Madre. There is no
further exploration planned and no mineral resources are estimated for this
area.

Rayas: The 2005 review of historic data revealed that
some areas with economically significant results from underground sampling and
underground core drilling had not been exploited. Exploitation is now ongoing
with back filling of old stopes and mining of old pillars. Renewed exploration
of the deep potential at Rayas, below the 1,650 metre elevation, (450 metre
level) of previous exploitation, is underway. The first phase of cross cut and
drift development is complete and drilling commenced in February 2010. Assay
Data and geological interpretation from the drilling in 2010 has been used to
estimate the resources of the Santa Margarita vein. Drilling in the deep Rayas
area is planned to continue in 2011 to explore the deeper extensions of the
Rayas Clavo.

Cata: The 2005 review of historic data revealed that
areas with economically significant results from underground sampling and
underground core drilling had not been exploited. A deep underground drilling
program, below the 1,700-metre elevation (406 metre level, the lowest level of
exploitation by the previous operator), to in-fill and expand the previous
operators drilling at Cata, commenced in 2007 and was completed in September
2008. Economically significant mineralization has been intersected in many of
the Cata deep drill holes, as reported in various news releases of 2007 and
2008. The Company reported its first NI 43-101 compliant resource at Guanajuato
from the Cata area on June 30, 2009.

Several other areas of economic significance were geologically
mapped underground and re-sampled in 2006. Exploitation in the deepest parts of
Cata, and below the previous operators work, re-commenced in 2007 and is ongoing with a program of ramping, sub-level
development and production using cut-and-fill mining methods. To date, mining
has been extended from the 406 metre level to the 490 metre level. Underground
exploratory core drilling of the 1414 stope area between the Valenciana and Cata
mine areas at the 320 metre level is underway. While this is being drilled,
development along the 320 level will advance sufficiently to start the deep
drilling under the main Valenciana Mine. The deep drilling will commence in the
second quarter of 2011 and will test the Veta Madre structures in the Valenciana
area below the 390 level, and along a 600 metre strike length.

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- 26 -

Santa Margarita: In the Rayas area, development along
the Santa Margarita structure discovered economically significant gold and
silver mineralization in mid-2009. The Santa Margarita structure is parallel to
the Veta Madre and approximately 10 metres towards the hangingwall. Development
is ongoing via ramp access and will be extended between the 435 and 475 metre
levels in 2011. The Rayas deep core drilling program which commenced in 2010 was
successful in confirming economic mineralisation of the Santa Margarita
structure to depth. Stoping started in 2010 using mechanized cut and fill mining
methods.

Los Pozos: The Los Pozos area is located between the
Cata and Rayas shafts and has been the site of ramp development and underground
core drilling throughout 2009. The Los Pozos area is part of the Veta Madre that
had not been exploited by previous operators, and whose economic significance
was ascertained by re-sampling and underground core drilling during 2009 and
2010. The zone of mineralization has been confirmed to extend from the 275 to
the 390 metre level.

San Ignacio: The surface drilling program at the San
Ignacio mine property in Guanajuato commenced during the third quarter of 2010.
The property is located approximately 5 kilometres west-northwest of the city of
Guanajuato, where the Company operates its flagship Guanajuato mine. The
property was part of the package purchased by Great Panther in 2005 but due to
the Companys focus on the main mine complex, it had not conducted any work at
San Ignacio until 2010. The past-producing San Ignacio mine was put on
care-and-maintenance by the previous owners in 2001 due to low metal prices but
the infrastructure is still intact.

The San Ignacio mine property covers part of the La Luz vein
district, which is parallel to, and west of, the principal Veta Madre structure
that hosts the main Guanajuato mines. The La Luz district marks the site of the
first discovery of silver in the area in the year 1548, which led to the
discovery of the Veta Madre silver-gold deposits in 1550. It comprises a swarm
of generally north-northwest striking, west dipping quartz veins and breccias
with associated low sulphidation silver-gold mineralization, along an
approximate eight-kilometre long trend.

The Companys San Ignacio mine property covers approximately 4
kilometres of strike length on the La Luz vein system and is contiguous with
Endeavour Silvers Bolanitos mine property that is currently in production. The
San Ignacio mine exploited only about 500 metres of strike length along one of
the three known structures on the property and there is no record of any
previous exploration elsewhere on the claim block. Production records from 1977
to 2001 indicate that a total of 617,455 tonnes at a grade of 113g/t Ag and
1.01g/t Au were extracted from this small portion of the property at an average
rate of approximately 85 tonnes per day. This is similar to the grade that was
mined at Guanajuato prior to the Companys purchase of the mines in 2005 but the
Company has more than doubled this grade since then with increased grade control
and improved mining methods. As there is no processing facility at San Ignacio,
ore was trucked to the Cata plant in the main mine complex in Guanajuato,
approximately 20 kilometres by road.

A program of geological mapping and rock sampling completed in
2010 by the Company indicates that the three known structures on the San Ignacio
property are up to 4 kilometres long and contain irregular silica breccia veins hosting gold and silver mineralization.
The results from the surface program were sufficiently encouraging that the
Company undertook a short Phase I drill program in Q4 2010 to test the Melladito
and Nombre de Dios vein structures at depth. This program was successful in
making what the Company considers to be a new discovery of significant
silver-gold mineralization.

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- 27 -

The Phase I drill program was continued into Q1 2011 with an
additional 4 holes while permitting for Phase II was underway. The eight holes
drilled have delineated a package of multiple parallel quartz veins, breccias
and stockwork zones that carry sufficient grades as to be potentially economic,
based upon Great Panthers experience at its neighbouring Guanajuato Mine
Complex. The veins have been drilled over a strike length of more than 150
metres and for a vertical depth of more than 300 metres.

The Phase II permit has now been received and a contract for
approximately 6,700 metres in 18 holes has been granted to BDW Drilling. The
Company is compiling drill data in order to estimate a preliminary resource and
has started the permit application process, including preparation of an
Environmental Impact Assessment, in anticipation of a positive decision to
establish a mine portal and drive a decline ramp from surface to access the
veins for underground mining. During the course of development, any ore from the
San Ignacio Mine property will be trucked to Great Panther Silvers Guanajuato
Plant for processing, where the capacity currently exists to double ore
throughput.

Funding for Exploration Program

The exploration program at Guanajuato will be funded through
cash flow from operations.

Individuals Responsible for Conducting Proposed Exploration
Work and Their Qualifications

Robert F. Brown, P. Eng

The exploration program will be guided by Robert F. Brown, P.
Eng (Province of British Columbia, Canada) who is both the Companys qualified
person as defined under NI 43-101 and Vice President of Exploration.

Mr. Brown gained insight into exploration geology and on-site
mine geology working 15 years with LAC Minerals Ltd, a former Canadian mining
company, and then another 14 years with various junior exploration companies, in
Canada, Mexico, Ecuador, Peru, Argentina and Indonesia before joining the
Company in 2004.

Sampling - Collection, Preparation, Analytical Procedures,
and Quality Assurance/Quality Control Protocols

Core and rock samples are brought to surface every day from
various underground workings to two central gathering points. Mine channel
samples are sorted in a secure building within the Guanajuato complex and hand
delivered to an on-site, independently operated laboratory. Core samples are
delivered to a large secure warehouse within the Guanajuato complex where they
undergo detailed logging and are cut in half with a core saw, with half the core
bagged for assay and the other half stored securely in a locked building.
Exploration geologists add blank and standard samples into the sequence of
bagged core, and deliver the samples to the laboratory.

Mine channel samples are collected daily by trained samplers
under the supervision of mine geologists. Mine geologists mark up the
underground locations where the samples are to be taken by the samplers. The
samplers label the sample bags, collect the samples, and seal the bags
underground. The samplers then carry the samples to surface and to the secure area. Mine
geologists then sort the samples and add blank and standard samples into the
sequence of samples, and deliver the samples to the laboratory.

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- 28 -

In the core warehouse, geologists log the core. This includes
detailed geotechnical measurements, geological logging following a standardized
geological legend, and marking the core for core saw splitting. After the core
is split, the geologists describe in detail each sample to be taken, then label,
tag, fill, and seal each sample bag with the appropriate core. Samples are
delivered daily to the laboratory.

Rock and core geological and sample details are entered daily
into a dedicated geological database located on the Guanajuato mine computer
server.

The Guanajuato assay laboratory was constructed in 2006-07 in a
warehouse within the Guanajuato mine complex. It was designed by SGS Canada
Inc., an internationally recognized analytical company (SGS Group). Laboratory
equipment was procured from sources recommended by SGS, and construction was
overseen by SGS. The Guanajuato mine laboratory was the 101st
independent laboratory designed and built by SGS. The laboratory is owned by the
Company and independently operated by SGS.

All samples collected at the mine are assayed at the on-site
laboratory. All samples are assayed for silver and gold using a combination of
fire assay and atomic absorption finish. Select samples including mine
concentrate samples use a combination of fire assay and gravimetric finish for
silver and gold assaying. Certain exploration samples are also analyzed for
copper, lead, zinc, arsenic, and antimony using aqua regia digestion and atomic
absorption finish. Assay results are stored in an onsite computer server, and
e-mailed daily to the Guanajuato mine computer server. Assays are then merged
into the mine database.

Assay quality assurance is guaranteed by the Company geologists
inserting blank, standard and split samples into the sample sequence. Standard
samples are inserted one every twenty samples, while blanks and splits are
inserted one every 40 samples. This is apart from internal quality assurance
measures taken by SGS.

Primary Exploration Properties

(1) Mapimi Project

The Mapimi Project (formerly Km66) was an advanced stage
exploration project that hosts significant silver-lead-zinc-gold mineralization
and a recently discovered molybdenum deposit. The Companys goal at Mapimi was
to define a bulk tonnage deposit amenable to open pit mining, thereby
significantly enhancing Great Panther's growing portfolio of silver projects.
The property consisted of 17 concessions in northeast Durango State and bisected
by a paved highway approximately 100 kilometres from Peñoles' smelter at
Torreon, so infrastructure was considered excellent.

Exploration on the Mapimi property since 2006 consisted of
detailed geological mapping and re-sampling of outcrops, adits and trenches; an
airborne geophysical survey and a ground induced polarization geophysical
survey; and 12,448 metres of core drilling in 60 holes. The drilling on the La
Gloria and Las Palmitas Ag-Pb-Zn Zones, which commenced in December 2006,
increased the confidence level of the initial resource, resulting in a new
Indicated Mineral Resource estimated at 6,585,900 tonnes grading 28g/t silver,
0.09g/t gold, 0.41% lead and 1.14% Zn and an Inferred Mineral Resource at
2,027,900 tonnes grading 34g/t silver, 0.13g/t gold, 0.54% lead and 0.81%
zinc.

Drill-testing of other targets on the property resulted in the
discovery of a buried molybdenum deposit, named the Bulls-Eye Zone, and of
Ag-Pb-Zn mineralization in an area named the North Zone.

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- 29 -

On September 16, 2009, the Company announced the termination of
its option on the Mapimi project as management determined that it was
uneconomical to continue with the project and it was better use of the Companys
funds to focus its efforts on expanding the production and resources at its
existing mines.

(2) San Antonio Project

The mining concessions comprising the San Antonio project cover
an area of 11,946 hectares, and are located in the municipality of Guadalupe y
Calvo, State of Chihuahua, Mexico, approximately 162 kilometres south-southwest
of the city of Hidalgo de Parral, Chihuahua, and 265 kilometres southwest of the
city of Chihuahua.

Multiple targets have been identified by Great Panther at San
Antonio within a variety of geological settings, including gold-copper veins,
breccias and stockworks, as well as silver-lead-zinc veins. A total of 20
separate mineralized structures have been identified to date. Underground
sampling by the Company in 2004 along the Santo Niño Zone returned an average
grade of 7.75 g/t gold over an average width of 3.03 metres along a 25 metre
strike length. The Company owns a 100% undivided interest in the entire San
Antonio package. As the project was considered to be a non-core asset to the
Company, it had been optioned to Altair Ventures Incorporated.

On February 1, 2010, Altair forfeited its option. On December
21, 2010 the Company relinquished its rights to the San Antonio and Santo Nino
mining concessions resulting in a $0.07 million write-down in the carrying
value.

Revenues

The Company recognizes revenue from the sale of concentrates
upon delivery when persuasive evidence of a sales agreement exists, the risks of
ownerships are transferred to the customer, collection is reasonably assured and
the price is readily determinable. Revenue is based on market metal prices and
mineral content. Revenue is recorded in the consolidated statement of operations
net of treatment and refining costs paid to counter parties under terms of the
off-take arrangements. Revenue from the sale of the concentrates is subject to
adjustment upon final settlement based upon metal prices, weights and assays.
For each reporting period until final settlement, estimates of metal prices are
used to record sales using forward metal prices based upon the expected final
settlement date.

For the year ended December 31, 2010, we earned $42.2 million
in revenue from our Topia and Guanajuato mining operations. Revenues for 2009
were $31.7 million.

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- 30 -

Market Prices

The market prices of gold, silver and other precious metals
have historically fluctuated widely and are affected by numerous global factors
beyond our control. A decline in such market prices may have an adverse effect
on revenues we receive from the sale of minerals. A decline in prices will also
reduce our exploration efforts and make it more difficult to raise capital.

Seasonality of our Business

Our business is not expected to be seasonal and our mining and
milling operations will be carried out year round.

Sources and Availability of Raw Materials

Other than water and power, both of which are readily
available, we do not require any raw materials with which to carry out our
business.

Patents and Licenses; Industrial Commercial and Financial
Contracts; and New Manufacturing Processes

In conducting our business operations, we are not dependent on
any patented or licensed processes, technology, industrial, commercial or
financial contracts or new manufacturing processes.

Competitive Conditions

We compete with other mining companies, some of which have
greater financial resources and technical facilities, for the acquisition of
mineral interests, as well as for the recruitment and retention of qualified
employees.

Government Regulations

The mining industry in Mexico is controlled by the Secretaria
de Economia  Dirección General de Minas which is located and administered from
Mexico City. Mining concessions in Mexico may only be obtained by Mexican
nationals or Mexican companies incorporated under Mexican laws. The construction
of processing plants requires further governmental approval.

The holder of a mining concession is granted the exclusive
right to explore and develop a designated area. Mining concessions are granted
for 50 years from the date of their registration with the Public Registry of
Mining to the concession holder as a matter of law if all regulations have been
complied with. During the final five years of this period, the concession holder
may apply for one additional 50 year period, which is automatically granted
provided all other concession terms had been complied with.

In accordance with the Federal Duties Law ("LFD") the holder of
a mining concession is obligated to pay biannual duties in January and July of
each year based upon the number of hectares covered by the concession area.

Concessionaires must perform work each year that must begin
within ninety days of the concession being granted. Concessionaires must file
each May, proof of the work performed. Non-compliance with these requirements is
cause for cancellation only after the Ministry of Mines communicates in writing
to the Concessionaire of any such default, granting the Concessionaire
a specified time frame in which to remedy the default.

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- 31 -

There are no limitations on the total amount of surface covered
by mining concessions or on the amount of land held by an individual or company.
Excessive accumulation of land is regulated indirectly through the duties levied
on the property and the production requirements as outlined above.

Mexican mining law does not require royalties to the
Government, except for the discovery premium related to National Mineral
Reserves, Concessions in Marine Zones and Allotments to the Council of Mineral
Resources.

|C. | Organizational Structure
|-- | ------------------------

As at the date of this annual report, we have three
wholly-owned subsidiaries. They are:

|1. | Minera Mexicana el Rosario, S.A. de C.V. (MMR), a
      company incorporated in the United States of Mexico. This Mexican
      subsidiary holds our Mexican property interests. This Mexican subsidiary
      was acquired by us on February 5, 2004.    
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                             
|2. | Metalicos de Durango, S.A. de C.V., a company
      incorporated in the United States of Mexico on July 12, 2005. This
      operational subsidiary is responsible for the day-to-day affairs and
      operations of the Topia Mine.                       
|   |                                                                                                                                                                                                                                                             
|3. | Minera de Villa Seca, S.A. de C.V., a company
      incorporated in the United States of Mexico on October 5, 2005. This
      operational subsidiary is responsible for the day-to-day affairs and
      operations of the Guanajuato Mine.                
|   |                                                                                                                                                                                                                                                             
|   | On November 30, 2009, Exploraciones Mineras el Rosario,
      S.A. de C.V., the Companys subsidiary responsible for exploration and
      further development of the Companys mineral properties, was merged with
      Minera de Villa Seca, S.A. de C.V.

|D. | Property, Plant and Equipment
|-- | -----------------------------

We rent executive and administrative office space located at
Suite 350 and Suite 2100-1177 West Hastings Street, Vancouver, British Columbia,
V6E 2K3, Canada, for the sum of $20,607 per month.

Our Mexican subsidiary, Minera Mexicana el Rosario, S.A. de
C.V. (MMR), rents office space at the following locations:

- Juan Nepomuceno Herrera No. 712, Fraccionamiento Valle del Campestre, León,
  Guanajuato, Mexico, C.P. 37150, for the sum of $16,500 Mexican Pesos
  (approximately $1,346) per month;
- Cerro Gordo No. 210 Fraccionamiento Lomas del Parque, Durango, Durango,
  Mexico, C.P. 3410, for the sum of $8,000 Mexican Pesos (approximately $653)
  per month; and

Our Mexican subsidiary Minera de Villa Seca, S.A. de C.V.,
maintains office space at Hacienda de Bustos, Mineral de Cata, Guanajuato,
Guanajuato, Mexico, C.P. 36010. The premises are owned by MMR.

Our Mexican subsidiary, Metalicos de Durango, S.A. de C.V.,
maintains office space at Boulevard La Sierra No. 1, Topia, Durango, Mexico,
C.P. 34541. The premises are owned by MMR.

---

- 32 -

We believe that our current office arrangements provide
adequate space for our foreseeable future needs.

We rent land for the tailings dam located in Topia, Durango,
Mexico.

We rent accommodation for mine personnel and corporate business
travel located in Guanajuato, Guanajuato, Mexico.

At present, our activities are focused on the mining,
exploration, development and acquisition of precious and base metal properties
located in Mexico.

Primary Mining Properties

(1)Topia Mine

a. Location and Accessibility

The Topia mine is located in the municipality of Topia in the
west central part of Durango State, Mexico. Access is gained by travelling north
for roughly 200 km on paved highway #23 from Durango through the city of
Santiago Papasquiaro, and then west on paved and gravel roads to the town of
Topia, a distance of approximately 150 km. Total driving time from Durango City
is about 8 hours. Most of the main roads in Topia are paved with concrete or
cobblestones, and the town contains numerous stores, restaurants and hotels. A
small airstrip on the east side of the town is serviced daily from Culiacán,
Sinaloa by small aircraft. Flight time from Culiacán is less than an hour.

The terrain is quite steep and rugged with elevations ranging
from approximately 600 metres in the river valleys in the western portion of the
property rising to nearly 2,000 metres in the northeastern portion of the
property where high level plateaus exist. The area is generally dry except
during the rainy season when between 20-50cm of rain may fall. Mining operations
and most exploration activities (especially underground exploration and
development) can be conducted on a year-round basis. Access to the numerous mine
entrances is via gravel roads that are narrow in the steep Sierra.

Refer to Exhibit 8.3 - Map of Topia Property.

b. History

Although the discovery of silver in the area dates back to
1538, the existing mine was not built until 1952, when Peñoles consolidated the
mining concessions and built road access into the town. Great Panther purchased
the mine in 2005 and commenced mining in January 2006.

c. Geology and Mineralization

The Topia mine lies within the Sierra Madre Occidental
geological province of northwestern Mexico. The Sierra Madre is a prolific belt
of mineral wealth hosting many significant gold and silver deposits. The
silver-gold-lead-zinc veins of the Topia district have formed along a
northeast-trending series of faults and are of the epithermal type. Mineralized
veins are limited to the lower series of andesitic lavas and interbedded
pyroclastics known as the Topia andesites. These veins contain ore grade
mineralization over a limited vertical extent of between 100 and 300 metres but
this mineralized zone extends laterally along strike in individual veins for as
much as four kilometres.

---

- 33 -

d. Mineral Resource and Mineral Reserve Estimates

There are no known reserves on the property and the proposed
program is exploratory in nature. Although the Company has not established
Mineral Reserves for the property, we feel that Mineral Resources are adequate
for mine planning and exploitation at Topia.

We advise U.S. investors that while these terms Resource
Estimate and Inferred Mineral Resource are recognized and required under
Canadian regulations, the U.S. Securities and Exchange Commission does not
recognize them. U.S. investors are cautioned not to assume that any part of all
of the mineral deposits in this category will ever be converted into reserves.

On March 7, 2011, the Company announced that Roscoe Postle
Associates Inc. (RPA) delivered an update to the ongoing mineral resource
development at the Topia mine. The 2011 RPA mineral resource estimate comprised
Measured and Indicated mineral resources of 171,000 tonnes at 864g/t silver,
1.56g/t gold, 7.53% lead and 4.37% zinc (7.44 million silver equivalent ounces),
a 36.3% increase over the 2009 resource estimate. In addition, RPA estimates
285,000 tonnes of 868g/t silver, 1.5g/t gold, 6.5% lead and 3.7% zinc (11.91
million silver equivalent ounces) in the Inferred category, a 109.3% increase
over the previous estimate.

The significant increase in our resource base at Topia is a
validation of the longevity of this high grade silver-gold-lead-zinc mine.
Considering there were no compliant resources when the Company bought the Topia
mine, we have consistently increased the resource base with every drill program,
while increasing production at the same time.

The 2011 RPA mineral resource estimate provides updates for the
Argentina vein (Argentina Mine), plus new mineral resource estimates for the Don
Benito (north and south veins in the 1522 and Crucero 9N Mines), Recompensa
(Recompensa and Rincon Mines), Cantarranas (Hormiguera Mine), San Jorge (San
Miguel Mine), San Gregorio (San Gregorio, Mina 7, and Durangueno Mines), El
Rosario and La Prieta veins.

The estimate was based on a minimum NSR value of $US130/tonne
(corresponding to the 2010 direct mining and processing costs which are 77% of
the total operating costs). This is applicable at Topia since the general and
administrative (G&A) costs are $US38 / tonne. Current operating costs for
the Topia Mine veins are $US130 / tonne ore mined and processed, and any
additional resources to the mining plan would require no increase in G&A
costs and reduced unit mining costs. The 2011 RPA mineral resource estimate
assumed (1) actual concentrate transport, and smelter treatment and refining
charges in effect through 2009 and 2010; (2) RPA long term estimates of metal
prices as of February 2011, and typical plant recoveries for 2010, in Table 1;
and (3) minimum mining width of 0.3 metres. Capping was individually applied to
each of the veins making up the summary in Table 1.

This estimate replaces those by Wardrop in 2009 and 2006 for
the Argentina and various other veins on the property. The breakdown for the RPA
mineral resource estimates on the Topia property is given in Table 1 below. The
estimate has increased over that reported in 2009, mainly due to inclusion of
new veins that were being explored and mined but were unreported as mineral
resource. A direct comparison of the Wardrop and RPA mineral resources is not
relevant due to differing metal prices and minimum NSR values, as well as
estimating methodologies. However, the overall percentage increase is shown in
Table 3 below.

The production rate from the Topia mines is increasing each
year and is planned at 36,000 tonnes in 2011. Additionally, there are other
mineralized veins that are not included in this resource estimate. By applying
reasonable estimates of 50% mining dilution and 80% mining recovery, management
expects the current resources to support a mine life of at least fifteen
years. It is anticipated that, with additional drilling, the resource will
continue to increase. This rolling resource is typical for underground mines
as it is often not cost effective to define a large resource/reserve in advance
of mining.

---

- 34 -

While most of the current resource base came from Great Panther
Silvers diamond drilling and underground development, the resources estimated
in certain veins (e.g. Argentina) on the property came largely from the
verification of Peñoles sampling, on levels that are planned for access later
in 2011 and 2012 and are still intact. The majority of Great Panthers mining to
date has come from new mine development on veins reported in these estimates.
There is lesser production from other veins that are not included in this update
and these may be estimated in future resource updates. The new total contained
metal for the mineral resource categories is shown in Table 2 below.

|Table 1.
      2011 Summary Mineral Resource Update:
|----------------------------------------------------
|Topia
      Mineral Resources - December 31, 2010   
|Class                                               
|                                                    
|Measured                                            
|Indicated                                           
|M & I                                               
|Inferred                                            

|   | Metal Prices     | Recoveries  
|-- | ---------------- | ------------
|   | (RPA
      2011) | (Plant 2010)
|Au | US$1,200/oz      | 80.00%      
|Ag | US$21.00/oz      | 92.00%      
|Pb | US$1.00/lb       | 94.00%      
|Zn | US$1.10/lb       | 92.00%      

|Table 2.
      Contained metal (all veins):
|-------------------------------------------
|Category                                   
|M & I Resources                            
|Inferred
      Resources                   

The addition of multiple other veins into the 2011 RPA mineral
resource estimate has lead to a substantial increase in silver equivalent ounces
from Wardrops estimate of 2009, as shown in Table 3.

---

- 35 -

|Table 3.
      Percentage improvement 2011 over 2009:
|-----------------------------------------------------
|Category                                             
|M & I Resources                                      
|Inferred Resources                                   

Due to the steep topography and the nature of the narrow veins
at Topia, surface drilling is typically widely spaced and is used as a guide for
underground development by locating and confirming structural continuity and
grade, while development by drifting, sampling and some underground drilling
along the vein defines the measured and indicated mineral resources.
Accordingly, the surface drilling is used to determine inferred resources.

Areas of interest for the summer 2011 Topia Mine surface drill
program will be the Oliva vein (west portion) and, in the same area, the eastern
portion of the Recompensa vein and several intermediate veins of interest noted
in the 2010 program. Also, more detailed drilling will take place at La Prieta,
which can significantly upgrade the present inferred resource on the La Prieta
veins as well as on three other subsidiary veins. Detailed drilling on the
Higueras vein, along with strike extensions of the San Gregorio and El Rosario
veins will continue to grow the Topia Mine mineral resources. The Argentina vein
remains open to expansion at depth and to the east for approximately 500 metres
below old mine workings and will be drill tested this summer.

e. Exploration History

The Company has conducted extensive work on the Topia property
as far back as 2004. The diamond drill program conducted between June 2004 and
February 2005 comprised 7,436 metres in 30 surface holes with results evidencing
high grade silver-lead-zinc mineralization. Five separate areas were tested with
one or two main veins present in each area. The main goal of the program was to
test the strike, dip and grade continuity of the veins beyond where they had
been mined in the past in order to indicate the exploration potential of the
property and to guide the short term underground development work with the goal
of successfully re-opening the mine.

Based upon the success of the exploration program, the Company
exercised its option to purchase the Topia Mine in July 2005. Once access was
gained to the underground workings, underground mapping, sampling and diamond
drilling became an integral part of the ongoing exploration program at Topia. In
December 2005, we commenced limited production at the Topia Silver-Lead-Zinc
Mine in Durango, Mexico.

In March 2006, we reached a significant milestone in becoming a
primary silver producer with our first shipment of concentrates from operations.
In the second half of 2006, we commissioned our second ball mill increasing the
plants production from 120 to 170 tonnes per day.

During 2007 and 2008, ongoing exploration development of the
mine continued to demonstrate high grades of silver-lead-zinc. In addition, new
underground drilling and chip-sampling has demonstrated very good potential on
the yet unmined parts of many of the known veins.

Surface drilling continued into early 2008 and then resumed in
mid-2009 where a 4,000-metre program on the major production areas of
Recompensa, Hormiguera, El Rosario, and San Gregorio. Great Panther has now
drilled a total of 20,873 metres in 97 surface holes and 3,541 metres in 68
underground holes.

---

- 36 -

During the first three quarters of 2010, the Company completed
the 8,815.4 metre (expanded from the initial 6,000 metre) surface drill program
on the Topia mine veins. The drilling was extremely successful and will guide
mine development to continue to expand silver production from the San Gregorio,
Recompensa, and Cantarranas (Hormiguera mine) veins as well as enable new
production to be added from veins where no mining is currently taking place.
Drilling on the recently acquired La Prieta property proved the potential for
this to be an additional mine for the Topia operations, with high silver values
in the three drill holes of up to 2,500g/t over 0.25 metres. There were also
several significant intercepts of other veins that are not currently being
mined, including the Higuera vein (close to the San Gregorio vein), and the
western portion of the Oliva vein (close to the Recompensa vein).

In addition, mine development on the Cantarranas vein at the
Hormiguera mine has encountered 161 metres of strike length with an average
width of 0.19 metres grading 1,403g/t silver, 0.88g/t gold, 2.02% lead, and
7.76% zinc. At Mina 7, on the San Gregorio vein, development is ongoing
eastward, with 90 metres of strike length on the vein, with an average width of
0.43 metres grading 1,436g/t silver, 0.53g/t gold, 7.26% lead and 12.23% zinc.
Sub-level development and stoping is ongoing in both areas.

f. Total Costs Incurred to Date and All Planned Future Costs

As at December 31, 2010, total costs incurred on mineral
properties, plant and equipment at Topia were $10.6 million. Total costs
incurred on exploration were $11.6 million.Planned costs for 2011 are
approximately $5 million for capital investment and exploration.

g. Source of Power and Water that can be Utilized at the
Property

Topia is connected to the national power grid. Artesian springs
located above Topia provide water year-round by gravity to the town. Most of the
lower mine portals discharge water and the Victoria adit has provided enough
water to supply milling activities in the past.

(2) Guanajuato Mine

a. Location and Accessibility

The Guanajuato mine is located alongside the city of
Guanajuato, 380 km northwest of Mexico City in central Mexico. Guanajuato is
situated in the Central Plateau of Mexico in the mountains of Sierra de
Guanajuato at elevations ranging from 1,600 to 2,200 metres. The principle claim
group is centred at approximately 21o03N latitude and
101o15W longitude (NAD 27, UTM coordinates 2327500N, 265500E). The
Guanajuato mine consists of 1,107.28 hectares, made up of 28 non-contiguous
concessions.

Excellent access is availed to Guanajuato with an international
airport 30 minutes to the west near Silao/Leon. Toll freeways skirt the city
linking it with Leon, Guadalajara, and Mexico City. All of the facilities of the
Guanajuato mine are accessed from city streets.

The Guanajuatito ramp provides easy access to the
mineralization throughout the Guanajuatito-Encarnación area where only a minor
amount of mining has taken place in the past.

Refer to Exhibit 8.4  Map of Guanajuato Property.

---

- 37 -

b. History

The Guanajuato Mining District was founded in 1548, with the
first discovery of silver in the area. Estimates of historical production range
from 700 million to 1.5 billion ounces of silver and 4 to 7 million ounces of
gold.

Mining at Guanajuato has been conducted since the year 1600,
initially by the Spaniards and subsequently by Mexican, British and American
companies. Since 1939, the property now owned by Great Panther was owned and
operated by a Mexican mining cooperative. Production by the latter, from whom
the Company bought the property, had dwindled to about 200 tonnes per day by
2005, despite the plant capacity of 1,200 tonnes per day. Grades had dropped and
the cooperative was losing money. Operations stopped completely in August of
that year and Great Panther took possession of the mine in December 2005.

c. Geology and Mineralization

Three major fault systems with associated mineralization occur
in the Guanajuato Mining District, La Luz, Sierra, and the Veta Madre systems,
the largest being the 25 km long Veta Madre. The principal mineralizing event is
thought to be late Oligocene in age +27 Ma, which has created three identifiable
stages of mineralization according to Clark (2005); 1) pre-ore, 2) ore, 3)
post-ore and the ore can be divided into three zones; upper ore, lower ore, and
deep ore. The upper ore is defined as being >2,100m above sea level
(a.s.l.), lower ore is found between 2,100m and 1,700m a.s.l. and deep ore as
being <1,700m a.s.l.

All historic descriptions of the mineralization contain the
term ore. In most cases, the terminology applies to previously mined
mineralization. Historic authors have generally agreed that there are three
separate zones of mineralization; upper ore, lower ore and deep ore. Normally
this categorization refers to areas now mined out but in other cases, it refers
to horizons of un-mined material that may contain mineralization that would not
be considered as ore as defined by NI 43- 101 Standards of Disclosure for
Mineral Projects adopted by the securities regulators in Canada. The authors
have chosen to use the same language to be consistent with the historic
documentation and are not implying that the mineralization will ever become ore
that can be mined at a profit.

The Veta Madre systems strike northwesterly and dip
450 to 650SW. The bulk of the mining production has come
from a five-kilometre section of the Veta Madre stretching between the
Valenciana shaft of our companys ground in the northwest to the Sirena shaft on
Peñoles ground in the southeast. In this five kilometre area, the vein stockwork
averages approximately 20 metres in width but can be as wide as 90 metres. Most
of the historic production has come from the economically important lower ore
level (2,100 metres to 1,700 metres a.s.l.) and is typically associated with
faults and both footwall and hanging wall stockwork vein systems.

The argentiferous mineralization is hosted in quartz veins with
gangue mineralogy of quartz, calcite, pyrite, adularia, and sericite. The
principal silver bearing mineralization is acanthite (argentite), aguilarite and
naumannite while gold occurs as free gold and as electrum. The gold to silver
ratios vary from approximately 1:1 to 1:200 and historically have averaged about
1:100. Base metal mineralization is not common; when it occurs it is observed as
chalcopyrite, sphalerite and galena. The exception is the deep ore in the
Rayas mine which is associated with chalcopyrite and galena.

The economic mineralization is hosted in
quartz-carbonate-adularia veins and stockwork systems with identifiable
ore-shoots that carry the bulk of the economic mineralization. The ore shoots
are discontinuous, 10-40 metre wide and typically equal in vertical
dimensions to strike length. The discontinuous nature of the ore-shoots has made
ongoing underground and surface exploration challenging and not necessarily well
understood. On average, approximately 20% of the volume of the individual veins
becomes ore.

---

- 38 -

d. Mineral Resource and Mineral Reserve Estimates

In December 2010, Roscoe Postle Associates (RPA), of
Vancouver, B.C., provided an updated NI 43-101 compliant Measured and Indicated
mineral resource estimate on the Cata Clavo, Los Pozos, and Santa Margarita
zones at the Guanajuato mine. The new Measured and Indicated mineral resource
contains 5,450,000 ounces silver equivalent. Inferred mineral resources are
estimated at 2,678,000 ounces silver equivalent. The Measured and Indicated
mineral resources include 4,372,000 Ag eq oz categorized as Proven and Probable
mineral reserves, using a cut-off grade of 185 g/t silver equivalent. This is
the first time that NI 43-101 compliant reserves have been estimated for the
Guanajuato Mine and is a positive step in confirming the long-term viability of
this historic operation.

The new resource base represents a 53% increase over the
previous resource estimate in June of 2009, even after deducting the production
from that zone over the last year and a half. This demonstrates the Company's
ability to not only replace what is being mined, but to increase the resource
base and extend the mine life with additional drilling. There were no compliant
resources at Guanajuato when Great Panther purchased the property in 2005 and
most of the more than 4,500,000 Ag eq oz that the Company has mined from
Guanajuato since 2006 has come from non-compliant resources.

Mining of the three zones, Cata, Los Pozos, and Santa Margarita
currently accounts for most of the Guanajuato metal production. Resource
drilling is ongoing to delineate new resources and reserves on the upper and
depth extensions of Los Pozos and the southeast strike extension of Santa
Margarita but also includes Guanajuatito, Valenciana, San Telesforo, and the
depth extensions of the Rayas Clavo, none of which are included in this resource
estimation but which will be included in the 2011 update. In addition, drilling
of the very promising San Ignacio project will continue through 2011 and will
make a significant contribution to future resources for the Guanajuato Mine. As
such, the resource base will continue to build at Guanajuato and it is the
Company's stated objective to delineate approximately 25-30 million Ag eq oz of
resources/reserves by the end of 2012.

For the year 2010, production from Guanajuato is estimated to
be 1.02 million Ag oz and 6,720 Au oz (1.44 million Ag eq oz). The resource and
reserve estimates, together with the significant potential of the ongoing
drilling programs, positively support the achievement of the growth strategy
objectives for Guanajuato.

Silver equivalent values were applied to computer generated
block models in order to define the mineral resource. The mineral reserve
cut-off value of 185g/t (6.0 oz/t) silver equivalent is the metal content
contained in one tonne of ore for which the net revenue (net of smelter and
refining costs) is equal to the average full operating costs to mine and process
one tonne of ore. RPA used medium term projected metal prices of US$17.67/oz Ag
and US$1,150/oz Au (relative price ratio of 65 gold to 1 silver), 2010
concentrate sales contract terms, and typical plant performance metal recoveries
and concentrate grades to calculate the net value. Total operating costs at
Guanajuato, including mining, milling, and general and administration costs, are
currently US$85/tonne. Experience gained from mining the veins by the
cut-and-fill mining method and the upward trend in metal prices, determined that
the appropriate cut-off value for defining mineral resources at Guanajuato be
set at 136g/t (4.3oz/t) silver equivalent. The use of a lower cut-off for
resources reflects the less stringent guidelines for resources versus reserves.

---

- 39 -

Based upon these parameters, the Measured and Indicated mineral
resource contains 5,450,000 Ag eq oz including 2,495,000 Ag eq oz in the
Measured category and 2,956,000 Ag eq oz in the Indicated category. Inferred
resources are estimated at 2,678,000 Ag eq oz. Of the Measured and Indicated
mineral resource, 4,372,000 Ag eq oz is classified as Proven and Probable
mineral reserve, using a cut-off of 185g/t silver equivalent. The Proven mineral
reserve is estimated at 1,935,000 Ag eq oz, while the Probable mineral reserve
is estimated at 2,438,000 Ag eq oz. Breakdowns for silver and gold can be found
in the tables below.

Measured, Indicated and Inferred mineral resources in the three
areas were estimated by Dave Rennie, P.Eng, a Principal Geologist for RPA, and
the proven and probable mineral reserves were estimated by R. Dennis Bergen, P.
Eng, Associate Principal Mining Engineer for RPA. Both are independent of Great
Panther as per the criteria set out in NI 43-101. The mineral reserves and
mineral resources estimates are tabulated below:

|October 31 2010 Proven Mineral Reserves | 
|--------------------------------------- | 
|                                        | 
|Zone                                    | 
|Cata - Madre                            | 
|Cata - Alto 1                           | 
|Pozos                                   | 
|Santa Margarita BX                      | 
|Total Proven                            | 

|October 31 2010 Probable Mineral Reserves | 
|----------------------------------------- | 
|                                          | 
|Zone                                      | 
|Cata - Madre                              | 
|Cata - Alto 1                             | 
|Cata - Alto 1a                            | 
|Cata - Alto 2                             | 
|Pozos                                     | 
|Santa Margarita BX                        | 
|Santa Margarita FWSTK                     | 
|Total
      Probable                      | 
|                                          | 
|Total Proven
      & Probable             | 

---

- 40 -

|October 31 2010 Proven & Probable Mineral Reserves | 
|-------------------------------------------------- | 
|                                                   | 
|Zone                                               | 
|Cata - Madre                                       | 
|Cata - Alto 1                                      | 
|Cata - Alto 1a                                     | 
|Cata - Alto 2                                      | 
|Pozos                                              | 
|Santa Margarita BX                                 | 
|Santa Margarita FWSTK                              | 
|Total Proven
      & Probable                      | 

|Notes:
|------
|1.    
|2.    
|3.    
|4.    
|5.    
|6.    

|                           |  |     |  |  | Au   |  |  | Ag  | 
|-------------------------- |  | --- |  |  | ---- |  |  | --- | 
|Zone                       |  |     |  |  | g/t  |  |  | g/t | 
|Cata/Alto dilution         |  | 20% |  |  | 0.30 |  |  | 80  | 
|Cata extraction            |  | 80% |  |  |      |  |  |     | 
|Alto extraction            |  | 85% |  |  |      |  |  |     | 
|Pozos dilution             |  | 15% |  |  | 0.30 |  |  | 80  | 
|Pozos extraction           |  | 85% |  |  |      |  |  |     | 
|Santa Margarita dilution   |  | 20% |  |  | 1.00 |  |  | 10  | 
|Santa Margarita extraction |  | 90% |  |  |      |  |  |     | 

|October 31, 2010 Measured Mineral Resource | 
|------------------------------------------ | 
|Zone                                       | 
|                                           | 
|                                           | 
|Cata                                       | 
|Los Pozos                                  | 
|Santa Margarita                            | 
|Total                                      | 

---

- 41 -

|October 31, 2010 Indicated Mineral Resource | 
|------------------------------------------- | 
|Zone                                        | 
|                                            | 
|                                            | 
|Cata                                        | 
|Los Pozos                                   | 
|Santa Margarita                             | 
|Total                                       | 

|October 31, 2010 Measured and Indicated Mineral Resource | 
|-------------------------------------------------------- | 
|Zone                                                     | 
|                                                         | 
|                                                         | 
|Cata                                                     | 
|Los Pozos                                                | 
|Santa Margarita                                          | 
|Total                                                    | 

|October 31, 2010 Inferred Mineral Resource | 
|------------------------------------------ | 
|Zone                                       | 
|                                           | 
|                                           | 
|Cata                                       | 
|Los Pozos                                  | 
|Santa Margarita                            | 
|Total                                      | 

Both drill core and underground chip samples were assayed
independently by SGS at the Companys Guanajuato mine site laboratory. The
Companys QA/QC program includes the regular insertion of blanks, duplicates,
and standards into the sample shipments.

e. Exploration History

Since acquiring the Guanajuato Mine in 2005, Great Panther has
completed 92 surface drill holes totalling 17,061.00 metres and 164 underground
holes totalling 25,231 metres.

The 2005 drilling was completed under and northwest of the
Guanajuatito ramp along the trend of the Veta Madre, approximately one kilometre
northwest of the famous Valenciana Mine (owned by Great Panther). It was
designed to duplicate and surround a lone 1989 drill hole (#317) that
intersected a 5.35 metre wide zone grading 3.34 g/t Au and 81.5 g/t Ag,
including 10.65 g/t gold and 165 g/t silver over 1.55 metres. The drilling
program intersected bonanza grade silver and above average gold within the Veta
Madre vein structure.

---

- 42 -

An extensive underground sampling program continued through
2006 at Guanajuato. Preliminary sampling in the first quarter of 2006 returned
spectacular bonanza grades from the Valenciana Mine. Silver grades ranged from
1,100 g/t (32 oz/t) to 30,468 g/t (889 oz/t) and gold grades ranged from 19 g/t
(0.6 oz/t) to 177 g/t (5.2 oz/t) in 27 selective grab samples taken by the mine
staff. These results yield an arithmetic average of 11,036 g/t (322 oz/t) Ag and
62 g/t Au (1.8 oz/t). Using a silver-to-gold ratio of 60:1, this equates to a
silver equivalent grade of 13,373 g/t (430 oz/t) or a gold equivalent grade of
224 g/t (7.2 oz/t). The samples also contained, on average, 0.34% Cu, 0.24% Pb
and 0.87% Zn.

The samples were taken from the walls of six different stopes
above and below the 285 metre level over a total strike length of about 500
metres in a part of the mine that has historically been mined by hand, dating
back to the early 19th century. As such, there has been very little, if any,
mechanized mining here, and stopes are typically small and erratic in shape. The
sampling was carried out as a first-pass assessment of the tenor and
distribution of mineralization that has been left behind by these historic
mining campaigns. While grades from the various stopes were comparable, it is
presently unknown just how representative these grades may be from a mining
standpoint.

In addition, initial surface rock sampling on the Promontorio
claim, southeast of the Rayas Shaft, has identified a gold-rich zone of
mineralization along more than 100 metres of the Veta Madre structure.
Compilation of the underground data is ongoing, as will be the evaluation of the
extent of former mining, and re-sampling of stopes and levels. There is more
than 300 metres of strike length to the southeast of Promontorio that has
apparently seen only limited exploration and underground development, such that
the potential for previously unrecognized mineralization in this area is
excellent. Overall, the property encompasses more than four kilometres of strike
length on the Veta Madre structure, much of which has seen little to no
exploration.

In June 2006, we commenced the first phase of our underground
diamond drilling program. The purpose of the drilling was to better define zones
of silver-gold mineralization for production purposes and for the preparation of
a NI 43-101 compliant resource. This drilling focused mainly on San Vicente
North.

In October 2006, we commenced a second phase of our diamond
drilling program and completed extensive underground sampling at the limits of
the silver-gold mineralization in the Guanajuatito mine. In early 2006, we
commenced a Phase II surface diamond drilling program designed to test three
separate areas along 4 kilometres of strike length of the Veta Madre. The drill
program was to follow-up on the successful drilling at Guanajuatito, in the
northwest part of the property, as well as to test the Animas and Garrapata
areas which are farther along strike to the southeast. The program was highly
successful in identifying and delineating three new zones of silver-gold
mineralization in the northwest, central and southeast parts of the mine
property. These discoveries accentuate the previous lack of exploration on the
property and the potential for new zones to be found throughout the mine. In
addition, the easy access to these zones from existing underground workings
means that they can be developed and mined quickly and cost-effectively.

The Company continued surface diamond drilling in 2007 and
intersected four new silver-gold zones and provided further definition on the
three previously known zones of silver-gold mineralization in the Promontorio
area. All zones are sub-parallel and occur within 70 metres of the main Veta
Madre. Having several zones within close proximity like this will significantly
lower their development costs and plans are already in preparation for the
exploitation of this area. The new mineralization lies between 70 and 150 metres
below surface and is accessible by ramp.

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- 43 -

In September 2007, a deep underground drilling program
commenced in the Cata area of the Guanajuato mine. The program was designed to
twin, then fill in between, diamond drill holes completed in the 1980s and
1990s by the previous owners that indicated the continuation of silver-gold
mineralization for approximately 200 metres below the existing mine
workings.

The deep drilling at the Guanajuato mine is testing the area
between the 400 and 600 metre levels (dip length of 300 metres) along a strike
length of 1,000 metres between and below the Cata and Rayas shafts. This
drilling will be conducted under the historically high grade Cata and Rayas
Clavos, which contained strong gold-silver mineralization down to the 417
metre and 450 metre levels, respectively. Drilling on the Cata Clavo was
completed in 2008, and successfully confirmed the depth extension of high grade
gold and silver mineralization. Mining has extended from the 430 to the 490
metre levels of the Cata Clavo and the ramp will be extended to lower levels of
the Cata Mine area. The program continued in the Rayas area in 2010.

During 2010, diamond drilling totalled 19,500 metres at
Guanajuato. Much of this drilling was targeted towards adding new resources at
the existing operations plus the completion of the first four holes 1,839
metres, at the San Ignacio property. Drilling plans are increased in 2011 to
include at least 20,000 metres at San Ignacio.

f. Total Costs Incurred to Date and All Planned Future Costs

As at December 31, 2010, total costs incurred on mineral
properties, plant and equipment at the Guanajuato mines were $19.4 million.
Total exploration costs were $11.4 million.

Planned costs for 2011 are approximately $18.1 million for
capital investment and exploration.

g. Source of Power and Water that can be Utilized at the
Property

The electricity supply to the operations in our Guanajuato mine
is provided through the national power grid administered by CFE. The water
supply is carried out through groundwater of our mines and rainwater
filtrations.

Primary Exploration Properties

(1) Mapimi Project

a. Location and Accessibility

The Property is situated in the northern plateau region of
Durango State. It is located approximately 66 kilometres west of the town of
Bermejillo and 100 kilometres north-west from the city of Torreon and San Pedro
de las Colonias, in Coahuila State. The property is easily accessible and the
infrastructure is considered excellent, since the property is bisected by paved
highway approximately 100 kilometres from Peñoles smelter at Torreon.

Airports are situated in the city of Torreon as well as the
city of Durango. Both airports have scheduled daily flights to and from Mexico
City, Mazatlan, Monterrey and Houston, Texas.

Refer to Exhibit 8.5  Map of Mapimi Property.

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- 44 -

b. History

In 1995, Minera Apolo, S.A. de C.V. (Apolo) acquired the
property and optioned the property to Coeur dAlene Mines Inc. in late 1996.
Between 1997 and 1998, Coeur DAlene carried out regional and geological mapping
in some areas of the property. They completed a total of 397 metres of
trenching, a gravity survey, 81 reverse circulation drill holes, 22 diamond
drill holes and 422 surface channel samples. Coeur dAlene returned the property
to the vendor in 1998 and Great Panther optioned it in September 2006.

On September 16, 2009, the Company announced the termination of
its option on the Mapimi project as management determined that it was
uneconomical to continue with the project and it was a better use of the
Companys funds to focus its efforts on expanding the production and resources
at its existing mines.

c. Geology and Mineralization

The structural fabric of the Mapimi Project appears to be
complex. Rhyolite sills intrude sandstones, calcareous siltstones, and
limestones of the Cretaceous Caracol Formation, a common host to many of the
world class silver-lead-zinc deposits throughout the Mexican Silver Belt.
Pre-mineral faulting and fracturing is intense within and adjacent to the
mineralized zones, providing excellent porosity for mineralizing fluids.
Post-mineral faulting is also common and offsets mineralized zones in
places.

Mineralization at Mapimi includes three distinct types. Two
adjacent and related zones called La Gloria and Las Palmitas contain lead, zinc,
and silver minerals with lesser amounts of gold and copper minerals. This style
is associated with hydrothermal breccias and stockworks related to a cluster of
rhyolite domes, and shows a strong similarity to the historic Real de Angeles
District in Zacatecas State, Mexico. An upper, oxidized portion (~40-60 metres)
of the mineralization consists of jarosite and hematite; with sulphides
consisting of pyrite, silver sulfosalts, sphalerite and galena at depth. The
breccias have a general orientation of N40E, and a steep northwest dip. The
largest breccia to date has known dimensions of 250 by 45 metres but is open in
all directions. More than 20 breccia bodies have been identified in 5 main
sectors.

A second type of silver-lead-zinc mineralization occurs
approximately three kilometres north of La Gloria and appears to be of the
carbonate replacement type. Called the North Zone, mineralization here is narrow
but high grade and appears to be related to the rhyolite-sediment contacts. It
is hosted in the Caracol Formation but there may be potential for better widths
and grades in the underlying Aurora Limestone.

The third style of mineralization at Mapimi was discovered in
2008 and consists of molybdenite in quartz veins within a zone of skarn
alteration. Named the Bulls-Eye Zone because it is highlighted by a strong
magnetic anomaly, the mineralization starts at a depth of about 40 metres and
extends over an area of about 250 metres in diameter and is approximately 200
metres thick. The Bulls-Eye Zone lies between La Gloria and the North Zone.

d. Mineral Resource and Mineral Reserve Estimates

There were no known reserves on the property and the field
program was exploratory in nature. The Company does have a resource estimate as
described below.

During 2006, the Company commissioned Wardrop to prepare a NI
43-101 compliant resource estimate for the property. The independently produced
report estimated that the Palmitas and Gloria Zones together contain an Inferred
Mineral Resource of 4,969,800 tonnes at a grade of 59 g/t Ag, 0.13 g/t Au, 0.81% Pb and 1.31% Zn. Wardrop calculated that these grades
equate to a silver equivalent grade of 139 g/t using commodity prices (based
upon 3 year averages) of US$7.70/oz for silver, US$471/oz for gold, US$0.41/lb
for lead and US$0.69/lb for zinc and recoveries of 76%, 70%, 80% and 80%,
respectively. This resource equates to a total of 22.3 million ounces of silver
equivalent.

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- 45 -

In March 2008, Wardrop delivered an updated NI 43-101 compliant
mineral resource estimate for the La Gloria / Las Palmitas Zones. The new
estimate effectively upgraded the previous resource of 22.3 million silver
equivalent ounces (Ag eq oz) from the Inferred to the Indicated category and
added an additional 6.3 million Ag eq oz in the Inferred category for a global
resource of 28.6 million recoverable Ag eq oz.

In the new resource estimate, Wardrop used different parameters
than in 2006, such that the new estimate was considered to be more robust. In
keeping with the previously reported resource estimate, Wardrop applied a
cut-off grade of 50g/t silver equivalent. Metal prices and recoveries used were
US$9.55/oz and 76%, respectively, for silver, US$530/oz and 70% for gold,
US$0.63/lb and 80% for lead and US$1.00/lb and 80% for zinc. Statistically
higher grade samples were also removed by capping the assay data at 150g/t for
silver, 3.0g/t for gold, and 4.5% for each of lead and zinc. Wardrop used
Ordinary Kriging and Inverse Distance Squared to estimate the resource, with
blocks of 5 metres x 5 metres x 5 metres being used for the three-dimensional
model. Metallurgical recoveries used are the same as for the 2006 resource
estimate, which were based upon tests conducted by Silver Standard Resources
Inc. in 1999 as part of a property review.

The effect of the higher commodity prices used in the most
recent resource estimate compared to those used in 2006 is that lower grade
material now becomes potentially economic, which thereby lowers the average
grade of the resource while increasing the tonnage. Thus, the new resource
represented an increase in tonnage of approximately 73% while the average grade
of the Indicated and Inferred Resources was now 105g/t Ag Eq and 97g/t Ag Eq,
respectively, compared to 139g/t Ag Eq in the 2006 resource. As such, the
estimated recoverable ounces of silver equivalent increased by approximately
28%.

e. Exploration History

A first phase exploration program was implemented at Mapimi in
late 2006 and consisted of an airborne geophysical survey and ground induced
polarization geophysical survey follow-up; detailed geological mapping and
re-sampling of outcrops, adits and trenches; followed by a core drilling program
focused on confirming previous Coeur dAlene drilling results in the Las
Palmitas and La Gloria zones.

During February 2007, Great Panther contracted Aeroquest
Limited to fly a 550 line kilometre airborne electromagnetic (EM) and magnetic
geophysical survey over the Mapimi project. Numerous EM and magnetic targets
were detected and the interpretation of this survey, in conjunction with surface
mapping, provided a geological framework for 103 kilometres of detailed induced
polarization (I.P.) geophysics. While some of the geophysical anomalies
outlined by the airborne survey are directly related to regional geological
features, others appear to be related to known mineralization or are spatially
associated with zones of strong alteration.

The Phase II diamond drilling program, which commenced in
October 2007, tested two large coincident geological, geochemical, and
geophysical anomalies, namely the Bulls-Eye and North Zones. The program
identified semi-massive silver-lead-zinc mineralization in the North Zone that
is spatially related to the rhyolite-sediment contacts and a large zone of
molybdenum mineralization in the Bulls-Eye Zone.

To the end of 2008, a total of 12,448 metres in 60 holes have
been drilled by the Company at Mapimi. Exploration at Mapimi was suspended in
mid-2008 in order to conserve cash.

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- 46 -

On September 16, 2009, the Company announced the termination of
its option on the Mapimi project.

f. Total Costs Incurred to Date and All Planned Future Costs

At the date of the termination of the option, total exploration
costs incurred at Mapimi were $5,329,000. Management determined that it was
uneconomical to continue with this project and the Company is focusing its
efforts on expanding the production and resources at its existing mines.

g. Source of Power and Water that can be Utilized at the
Property

The municipality of Mapimi is on an electrical power grid and
has telephone services provided by TelMex. Water and drainage systems are also
present.

(2) San Antonio Project

a. Location and Accessibility

The San Antonio Project is located 50 kilometres NNW of the
Guadalupe y Calvo Mining District in the State of Chihuahua, Mexico and
approximately 162 kilometres S-SW of the city of Hidalgo de Parral, Chihuahua,
and 265 kilometres SW of the city of Chihuahua. It consists of four contiguous
mining concessions covering in the aggregate 11,946 hectares. Three of these
concessions were staked and one (Santo Niño) was purchased and all are owned
100% by MMR.

Road access to the San Antonio project is via paved highway
from Hidalgo de Parral to the town of Guadalupe y Calvo, a distance of 255
kilometres, and then to Baborigame via a maintained unsurfaced road, a distance
of 90 kilometres, and then via 33 kilometres of logging and ranch roads to a
small ranch in the Arroyo San Antonio near the center of the project area.
Straight line distance from Baborigame to the project area is 9 kilometres.

b. History

The San Antonio prospect lies within the Guadalupe y Calvo
mining district. Earliest recorded mining activity in the region is the
discovery in 1835 of the veins in the San Juan Nepocemo area west of Baborigame.
Various Au-Ag vein deposits were subsequently discovered and commercial mining
continued without interruption until 1940. Since then, only small scale
artisanal mining has been conducted in the region. The San Antonio project lies
outside of the areas of significant mine development, and little is known of the
exploration history of the project. The numerous workings in the Arroyo San
Antonio attest to minor production from the project area.

Neither significant nor modern exploration programs are known
to have been conducted at the property. Anaconda, Barrick Gold and Hemlo Gold
made reconnaissance visits to the property in the 1990's. In the 1980's the
Consejo de Recursos Minerales conducted site specific visits to the Sary, Piedra
Verde, and Santo Niño claims. The property was visited by Robert Archer, the
President and CEO of the Company, in May of 2003. Mr. Archer collected ten
reconnaissance rock chip samples from mine workings and altered outcrops in the
Arroyo San Antonio.

The property had not been subjected to exploration drilling
prior to our acquisition of the claims.

On December 21, 2010, the Company relinquished the San Antonio
and Santo Nino mining concessions.

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- 47 -

c. Geology and Mineralization

Numerous epithermal veins and mineralized structural zones are
exposed in the Arroyo San Antonio. It is not clear if these structures are
faults that juxtaposed rock types, or alternatively the structures formed along
pre-existing lithologic contacts. Mineralized structures vary from 1 to 200 cm
wide. All of these mineralized structures lie within a much broader zone of
pervasive chloritization that is continuously exposed along the Arroyo San
Antonio.

Geologic and mineral occurrence maps indicate that within the
project area at least 12 mineralized structures or veins have been explored or
exploited, and numerous others of unknown extent and importance are present.
Great Panther evaluated many of these in 2004 and 2005 and established that many
were of limited potential to support an economic mining operation. Nonetheless,
their evaluation revealed important information regarding the geological setting
of the project area and allowed the Company to focus in on areas with the
greatest potential.

d. Mineral Resource and Mineral Reserve Estimates

As of the date of this report, there are no known reserves on
the property and any near term field work would be exploratory in nature.

e. Exploration History

The 2004-2005 exploration program at San Antonio comprised
geological mapping and sampling, prospecting, soil sampling and diamond
drilling. The objective of the program was to identify zones of continuous and
potentially economic gold and copper grades within the mineralized structures
(veins) or stockwork zones. Historical mining on these veins was limited and
their vertical and lateral extent is unknown as they have never been drilled.
Ongoing exploration work sampled the historic workings in detail, along with
numerous other structures that have been found in the area. In addition, the
large zone of stockwork and disseminated mineralization that lies between the
veins was systematically sampled in order to determine the grade and
distribution of gold and copper values as field crews continued to work their
way from north to south across the core claims. A diamond drill program which
commenced in February 2005 comprised 1,936 metres in 16 holes, and focused on
the high grade gold-copper vein system in the central part of the property.

No field work was done on the property in 2006.

In 2007, Altair Ventures, under the terms of the aforementioned
option agreement, conducted an exploration program with Great Panther as
operator. The focus of the exploration effort was to fully evaluate the numerous
gossans and alteration zones on the project using a combination of geological
mapping, rock sampling, and PIMA surveys. All three techniques, plus satellite
image analysis, aided the Company in defining priority targets for more detailed
sampling and appraisal as drill targets. Phase Two diamond drilling commenced on
the San Antonio project in November 2007. The program comprised 1,585 metres in
8 holes and tested a district scale epithermal system that has been identified
on the property.

Field work on the project was being conducted by Resource
Geosciences de Mexico, S.A. de C.V. of Hermosillo, Sonora under contract to our
Mexican subsidiary, Minera Mexicana el Rosario, S.A. de C.V.

No field work was done on the property in 2009. On February 1,
2010, Altair forfeited its option. On December 21, 2010, the Company
relinquished the San Antonio and Santo Nino mining concessions.

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- 48 -

|ITEM 4A | Unresolved Staff Comments
|------- | -------------------------

None

|ITEM 5 | Operating and Financial Review and
      Prospects
|------ | --------------------------------------------------

The information in this section is presented in accordance with
Canadian generally accepted accounting principles, and has been reconciled to
United States generally accepted accounting principles. The following discussion
of our financial condition and results of operations for the fiscal years ended
December 31, 2010, 2009 and 2008 should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this
registration statement in accordance with Item 8  "Financial Information".

Critical Accounting Estimates

The accounting estimates believed to require the most
difficult, subjective or complex judgements, and which are the most critical to
our reporting of results of operations and financial position, are as follows:

Amortization

The Companys mineral properties and related plant and
equipment are amortized based upon estimates of useful lives not to exceed the
life of the mine. Effective March 31, 2010, the remaining lives of the Topia and
Guanajuato mines were extended from 6 years to 10 years and 2 years to 3 years,
respectively. Later in 2010, the Company obtained successful drilling results at
both mines and completed a NI 43-101 mineral resource/reserve estimate on a
segment of the Guanajuato mine. Consequently, effective December 31, 2010, the
Company extended the Guanajuato mine life from 3 years to 5 years and retained
Topias mine life at 10 years. Managements estimate of expected remaining mine
life is based upon available internal and external estimated resource
information, historical production and recovery levels, planned future
production and recovery levels, and other factors. Changes in mine life are
recognized prospectively.

Impairment of long-lived assets

The Company reviews and evaluates its long-lived assets,
including mineral properties, plant and equipment, for impairment when events or
changes in circumstances indicate that the related carrying amounts may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to its estimated undiscounted
future cash flows expected to be generated by the asset. Estimated cash flows
include assumptions about long-term silver, gold, lead and zinc prices, future
production levels, and future operating, capital and reclamation costs. If
carrying value exceeds estimated discounted future cash flows, an impairment
loss is recognized based on the excess of carrying value over the estimated fair
value of the asset.

Management's estimates are subject to risks and uncertainties
of changes affecting the recoverability of the Company's investment in its
mineral property, plant, equipment and mine development. Management's estimates
of these factors are based on current conditions. Nonetheless, it is reasonably
possible that in the near term, changes that could adversely affect management's
estimate of net cash flows expected to be generated from its properties could
occur which may necessitate a write-down for asset impairment.

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- 49 -

Site Restoration Costs

Upon the completion of any mining activities, the Company will
customarily be required to undertake environmental reclamation activities in
accordance with local and/or industry standards. It is reasonably possible that
the ultimate cost of remediation and reclamation could change in the future due
to uncertainties associated with defining the nature and extent of environmental
contamination, the application of laws and regulations by regulatory authorities
and changes in remediation technology. The Company continually reviews its
accrued liabilities, if any, as evidence becomes available indicating that its
remediation and reclamation liabilities may have changed. Any such increases in
costs could materially impact the future amounts charged to operations for
reclamation and remediation obligations.

Stock-based Compensation Expense

From time to time, the Company may grant share purchase options
to directors, officers, employees and service providers. The Company uses the
Black-Scholes option pricing model to estimate a value for these options. This
model, and other models which are used to value options, require inputs such as
expected volatility, expected life to exercise and interest rates. Changes to
any of these inputs could cause a significant change in the stock-based
compensation expense charged in a period.

Income Taxes

The Company uses the liability method which takes into account
the differences between financial statement treatment and tax treatment of
certain transactions, assets and liabilities. Future tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Valuation allowances are established
to reduce future tax assets when there is potential that some or all of the
assets will not be realized. Estimates of future taxable income and the
continuation of ongoing prudent tax planning arrangements have been considered
in assessing the utilization of available tax losses. Changes in circumstances
and assumptions and clarifications of uncertain tax regimes may require changes
to the valuation allowances associated with the Companys future tax
liabilities.

A. Operating Results

Revenue for the year ended December 31, 2010 was $42.2 million,
an increase of $10.5 million or 33% as compared to 2009. This increase is
primarily a result of higher metal prices and, to a lesser extent, increased
production. Total production for the 2010 fiscal year of 2,255,802 Ag eq oz
increased by 2% from 2,202,456 Ag eq oz in 2009. Compared to 2009, average gold,
silver, lead and zinc prices for the year ended December 31, 2010 increased by
26%, 38%, 25% and 31%, respectively.

Revenue for the year ended December 31, 2009 was $31.7 million,
an increase of $9.3 million or 41% as compared to 2008. This increase is
primarily a result of higher production and lower smelting and refining costs,
which are netted against revenue. Total production for the 2009 fiscal year of
2,202,456 Ag eq oz increased by 22% from 1,809,720 Ag eq oz in 2008. Smelting
and refining costs for Guanajuato were reduced substantially during the last
half of the fourth quarter of 2008 when a new customer contract was negotiated.
The full effect of the cost savings is reflected in 2009. The Company also
negotiated more favourable, open market terms for spot sales of Topias lead
concentrate during the first half of 2009. These savings were partially offset
by general decreases in metal prices. Compared to 2008, average silver, lead and
zinc prices for the year ended December 31, 2009 decreased by 3%, 18%, and 12%
while the gold price increased 12%.

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- 50 -

For the years ended December 31, 2010, 2009 and 2008, cost of
sales was $21.2 million, $16.8 million and $18.1 million respectively. The year
over year increase in cost of sales is primarily due to higher tonnes mined and
milled, increased mine development as well as general inflation, including
increased power charges.

For the year ended December 31, 2009 and 2008, cost of sales
was $16.8 million and $18.1 million, respectively. The Company implemented cost
reduction and mine site efficiency measures during the fourth quarter of 2008
which were continued through 2009. As a result, savings were realized from
reduced mine operating costs for the full year in fiscal 2009.

For the years ended December 31, 2010, 2009 and 2008, the total
combined cash cost per ounce was US$7.43, US$5.58 and US$10.25, respectively.
The 33% year over year increase from 2009 to 2010 was primarily due to lower
than forecasted production, lower ore grades, general inflation including
increased power charges, higher smelting and refining charges and development
costs at Guanajuato, and lower ore grades and higher mining costs at Topia. The
46% year over year decrease from 2008 to 2009 was primarily achieved by sharply
reduced site-controlled costs and lower smelting and refining charges for
Guanajuato and Topia concentrates. The Company focused on higher grade ore as
well as other efficiency initiatives to reduce costs in 2009.

The non-GAAP measure of cash cost per ounce of silver is used
by the Company to manage and evaluate operating performance at each of the
Companys mines and is widely reported in the silver mining industry as a
benchmark for performance, but does not have a standardized meaning and may not
be comparable to other companies.

The Companys ability to control the cash cost per ounce is one
of its key performance drivers impacting both the Companys financial condition
and results of operations. Having a low silver production cost base allows the
Company to remain profitable even during times of declining commodity prices and
provides more flexibility in responding to changing market conditions. In
addition, a profitable operation results in the generation of positive cash
flows, which then improves the Companys financial condition.

Amortization and depletion of mineral properties, plant and
equipment for the year ended December 31, 2010 was $2.4 million compared to $3.5
for the same period in 2009. The decrease was due to the increase in mine life
at both Guanajuato and Topia at March 31, 2010 and December 31, 2010 which had
the effect of decreasing the asset retirement obligation and the corresponding
asset. The excess of the reduction in the liability over the remaining
unamortized asset retirement costs was recognized as a reduction in depreciation
expense in 2010.

Amortization and depletion of mineral properties, plant and
equipment for the twelve months ended December 31, 2009 was $3.6 million
compared to $4.3 million for the same periods in 2008. The year over year
decrease was due to the extension of Topias mine life from a remaining three
years to seven years at the end of 2008.

The Company incurred mineral property exploration expenditures
of $7.1 million for the year ended December 31, 2010, compared to $1.6 million
for the corresponding periods in 2009. In the early part of 2009, exploration
expenditures were low due to the deferral of most mine development that was not
related to immediate production, as part of the cost containment program
implemented in the fourth quarter 2008. In the fourth quarter of 2009, the
Company began exploratory drilling at both Guanajuato and Topia as the
three-year growth strategy commenced.

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- 51 -

Mineral property exploration expenditures of $7.1 million in
2010 were higher than the Companys anticipated spending of $6.3 million. This
was mainly due to the expansion of the planned Topia surface drilling
program.

The Company incurred mineral property exploration expenditures
of $1.6 million for the year ended December 31, 2009, compared to $6.3 million
for the corresponding period in 2008. The significant year over year decrease in
mineral property exploration expenditures was due to the deferral of most mine
development that was not related to immediate production, as part of the cost
containment program implemented in the fourth quarter 2008. Exploratory drilling
resumed at both Guanajuato and Topia during the third and fourth quarters of
2009.

General and administrative expenses were $5.9 million for the
year ended December 31, 2010, compared to $5.8 million for the same periods in
2009. This increase was primarily due to costs incurred relating to investor
relations, including the addition of a new vice president of corporate
development, and increased business development activities. The Company plans to
spend $6.5 million in general and administrative expenses in 2011. This increase
is primarily due to expanded marketing activities planned for the United States
and Europe in 2011.

For the years ended December 31, 2009 and 2008, general and
administrative expenses totalled $5.8 million and $6.0 million, respectively.
The $0.2 million year over year decrease was mainly due to $0.5 million of
non-recurring costs incurred in 2008 relating to Value-Added Tax (VAT)
recovery fees, a provision for potentially uncollectible VAT and a true-up of
2007 audit fees. These savings were partially offset by the payment of bonuses
in the fourth quarter of 2009.

For the year ended December 31, 2010, the Company incurred
stock-based compensation expense of $0.9 million. The Company granted in the
fourth quarter 240,000 incentive stock options to employees at an exercise price
of $1.15 and 415,000 incentive stock options to employees and a consultant at an
exercise price of $1.90. During the third quarter of 2010, the Company granted
670,000 incentive stock options to employees at an exercise price of $0.90.

For the years ended December 31, 2009 and 2008, stock-based
compensation expense was $2.4 million and $1.6 million, respectively. The year
over year increase was primarily due to 6,417,700 more incentive stock options
were granted in 2009 than in 2008. The weighted average fair value of options
granted during 2009 was $0.28 compared to $0.32 in 2008.

During the year ended December 31, 2009, the Company repaid its
$2.02 million, 8% per annum, unsecured convertible loan note by issuing
3,740,741 common shares at $0.54 per share. This transaction resulted in $0.05
million being charged as debt settlement expense to the income statement and
$1.6 million being recorded against retained earnings for settlement of the
convertible debt. There was no convertible loan notes repayment during 2010.

The Company recorded a foreign exchange loss of $1.0 million
and $0.4 million for the fourth quarter and year ended December 31, 2010,
respectively, compared to a foreign exchange gain of $0.2 million and a foreign
exchange loss of $0.4 million, respectively, for the same periods in 2009. Year
over year results are not comparable as on January 1, 2010, the Company changed
its method of translation of the results of its foreign operations from the
temporal to the current rate method on a prospective basis. Under the current
rate method, assets and liabilities are translated into the reporting currency
using the exchange rate at the balance sheet date and revenue and expense items
are translated at the average exchange rate prevailing during the period.
Differences arising from foreign currency translation are recorded in
accumulated other comprehensive income (loss) as a translation adjustment until
they are realized.

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- 52 -

The Company recorded a foreign exchange loss of $0.4 million
for the fiscal year 2009 compared to a foreign exchange gain of $0.1 million in
the fiscal year 2008. The foreign exchange loss for the fiscal year 2009 is
mainly a result of the general appreciation of the Canadian dollar against both
the United States dollar and the Mexican peso, whereas the Canadian dollar
weakened against both currencies in 2008.

The Company recorded a recovery of income taxes of $1.7 million
for year ended December 31, 2010 compared to a provision for income taxes of
$0.7 million for the same period in 2009. The $1.7 million recovery for 2010 was
primarily due to the reversal of the Companys $1.9 million future income tax
liability during the second quarter of 2010 which was a result of the completion
of tax planning that allows for the utilization of prior years Mexican tax
losses.

For the year ended December 31, 2009, the Company recorded an
income tax provision of $0.7 million compared to an income tax recovery of $1.2
million in the same period in 2008.

During the year ended December 31, 2010, the Company entered
into a put and call option contract for 500 metric tonnes of zinc with a
contract period from July 2010 to December 2010 and a put and call option
contract for 500 metric tonnes of lead over ten monthly contract periods from
December 2010 to October 2011. The Company determined that these contracts are
derivative financial instruments that should be measured at fair value at each
reporting period with any gains or losses recognized in net income in the period
in which it arises. As at December 31, 2010, the Company settled the entire zinc
put and call option contract realizing a loss of $0.1 million and recorded a
mark-to-market unrealized loss of $0.02 million related to the lead put and call
option contract. Consequently, during the year ended December 31, 2010, the
Company recorded a net mark-to-market loss of $0.1 million compared to $nil in
in 2009 and 2008.

Net income for the year ended December 31, 2010 was $5.0
million compared to a net loss of $0.9 million for the same period in 2009. The
increase in 2010 net income of $5.8 million was mainly due to the $7.2 million
increase in earnings from mining operations, $1.5 million decrease in
stock-based compensation expense and the non-cash reversal of the $1.9 million
future income tax provision. The increase in net income is partially offset by
the $5.5 million increase in mineral property exploration expenditures.

For the year ended December 31, 2009, the Company has a net
loss of $0.9 million compared to a net loss of $13.8 million for the year ended
December 31, 2008. On a year over year basis, earnings from mining operations
improved by $11.4 million during 2009, which was a result of the Companys
efforts to implement mine site efficiencies, increase production, and improve
grades. The Company realized $4.7 million in year over year savings as a result
of scaling down its exploration program in response to poor economic conditions
in the latter half of 2008 and into the first part of 2009.

|B. | Liquidity and Capital Resources
|-- | -------------------------------

At December 31, 2010, the Company had working capital of $18.7
million and cash and cash equivalents of $14.0 million compared to working
capital of $18.2 million and cash and cash equivalents of $13.3 million at
December 31, 2009. This increase in liquidity in 2010 resulted from a $2.9
million increase in cash generated by operating activities to $4.2 million in
2010 from $1.3 million in 2009. The Company also generated cash flow of $5.9
million in 2010 from the exercise of options and warrants compared to $1.2
million in 2009. These increased inflows were partially offset by capital
expenditures of $8.0 million in 2010 compared to $1.8 million in 2009.

---

- 53 -

Great Panther plans to produce 2.9 million Ag eq oz in 2011 and
invest $23.8 million in capital expenditures, including $10.4 million in mineral
property exploration expenditures. These investments in 2011 will include the
purchase of new, more efficient mobile mining equipment, plant upgrades,
significantly furthering mine development and ramping up exploratory drilling,
and will make good progress towards the goal of increasing production to 3.8
million Ag eq oz and growing resources to 40 million Ag eq oz by 2012.
Management anticipates that cash flow generated from mining activities along
with working capital will be sufficient to fund the Companys operations without
requiring any additional capital during the next twelve months.

On July 22, 2010, the Company entered into a zinc put and call
option contract (the Zinc Contract) for 500 metric tonnes with a contract
period from July 2010 to December 2010. The floor and cap price per metric tonne
was US$1,800 and US$1,975, respectively. Under the terms of the Zinc Contract,
the Company received the prevailing market zinc price while within the price
range. When the market price was outside the price range, the Company received a
minimum of the floor price or a maximum of the cap price if the market was below
the floor price and above the cap price, respectively. Also under the terms of
the Zinc Contract, the Company pledged $0.1 million (US$0.1 million) as cash
collateral. Accordingly, this amount was classified as restricted cash. As at
December 31, 2010, the cash collateral from the Zinc Contract is $0.05 million
(US$0.05 million) and the liability under the Zinc Contract is $0.03 million.
The contract settled in early January 2011.

On November 3, 2010, the Company entered into a lead put and
call option contract (the Lead Contract) for a total of 500 metric tonnes
which are settled equally over ten monthly contract periods from December 2010
to September 2011. The floor and cap price per metric tonne is US$1,800 and
US$3,100, respectively. Under the terms of the Lead Contract, the Company will
receive the prevailing market lead price while within the price range. Should
the market price be outside the price range, the Company will receive a minimum
of the floor price or a maximum of the cap price if the market is below the
floor price and above the cap price, respectively.Also under the terms
of the Lead Contract, the Company pledged $0.1 million (US$0.1 million) as cash
collateral. Accordingly, this amount was also classified as restricted cash. As
at December 31, 2010, the cash collateral from the Lead Contract is $0.1 million
(US$0.1 million) and the liability under the Lead Contract is $0.02 million.

On March 8, 2011, the Company paid off $4.05 million in two
outstanding $2.025 million principal amount 8% unsecured convertible loan notes
due on July 14, 2011 by the issuance of 1,800,000 fully paid common shares of
the Company at the originally agreed upon conversion price of $2.25 per common
share.

At the date of this report, the Company had no material
off-balance sheet arrangements such as obligations under guarantee contracts,
contingent interest in assets transferred to any unconsolidated entity,
obligations under certain derivative instruments other than those described
above, or obligation under a material variable interest held in any
unconsolidated entity that provides financing, liquidity, market or credit
risk.

Operating Activities

For the year ended December 31, 2010, cash flow provided by
operating activities was $4.2 million. This compares to cash flow provided by
operating activities of $1.3 million in 2009. The year over year improvement was
largely attributable to higher revenue from increased metal prices and partially
offset by an increase in amounts receivable due to an increase in the number of
unsettled shipments and higher metal prices at the end of December 2010 compared
to December 2009. As at February 28, 2011, 67% of the trade receivable balance
has been collected.

---

- 54 -

Before changes in non-cash working capital, the Company
generated $7.2 million in operating cash flow during the year ended December 31,
2010, compared to $6.5 million during the same period in 2009. This year over
year improvement is largely attributable to higher revenue from increased metal
prices, partially offset by increased spending on mineral property
exploration.

For the year ended December 31, 2009, cash flow provided by
operating activities was $1.3 million. This compares to cash flow used in
operating activities of $3.3 million in 2008. Before changes in non-cash working
capital, the Company generated $6.4 million in operating cash flow during 2009,
compared to cash out flow of $7.4 million in 2008. The year over year
improvement is largely attributable to higher revenue from increased production,
savings from mine site efficiencies, reduced smelting costs, reduced exploration
and general and administrative expenses

Investing Activities

For the year ended December 31, 2010, the Company had a net
cash outflow from investing activities for the development of mineral properties
and purchase of capital assets of $8.0 million compared to $1.8 million in 2009.
In addition, the Company also purchased $1.1 million of mine equipment through
two promissory notes and two capital leases during 2010. These capital
expenditures are part of the three-year growth strategy which commenced in the
fourth quarter of 2009.

For the year ended December 31, 2009, the Company had a net
cash outflow from investing activities for the development of mineral properties
and purchase of capital assets of $1.8 million compared to $1.8 million in 2008.
The Company also had $0.7 million of non-cash investing activities through a
capital lease and promissory note in 2009, compared to $0.8 million of capital
lease in 2008. Great Panther significantly curtailed capital expenditures
beginning mid-2008 as the economy worsened. The Company started incurring
capital expenditures in the fourth quarter 2009 as the three-year growth
strategy commenced.

The Company plans to invest $23.8 million in capital
expenditures in 2011. This includes $10.4 million of mineral property
exploration expenditures, of which $2.8 million relates to the San Ignacio
drilling program. Equipment and plant purchases and betterments of $7.7 million
and $1.3 million, respectively, are planned for 2011.

Financing Activities

Cash flow provided by financing activities was $4.7 million for
the year ended December 31, 2010 compared to $13.2 million in the comparative
period in 2009. There were no equity financings during 2010 compared to two
financings completed in 2009 for net proceeds of $12.2 million.

For the year ended December 31, 2010, the Company received
proceeds from the exercise of options and warrants totalling $5.9 million
compared to $1.3 million for the same period in 2009. These proceeds were
partially offset by a $1.2 million repayment of the Companys capital lease
obligations and promissory notes during the year ended December 31, 2010
compared to $0.4 million during the year ended December 31, 2009.

Cash flows from financing activities were $13.2 million during
2009 compared to $0.3 million in 2008. Proceeds received from equity financings
and the exercise of warrants and options totaling $13.5 million were partially
offset by a $0.4 million repayment of a capital lease obligation.

---

- 55 -

On March 8, 2011, the Company paid off $4.05 million in two
outstanding $2.025 million principal amount 8% unsecured convertible loan notes
due on July 14, 2011 by the issuance of 1,800,000 fully paid common shares of
the Company at the originally agreed upon conversion price of $2.25 per common
share. Accrued interest outstanding will be paid in cash.

Subsequent to December 31, 2010, the Company received proceeds
of $1.1 million on the exercise of 1,810,500 options and $0.9 million on the
exercise of 999,900 warrants.

2011 Outlook

Great Panthers three-year strategy to accelerate production to
3.8 million Ag eq oz by 2012 is now commencing its second year. New equipment
has been delivered to the mines, new production areas are being added, plant
performance continues to excel, plant capacity is being increased, resources
have been increased and reserves defined, and exploration drill programs have
made significant new discoveries of high grade mineralization.

The combined production target for 2011 has been set at 2.87
million Ag eq oz, consisting of 1.94 million oz silver, 11,200 oz gold, 1,170
tonnes lead and 1,430 tonnes zinc. Silver equivalents for 2011 have been
established using prices of US$1,200/oz Au, US$20/oz Ag, US$0.90/lb Pb and Zn.

Production from Guanajuato is planned to increase steadily
throughout 2011 as output from the Los Pozos and Santa Margarita areas reach
full capacity, Cata production returns to previous levels, and new production is
added from the Guanajuatito area. Plant throughput is estimated to be 200,000
tonnes at grades of 240g/t silver and 1.80g/t gold for metal production of 1.38
million oz silver and 10,400 oz gold, equivalent to 2.00 million Ag eq oz.

Output from Topia is estimated to increase as new mine
production is added as a result of development on existing and new veins and
plant capacity is increased. Plant throughput is estimated to be 40,000 tonnes
with metal production of 0.56 million oz silver, 800 oz gold, 1,170 tonnes lead
and 1,430 tonnes zinc, equivalent to 0.87 million Ag eq oz.

No production from the new discoveries at the San Ignacio
property is included in the 2011 target. However, as resources are estimated and
mine plans are developed, it is anticipated that this project will positively
impact the plans for 2012. Due to the proximity of San Ignacio to the Companys
main operations at Guanajuato, any ore extracted during the development phase
can be trucked to the plant for processing.

Diamond drilling in 2010, from both surface and underground,
totalled 30,730 metres at Guanajuato, San Ignacio and Topia. Due to the success
of this program in delineating new resources and making new discoveries, the
drilling budget for 2011 has been more than doubled to approximately 60,000
metres, including at least 20,000 metres at San Ignacio, and 30,000 metres from
underground at Guanajuato. This compares favourably with the 65,000 metres
originally proposed for the Companys overall three-year growth strategy.

---

- 56 -

Some highlights from the 2011 plan include:

|                                 |  | Guanajuato        |  |  | Topia               |  |  | Consolidated      | 
|-------------------------------- |  | ----------------- |  |  | ------------------- |  |  | ----------------- | 
|Tonnes milled                    |  | 201,000           |  |  | 39,750              |  |  | 240,750           | 
|Silver ounces                    |  | 1,376,000         |  |  | 562,700             |  |  | 1,938,700         | 
|Gold ounces                      |  | 10,400            |  |  | 800                 |  |  | 11,200            | 
|Lead tonnes                      |  | -                 |  |  | 1,170               |  |  | 1,170             | 
|Zinc tonnes                      |  | -                 |  |  | 1,430               |  |  | 1,430             | 
|Silver equivalent ounces         |  | 1,997,000         |  |  | 873,000             |  |  | 2,870,000         | 
|Silver head grades (grams/tonne) |  | 240               |  |  | 490                 |  |  |                   | 
|Silver recoveries                |  | 88%               |  |  | 90%                 |  |  |                   | 
|Production costs per ounce       |  | US$5.00 - US$6.00 |  |  | US$10.00 - US$12.50 |  |  | US$6.50 - US$8.00 | 

Operations produced 1,534,957 silver ounces of which 1,428,758
ounces were payable at a cash operating cost of US$7.43 per oz of silver, net of
by-product credits, for the year 2010. As production increases over the next two
years, unit costs will generally reduce due to efficiencies and the positive
influence from higher gold production. Ranges in production costs are shown to
allow for costs such as power, fuel and materials which are outside of our
control and rising faster than average inflation. In addition, other costs, such
as a portion of the smelting and refining costs, vary according to metal
prices.

Cash flow generated from mining activities will be reinvested
in operations for exploration and capital expenditures to increase resources and
production. Surplus cash flow will be available for potential acquisitions as
the Company continues to grow.

Both operations have demonstrated the ability to achieve higher
silver production at a competitive cost per ounce and with a higher profit
margin. The Companys emphasis will be on maintaining positive operating cash
flow while developing and exploring to continually increase metal production.
The Companys production strategy is to increase silver production by 20%
year-on-year at continually decreasing unit costs.

---

- 57 -

Reconciliation between Canadian and United States Generally
Accepted Accounting Principles and United States Accounting Pronouncements

The effect of the measurement differences between Canadian GAAP
and US GAAP on the consolidated balance sheets is summarized as follows (in
thousands of dollars):

|                                                            |   | December 31, 2010 |   |   | December 31, 2009 |  
|----------------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
|                                                            |   | Canadian          |   |   | US                |  
|                                                            |   | GAAP              |   |   | GAAP              |  
|Convertible note payable (note (a)(iv))                     | $ | 3,792             |   | $ | 4,050             |  
|Share capital (note (a)(iii) and note (a)(vii))             |   | 83,470            |   |   | 87,185            |  
|Contributed surplus (note (a)(iii) and note
      (a)(vii)) |   | 9,470             |   |   | 11,981            |  
|Equity component of convertible note (note (a)(iv))         |   | 1,563             |   |   | -                 |  
|Deficit                                                     |   | (55,892           | ) |   | (60,046           | )

Share capital and contributed surplus:

|                                                                           |   | 2010   |  |   | 2009   | 
|-------------------------------------------------------------------------- | - | ------ |  | - | ------ | 
|Share capital and contributed surplus,
      under Canadian GAAP           | $ | 92,940 |  | $ | 86,178 | 
|Adjustment for stock-based compensation for employees (note
      (a)(ii)) |   | 15     |  |   | 15     | 
|Reversal of recapitalization of deficit (note (a)(iii))                    |   | 6,211  |  |   | 6,211  | 
|Share capital and
      contributed surplus, under US GAAP                 | $ | 99,166 |  | $ | 92,404 | 

---

- 58 -

Deficit:

|                                                                                                                 |   | 2010    |   |   | 2009    |  
|---------------------------------------------------------------------------------------------------------------- | - | ------- | - | - | ------- | -
|Deficit, under Canadian GAAP                                                                                     | $ | (55,892 | ) | $ | (60,862 | )
|Adjustment for stock-based compensation for employees (note
      (a)(ii))                                       |   | (15     | ) |   | (15     | )
|Reversal of recapitalization of deficit
      (note (a)(iii))                                                    |   | (6,211  | ) |   | (6,211  | )
|Interest accreted on convertible loan note (note (a)(iv))                                                        |   | 2,214   |   |   | 1,778   |  
|Reversal of incremental fair value of
      liability component due to early conversion of convertible loan note |   | -       |   |   | 51      |  
|Reversal of premium of the equity component upon early
      conversion of the convertible loan note             |   | -       |   |   | 1,607   |  
|Effect of induced early conversion of
      convertible loan note, under US GAAP (note (a)(iv))                  |   | -       |   |   | (1,658  | )
|Amortization of
      option payments (note (a)(v))                                                              |   | (142    | ) |   | (425    | )
|Deficit, under US GAAP                                                                                           | $ | (60,046 | ) | $ | (65,735 | )

Income (loss) and earnings (loss) per share:

|                                                                                                                 |   | 2010        |   |   | 2009       |   |   | 2008       |  
|---------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | - | - | ---------- | -
|                                                                                                                 |   |             |   |   |            |   |   |            |  
|Income (loss) for the year, under Canadian
      GAAP                                                            | $ | 4,970       |   | $ | (867       | ) | $ | (13,761    | )
|Reversal of incremental fair value of liability component
      due to early conversion of convertible loan note |   | -           |   |   | 51         |   |   | -          |  
|Effect of induced early conversion of
      convertible loan note, under US GAAP note (a)(iv)                    |   | -           |   |   | (1,658     | ) |   | -          |  
|Interest accreted on convertible loan note (note (a)(iv))                                                        |   | 436         |   |   | 628        |   |   | 623        |  
|Amortization of option payments (note (a)(v))                                                                    |   | (142        | ) |   | (425       | ) |   | -          |  
|Income (loss) for
      the year, under US GAAP                                                                  | $ | 5,264       |   | $ | (2,271     | ) | $ | (13,138    | )
|                                                                                                                 |   |             |   |   |            |   |   |            |  
|Earnings (loss) per share                                                                                        |   |             |   |   |            |   |   |            |  
|Basic                                                                                                            | $ | 0.05        |   | $ | (0.03      | ) | $ | (0.16      | )
|Diluted                                                                                                          | $ | 0.04        |   | $ | (0.03      | ) | $ | (0.16      | )
|Weighted average number of common shares                                                                         |   |             |   |   |            |   |   |            |  
|Basic                                                                                                            |   | 114,422,226 |   |   | 90,210,438 |   |   | 81,321,733 |  
|Diluted                                                                                                          |   | 118,932,260 |   |   | 90,210,438 |   |   | 81,321,733 |  

---

- 59 -

|a. | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   | The consolidated financial statements have been prepared
      in accordance with Canadian generally accepted accounting principles
      (Canadian GAAP). A description of US GAAP and practices prescribed by the
      US Securities and Exchange Commission (collectively US GAAP) that result
      in measurement differences from Canadian GAAP are as follows:
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   | i.                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   | ii.                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   | iii.                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   | iv.                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                       

---

- 60 -

| |    | Applying US GAAP, the convertible notes at December 31,
      2010 would be recorded as a liability at face value of $4.05 million and
      no value would be assigned to the equity component of the convertible
      notes. In addition, accretion on the calculated debt discounts on the
      convertible notes under Canadian GAAP of $0.4 million for the year ended
      December 31, 2010 (2009 - $0.6 million, 2008 - $0.6 million) would not
      have been recorded under US GAAP, reducing interest expense by an
      equivalent amount.                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | During the year ended December 31, 2009, the Company
      induced the early conversion of the $2.0 million convertible loan note. In
      accordance with Canadian GAAP, the Company accounted for the early
      conversion as described in (note 9(b)(ii)) of our consolidated financial
      statements for the year ended December 31, 2010. Under US GAAP, the
      Company recognized an expense of $1.7 million which is the fair value of
      the common shares transferred in excess of the fair value of the common
      shares issuable pursuant to the original conversion terms.                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | v. | Mineral properties, plant, and
equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Effective March 31, 2010, the remaining life of the Topia
      Mine was extended from 6 years to 10 years. The Company increased its NI
      43-101 compliant resources at the Topia Mine in July 2009. Based on the
      updated resource calculation and the current production rate of
      approximately 36,000 tonnes per year, the Company expects the resources to
      support a mine life of approximately ten years. Effective December 31,
      2010, the Company retained Topias mine life at 10 years.                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Effective March 31, 2010, the remaining life of the
      Guanajuato mine was extended from 2 years to 3 years. In December 2010,
      the Company issued a NI 43-101 compliant resource estimate for three zones
      at the Guanajuato mine. Based on the resource estimate and the current
      production rate of approximately 2.6 million Ag eq oz per year, the
      Company expects the resources to support a mine life of approximately 5
      years. Effective December 31, 2010, the Company extended the mine life
      from 3 years to 5 years.                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Production facilities and mineral property costs are
      amortized over the estimated remaining life of mine which were 3 years for
      Guanajuato and 10 years for Topia for the year ended December 31, 2010.
      Under US GAAP, the Company expects to use the units-of-production method
      based on reserves as defined under SEC Industry Guide 7 once such reserve
      amounts are determinable for each of the whole mines.                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Under Canadian GAAP, periodic option payments related to
      mineral properties are expensed prior to commercial feasibility of mining
      operations being established. Under US GAAP, periodic option payments are
      capitalized when such payments are associated with the acquisition of
      mineral rights and amortized over their respective option term. As there
      were no option payments made to the Mapimi project during the year (note
      8) of our consolidated financial statements for the year ended December
      31, 2010, a measurement difference of $0.1 million resulted from the
      amortization of prior years option payments. There is no material
      measurement difference for the comparative
periods.

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- 61 -

|   | vi.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Statement of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | In the statement of cash flows, the presentation of the
      cash flows from operating activities includes an intermediate total which
      is not permitted under US GAAP, ASC 230, Statement of Cash
Flows.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | vii.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Share capital and contributed surplus                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Under Canadian GAAP, the Company allocates the net
      proceeds from equity financings containing common shares and share
      purchase warrants to share capital (note 11(b)) of our consolidated
      financial statements for the year ended December 31, 2010. Under US GAAP,
      the net proceeds from the issuance of units are allocated between common
      shares and share purchase warrants contained in such units, based on their
      relative fair values. Accordingly, the amount of $2.5 million, being the
      portion of the net proceeds allocated to these warrants, is recorded to
      contributed surplus under US GAAP.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|b. | International Financial Reporting Standards
      (IFRS):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In February 2008, the Canadian Accounting Standards Board
      (AcSB) announced the changeover from Canadian GAAP to International
      Financial Reporting Standards (IFRSs) for publicly accountable
      enterprises and listed entities, for the annual periods beginning on or
      after January 1, 2011.                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Company will prepare its first consolidated financial
      statements in accordance with IFRS for the year ending December 31, 2011
      (adoption date). In accordance with IFRS 1, First-time Adoption of
      International Financial Reporting Standards (IFRS 1), the Company will
      retrospectively apply IFRS effective at the adoption date, except for
      mandatory and elected optional exemptions from full retrospective
      application of IFRS as provided by IFRS 1.                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Preparation of our first consolidated financial
      statements in accordance with IFRS will require presentation of
      comparative information in accordance with IFRS. In order to present
      comparative information in accordance with IFRS in its IFRS financial
      statements, the Company will be required to restate its balance sheet as
      at January 1, 2010 to comply with IFRS (transition date).                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Our planned transition to IFRS and the conversion project
      consists of three phases: (i) Planning and Scoping, (ii) Detailed
      Assessment, Conversion Planning and Development, and (iii) Implementation,
      Parallel Reporting and Review.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Phase One: Planning and Scoping, which involves project
      planning and identification of differences between current Canadian GAAP
      and IFRS, has been completed. The identified areas of accounting
      differences of highest potential impact to the Company are impairment of
      assets, asset retirement obligations, property plant and equipment,
      exploration and evaluation expenditures, functional currency and initial
      adoption of IFRS under the provisions of IFRS 1.                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Phase Two: Detailed Assessment, Conversion Planning and
      Development involves detailed diagnostics and evaluation of the financial
      impacts of various options and alternative methodologies available under
      IFRS; identification and design of operational and financial business
      processes; initial staff training; analysis of IFRS 1 optional exemptions
      and mandatory exceptions to the general requirement for full retrospective
      application upon transition to IFRS; summarization of IFRS disclosure
      requirements; and development of required solutions to address identified
      issues.

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- 62 -

Phase Three: Implementation, Parallel
Reporting and Review, involves the execution of changes to information systems
and business processes; completion of formal authorization processes to approve
recommended accounting policy changes; and further training programs across the
Companys finance and other affected areas, as necessary. It will culminate in
the collection of financial information necessary to compile IFRS-compliant
consolidated interim and annual financial statements and reconciliations;
embedding of IFRS in business processes; and, audit committee approval of
IFRS-compliant financial statements.

The following table summarizes the
Company key activities and current status of its changeover plan:

Key Activities
    
    Current Status(1)
    Financial Reporting- Analyze and select accounting policies where
      choices are permitted, including IFRS 1 elections
    
    
    - The Company completed the selection of accounting
      policies and IFRS 1 elections-
      Quantify differences for opening balance sheet and key differences for
      quarterly comparatives
    
    
    - Quantification of key differences for opening
      balance sheet and quarterly comparatives are in the process of being
      finalized(2)
    Financial Information Systems- Determine and implement solution for
      capturing IFRS information for comparative periods
    
    
    - IFRS information for the opening balance sheet
      and comparative periods will be maintained in spreadsheets- Identify and evaluate impact on financial
      systems and the changes required
    
    
    - The system used by the Company to record stock
      based compensation is IFRS compliant- The Company's information systems have been
      configured to record transactions under IFRS


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- 63 -

(3)
    Internal Control Over Financial
      Reporting ("ICFR")- Maintain effective controls throughout the
      IFRS conversion process
    
    
    - Control enviroment surrounding ICFR has been
      maintained through the conversion process.-
      Identify and revise, as necessary, control environment for changes in
      processes and controls as a result of conversion to IFRS
    
    
    - The Company's assessment of changes in controls
      is underway and being documented.(4)
    Disclosure Controls and Procedures-
      Identify and revise, as necessary, disclosure controls as a result of
      conversion to IFRS
    
    
    - IFRS updates, formal and informal, were provided
      to the Company's staff, including individuals directly involved with
      investor relations and corporate communication.(5)
    Training and Financial Reporting
      Expertise- Provide technical training to key finance
      and accounting personnel at all sites
    
    
    - The Company provides financial support and
      time for financial personnel to stay abreast with IFRS- The Company engaged third party IFRS consultants
      to assist with the conversion to IFRS- The Company will provide specific training, on an
      as needed basis during 2011 and thereafter(6)
    Business Activities-
      Identify and assess impact of transition to IFRS on key business
      activities such as budgeting and human resources (i.e. compensation
      arrangements)
    
    
    - The Company is currently reviewing the impact on
      its key business activities and will conclude in 2011 once all differences
      are finalized


---

- 64 -

The Company also anticipates a
significant increase in disclosure resulting from the adoption of IFRS and is
continuing to assess the level of disclosure required as well as additional
systems changes that may be necessary to gather and process the required
information.

The Company has identified key areas
where changes in accounting policy are required on its transition from Canadian
GAAP to IFRS listed below. This list is intended to highlight the areas the
Company determined to be the most significant that will result from the
transition to IFRS. The Company has not yet finalized the impact of these
changes on its consolidated financial statements and will only be reporting
quantified differences once approved by the Audit Committee. The IASB has
significant ongoing projects that could affect the ultimate differences between
Canadian GAAP and IFRS and these changes may have a material effect on the
Companys consolidated financial statements.

The key areas where changes in
accounting policy are required for the adoption of IFRS are listed below:

i. First Time Adoption of IFRS

The Company has decided to use the
following optional IFRS 1 exemptions from full retrospective application of
IFRS:

- The Company has elected not to apply IFRS 3,
  Business Combinations (as revised in 2008) to past business combinations that
  occurred before the date of transition to IFRS. In accordance with this
  optional exemption, such past business combinations will not be restated.
- The Company has elected not to apply IFRS 2,
  Share-based Payment to equity instruments vested before the transition date.
  This election exempts the Company from retrospective restatement of
  share-based payments vested before the transition date.
- The Company has elected to apply the transitional
  provisions in IFRIC 4, Determining whether an Arrangement contains a Lease
  (IFRIC 4). Accordingly, for the arrangements existing as at the transition
  date, the Company determined whether an arrangement contains a lease on the
  basis of facts and circumstances existing at that date. The Company completed
  an analysis and has concluded as of the date of this MD&A that there were
  no arrangements within the scope of IFRIC 4.
- The Company has elected not to comply with
  requirements of IAS 21, The Effects of Changes in Foreign Exchange Rates for
  cumulative translation differences that existed at the date of transition to
  IFRS. In accordance with this IFRS 1 optional exemption, the cumulative
  translation differences for all foreign operations are deemed to be zero at
  the date of transition to IFRS and the gain or loss on a subsequent disposal
  of any foreign operation will exclude translation differences that arose
  before the date of transition to IFRS and will include later translation
  differences.
- For instruments where the liability component is no
  longer outstanding as at transition date, the Company elected not to apply
  requirement of IAS 32, Financial Instruments: Presentation to split a compound
  financial instruments into two portions of equity.

---

- 65 -

- As at transition date, the Company will not make
  any additional optional designations of financial instruments as available for
  sale, or financial asset or financial liability at fair value through profit
  or loss, unless such designation has been made on initial recognition of such
  instruments in accordance with IAS 39, Financial Instruments: Recognition and
  Measurement.
- The Company has elected to apply optional exemption
  from full retrospective application of IFRIC 1, Changes in Existing
  Decommissioning, Restoration and Similar Liabilities (IFRIC 1) to its
  decommissioning liabilities included in the cost of property, plant and
  equipment. In accordance with this IFRS 1 optional exemption, decommissioning
  and restoration liabilities of the Company are measured as at the date of
  transition to IFRS in accordance with IAS 37, Provisions, Contingent
  Liabilities and Contingent Assets. To the extent that the liability is within
  the scope of IFRIC 1, the amount that would have been included in the cost of
  the related asset when the liability first arose is determined by discounting
  the liability to that date using the best estimate of the historical
  risk-adjusted discount rates(s) that would have applied for that liability of
  the intervening period. The carrying amount of related asset as at the
  transition date is determined by calculating accumulated depreciation on the
  basis of the current estimate of the useful life of such asset, using the
  depreciation policy adopted by the Company in accordance with IFRS.
- The Company has elected to apply transitional
  provisions of IAS 23, Borrowing Costs (as revised in 2007) (IAS 23).
  Accordingly, the effective date of adoption of requirements of IAS 23 for the
  Company is its transition date. The Company will not apply requirements of IAS
  23 to qualifying assets completed prior to transition date. The Company did
  not have any qualifying projects in progress as of the date of this MD&A.

The Company has decided not to use an
optional IFRS 1 election to measure its property, plant and equipment at the
date of transition to IFRSs at its fair value and use that fair value as its
deemed cost, or use a previous GAAP revaluation of property, plant and equipment
as its deemed cost at the transition date. Instead, the Company will
retrospectively apply recognition and measurement requirements of IAS 16,
Property, Plant and Equipment (IAS 16). Under IAS 16, the Company made an
accounting policy choice to measure its property, plant and equipment after its
recognition at its cost less any accumulated depreciation and any accumulated
impairment losses.

ii. Exploration and Evaluation
Expenditures

IFRS 6 allows for capitalization of
exploration and evaluation expenditures that the Company had previously expensed
under Canadian GAAP. The Company has determined that expenditures incurred after
it has acquired the legal right to explore and before technical feasibility and
commercial viability to extract resources have been demonstrated should be
capitalized.

iii. Asset Retirement Obligation:

The primary differences between IFRS
and Canadian GAAP for reclamation and rehabilitation provisions include the
basis of estimation for undiscounted cash flows, the discount rate used, the
frequency of liability re-measurement, and recognition of a liability when a
constructive obligation exists. The Company is currently assessing the impact on
the carrying value of its asset retirement obligation upon adoption of IFRS.

---

- 66 -

iv. Convertible Notes:

IFRS requires that convertible notes be
bifurcated between its liability and equity components. IFRS emphasizes the
residual nature of equity and places the primary emphasis on the liability
component. As a result of this difference in methodology, the Company is
currently assessing the impact on the carrying value of its convertible notes
upon adoption of IFRS.

v. Property, Plant, and Equipment:

Key differences between Canadian GAAP
and IFRS with respect to property, plant, and equipment include component
accounting which must be applied to physical and non-physical components which
are significant and have a useful life which differs to that of the overall
asset, the mandatory capitalization of interest costs and requirements for the
annual review of estimates of useful life, residual value and the depreciation
method. The Company will continue to account for its property, plant and
equipment using the cost model. At this point, the Company does not expect to
record a material adjustment relating to this difference.

vi. Impairment of Assets:

Both Canadian GAAP and IFRS require an
entity to test for impairment of assets when there is an indication of
impairment. Under Canadian GAAP, a two-step approach to impairment testing is
performed. The asset carrying value is compared with its undiscounted future
cash flow to determine whether impairment exists. The impairment is then
measured by comparing the assets carrying value with its fair value. IFRS
requires the application of a one-step approach for both testing for and
measuring impairment, with asset carrying values compared directly with the
higher of fair value less costs to sell and value in use and includes the use of
discounted cash flows when a cash flow model is used. IFRS also allows the
reversal of impairments for long-lived assets if conditions that gave rise to
these impairments no longer exist. It is expected that there may be increased
volatility in impairment recognition due to the possibility of more frequent
impairments and the reversal of impairments under IFRS. We have assessed
impairment indicators under IFRS as at the date of transition for all of our
projects and concluded that there were no such indicators, which was consistent
with Canadian GAAP.

|C. | Research and Development
|-- | ------------------------

We do not currently, and did not previously, have research and
development policies in place. Over the past three fiscal years, we spent
approximately $0.6 million on due diligence for various other mining
properties.

|D. | Trend Information
|-- | -----------------

Our business is mining of precious metals deposits, principally
gold and silver, so the price of these commodities has a direct impact on our
prospects for success and our ability to raise capital. The recent trend for the
price of gold and silver has been positive and has remained steady at relatively
high historical prices. Management believes that the current trend will continue
for the foreseeable future. History has shown, however, that there can be no
such assurances.

|E. | Off-balance Sheet Arrangements
|-- | ------------------------------

We do not have any off-balance sheet arrangements.

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- 67 -

|F. | Tabular Disclosure of Contractual
      Obligations
|-- | ---------------------------------------------------

The following table outlines the contractual obligations of the
Company at December 31, 2010 (in thousands of dollars):

|                                |   | Less
      than 1 |  |   |                 |  |   |                 |  |   | After
      5 |  |   |        | 
|------------------------------- | - | ----------------- |  | - | --------------- |  | - | --------------- |  | - | ------------- |  | - | ------ | 
|                                |   | year              |  |   | 1-3
      years |  |   | 4-5
      years |  |   | years         |  |   | Total  | 
|Long-term debt (1)              | $ | 4,610             |  | $ | 78              |  | $ | -               |  | $ | -             |  | $ | 4,688  | 
|Capital lease obligations       |   | 401               |  |   | 132             |  |   | -               |  |   | -             |  |   | 533    | 
|Operating leases                |   | 148               |  |   | 243             |  |   | -               |  |   | -             |  |   | 391    | 
|Purchase obligations (2)        |   | 5,129             |  |   | -               |  |   | -               |  |   | -             |  |   | 5,129  | 
|Other long-term obligations (3) |   | -                 |  |   | -               |  |   | 903             |  |   | 1,817         |  |   | 2,720  | 
|Total obligations               | $ | 10,288            |  | $ | 453             |  | $ | 903             |  | $ | 1,817         |  | $ | 13,461 | 

|(1) | Long term debt includes convertible loan notes, which may
      be converted into common shares of the Company at the holders option at
      any time, and promissory notes.                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                               
|(2) | Purchase obligations include commitments for consulting,
      laboratory, drilling, maintenance and equipment purchases.                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                               
|(3) | Other long term obligations include the discounted cost
      estimate to settle the Companys reclamation costs of the Guanajuato mine
      and Topia mines, which include land rehabilitation, decommissioning of
      buildings and mine facilities, on-going care and maintenance and other
      costs.

|G. | Safe Harbor
|-- | -----------

Not applicable.

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- 68 -

|ITEM 6 | Directors, Senior Management and
      Employees
|------ | ------------------------------------------------

|A. | Directors, Officers and Senior
      Management
|-- | -----------------------------------------------

The information below sets forth the names and business
experience of each of our directors, officers and senior management, as of the
date hereof:

|Name                                | Present Position Great
      Panther             | Present Position Minera
      Mexicana el Rosario                        | Present Position Metalicos
      de Durango                              | Present Position Minera
      de Villa Seca                             
|----------------------------------- | ------------------------------------------------ | ------------------------------------------------------------------------ | ------------------------------------------------------------------------ | ------------------------------------------------------------------------
|Kaare G. Foy                        | Executive
      Chairman, 
      Director        | President,
      Director                                                | President,
      Director                                                | President,
      Director                                               
|Robert A. Archer                    | President, 
      CEO, Director                  | Secretary, 
      Director                                               | Secretary,
      Director                                                | Secretary, 
      Director                                              
|Malcolm A. Burne                    | Director                                         | n/a                                                                      | n/a                                                                      | n/a                                                                     
|John T. Kopcheff                    | Director                                         | n/a                                                                      | n/a                                                                      | n/a                                                                     
|Martin B. Carsky                    | Director                                         | n/a                                                                      | n/a                                                                      | n/a                                                                     
|Wendy M. Ratcliffe                  | Corporate
      Secretary                        | n/a                                                                      | n/a                                                                      | n/a                                                                     
|Raakel Iskanius                     | Chief Financial
      Officer                    | Chief Financial
      Officer                                            | Chief Financial
      Officer                                            | Chief Financial
      Officer                                           
|Charles Brown                       | Chief Operating
      Officer                    | Chief Operating
      Officer                                            | Chief Operating
      Officer                                            | Chief Operating
      Officer                                           
|Francisco Ramos
      Sanchez       | Vice President,
      Business
      Development | Director                                                                 | Director                                                                 | Director                                                                
|Robert Brown                        | Vice President, 
      Exploration               | n/a                                                                      | n/a                                                                      | n/a                                                                     
|Craig Mackay                        | Vice President,
      Technical Services         | Vice President,
      Technical Services                                 | Vice President,
      Technical Services                                 | Vice President,
      Technical
      Services                          
|Erick Bertsch                       | Vice President
      Corporate
      Development | n/a                                                                      | n/a                                                                      | n/a                                                                     
|Enriqueta       Hernandez Dominguez | n/a                                              | Vice President,
      Accounting and
      Administration
      (Mexico) | Vice President,
      Accounting and
      Administration
      (Mexico) | Vice President,
      Accounting and
      Administration
      (Mexico)
|Eduardo Ortiz Briones               | Vice President,
      Corporate
      Relations  | Vice President,
      Corporate Relations                                | Vice President,
      Corporate Relations                                | Vice President,
      Corporate
      Relations                         

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- 69 -

Business Experience, Function and Area of Experience

Kaare G. Foy

As our Executive Chairman and a director, Mr. Foy is
responsible for the financial and corporate management and supervision of the
affairs and business of our company and our subsidiaries.

Following graduation from Monash University in Australia, Mr.
Foy became an Associate of the Australian Society of Accountants and a Member of
the Australian Institute of Directors. In 1995, he emigrated to reside
permanently in Canada. For most of his career, he has specialized in company
"turnarounds," and has more than 30 years of experience serving on the boards of
publicly listed companies in Australia, Canada and the United Kingdom, including
Loscam Materials Handling Limited in Australia, and Greenchip Investments PLC in
the United Kingdom.

Mr. Foy is also Executive Chairman and a director of Cangold
Limited, the President of Oceanic Management Limited, and a director of Golden
Prospect Precious Metals Limited, a CISX-listed company.

Robert A. Archer

As our President, Chief Executive Officer and a director, Mr.
Archer is responsible for the day-to-day operations of our company and for the
development of our strategic direction. He is also responsible for the
management and supervision of the affairs and business in Mexico.

Mr. Archer has more than 30 years experience working for mining
companies throughout North America, including Newmont Exploration of Canada
Ltd., Rio Algom Exploration Inc., Placer Dome Canada Ltd. and Noranda
Exploration Inc. He also served as President of Consolidated Magna Ventures Ltd.

Mr. Archer is the President of R. A. Archer & Associates
and Platoro Resource Corp. He also serves as President and Chief Executive
Officer and is a director of Cangold Limited, a company publicly listed on the
TSX Venture Exchange. He is also a non-executive director of Altair Ventures
Incorporated, a company publicly listed on the TSX Venture Exchange.

Malcolm A. Burne

Mr. Burne was our Chairman, President and Chief Executive
Officer from June 3, 1987 until April 27, 2004. Mr. Burne has been a director
since June 3, 1987. As a non-executive director, he is also a member of our
Audit Committee.

A self-employed business banker for many years, Malcolm Burne
is a former stockbroker and financial journalist with The Financial Times. He
has controlled and managed fund management, venture capital and investment
banking companies in London, Australia, Hong Kong and North America. He has been
a director of over 20 companies, many of which have been in the mineral resource
and gold exploration fields. In addition, he was Executive Chairman of the
Australian Bullion Company (Pty) Ltd., which at the time was Australias leading
gold dealer and member of the Sydney Futures Exchange.

Mr. Burne is currently a director of Cangold Limited, a company
publicly listed on the TSX Venture Exchange, a director of Golden Prospect
Precious Metals Limited, a mineral investments and gold fund company publicly
listed on the CISX, and non-executive Chairman of Longships plc, a company
publicly listed on the AIM market of the London Stock Exchange. Mr. Burne is an
independent director.

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- 70 -

John T. Kopcheff

Mr. Kopcheff has been a director of our company since August
2001. As a non-executive director, Mr. Kopcheff is the Chairman of the
Compensation Committee, and until February 12, 2009, he was the Chairman of our
Audit Committee, at which time he stepped down and he is now a member of our
Audit Committee.

For 26 years Mr. Kopcheff was Managing Director of Victoria
Petroleum NL, recently renamed Senex Energy Limited, an oil and gas company
publicly listed on the main board of the Australian Stock Exchange. He recently
retired from the board and has retained the role of Special Advisor to the
board. Mr. Kopcheff is a also non-executive director of Greenearth Energy
Limited, a geothermal exploration company publicly listed on the main board of
the Australian Stock Exchange.

Martin B. Carsky

Mr. Carsky was appointed director of our company on February 9,
2009, at which time he was also appointed to the Audit Committee, the
Compensation Committee and the Nominating and Corporate Governance Committee. On
February 12, 2009, he was appointed Chairman of the Audit Committee. On January
1, 2011 he was appointed Lead Director.

He is an experienced financial executive with extensive
experience in capital markets, mergers and acquisitions, restructuring, and
corporate governance. He is the CEO of CON-SPACE Communications Ltd. a member of
the Savox Group of Companies. In addition to Great Panther, he is currently a
director and the Chairman of the Audit Committee of Cangold Limited. Mr. Carsky
holds a Bachelor of Science degree from the University of British Columbia in
Vancouver, British Columbia and holds the designation Chartered Accountant.

Mr. Carsky is an independent director.

Wendy Ratcliffe

Ms. Ratcliffe has been our Corporate Secretary since August
2001. She is responsible for making all necessary regulatory filings for our
company and its subsidiaries. Ms. Ratcliffe is also Corporate Secretary of
Cangold Limited, a company publicly listed on the TSX Venture Exchange.

Raakel S. Iskanius

Ms. Iskanius has been our Chief Financial Officer since May
2007. As our CFO, Ms. Iskanius is responsible for all aspects of the Company's
financial management, including financial reporting, analysis of operations and
regulatory compliance. Ms. Iskanius has more than 19 years of experience as a
finance professional with the vast majority of her career spent in natural gas
utility and multi-branch sectors. A Chartered Accountant, Ms. Iskanius has
worked for companies across North America including Terasen Gas Inc., KPMG and
The Loewen Group Inc.

Ms. Iskanius qualified as a Certified General Accountant in
1995 and received her Chartered Accountant designation in 1999. Ms. Iskanius is
also the Chief Financial Officer of Cangold Limited, a company publicly listed
on the TSX Venture Exchange.

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- 71 -

Charles Brown

Mr. Brown has been our Chief Operating Officer since August
2007. He is responsible for overseeing aspects of all mines relating to mining
and metallurgy. He is a seasoned professional with more than 35 years experience
successfully operating and developing mines both in Canada and internationally,
from small gold mines in Ontario and Venezuela to being Managing Director of
Tara Mines Ltd in Ireland, where he was responsible for one of the world's
largest underground zinc mines.

Prior to joining Great Panther, he was the Project Manager for
Newgold Inc. during its underground exploration and development program, leading
to the completion of a positive feasibility study.

Mr. Brown graduated from Nottingham University, U.K. with an
honours degree in Mining Engineering.

Ing. Francisco Ramos Sanchez

Ing. Francisco Ramos Sanchez was appointed as Vice President of
Business Development in November 2007. He is responsible for seeking out new
business opportunities for Great Panther. He was formerly Vice President of
Operations from April 2004 through November 2007.

Prior to that, Ing. Ramos was the Vice President, Operations of
our subsidiary MMR, since June 1998. With more than 30 years of experience in
the mining industry, Ing. Ramos is a Mexican mining engineer and metallurgist
based in Queretaro, Mexico. He obtained a Master's Degree in Mining Engineering
from the University of Guanajuato and has worked with senior mining companies
such as Peñoles, IMMSA and Minera Autlan. He has consulted for a number of
junior to mid-size companies in Canada, Mexico and the United States. He is also
the general director of Minco Ingenieria y Construcciones de Queretaro, S. de
R.L. de C.V. and Vice President of Operations of Cangold Limited.

Robert Brown

Mr. Brown has been our Vice President, Exploration since April
30, 2004. He is responsible for overseeing all exploration activities undertaken
by our company, and has particular experience in the immediate area of our
company's projects in the Sierra Madre Region of Mexico.

Mr. Brown is a Professional Engineer with a degree in
Engineering Geology from Queen's University. His 36 years of experience in the
mining industry includes 15 years with Lac Minerals in Canada, culminating in
the position of Exploration Manager. For more than 15 years, he has held senior
management positions in the junior sector, working on projects throughout the
Americas, Eastern Europe and Indonesia, primarily in gold and silver
exploration. He is also a director of Cangold Limited, and the President and a
director of Finlay Minerals Limited.

Craig Mackay

Mr. Mackay has been our Vice President Technical Services since
November 2010 and our Manager of GeoInformation and IT services since 2005. He
has more than 25 years of international experience in management and application
of spatial information technology, architecting geospatial data strategies and
building IT infrastructure to support mineral resource identification,
quantification and exploitation. Before joining the company, Craig worked in
Ireland, Saudi Arabia, Australia and Africa directing application and
consumption of geo-information management and office automation technologies in
mining, software R&D, agriculture and forestry. He has an MBA from Trinity
College, Dublin and an MSc in Information Technology from Stellenbosch, South
Africa.

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- 72 -

Erick Bertsch

Mr. Erick Bertsch was appointed as our Vice President,
Corporate Development in September 2010. He has more than 16 years experience in
the mining industry. Prior to joining the company, Erick began his mining career
in the field, before transitioning to investor relations in 2003 with several
companies in the Hunter-Dickinson Group. More recently, he has held corporate
development positions with Minco Gold and Geodex Minerals.

Enriqueta Hernandez Dominguez

Enriqueta Hernandez Dominguez was appointed Vice President of
Accounting and Administration (Mexico) in July 2010. Ms. Hernandez previously
served as Regional Controller of our Mexican operations in 2009. Enriqueta has
more than 24 years of experience in financial and tax fields in different kind
of industries both in Mexico and Canada. Ms. Hernandez holds a Bachelor Degree
in Accounting and a Master Degree in Business Administration, with honours, both
from the National University of Mexico.

Eduardo Ortiz

Eduardo Ortiz Briones was appointed Vice President of Corporate
Relations in January 2011. As our VP of Corporate relations, he is responsible
for the Companys government and community relations and media communication in
Mexico. Prior to joining the Company, Mr. Ortiz was Development and Relations
Manager for Minera Rio Panuco S.A. de C.V. and Real de Panuco S.A. de C.V.
México.

Mr. Ortiz holds a Bachelor in Business Administration from the
University National of Mexico.

Family Relationships

Two officers of the Company, Ms. Enriqueta Dominguez and Mr.
Eduardo Ortiz, are married.

Other Relationships

There are no arrangements or understandings between any major
shareholder, customer, supplier or others, pursuant to which any of the
above-named persons were selected as directors or members of senior management.

---

- 73 -

|B. | Compensation
|-- | ------------

Other than as set forth in the table below, none of our
executive officers was paid or earned compensation for performing his/her duties
during the fiscal year ended December 31, 2010. The value of perquisites and
other personal benefits, securities and property for the executive officers that
do not exceed the lesser of $50,000 or 10% of the total of the annual salary and
bonus are not reported herein.

During our last full financial year end, the following persons
were or are our directors and executive officers:

|Name                    | Principal Position                                                    | From                                | To                       
|----------------------- | --------------------------------------------------------------------- | ----------------------------------- | -------------------------
|Robert A. Archer        | President and Chief Executive
      Officer Director                  | April 27, 2004 April 27,
      2004 | Present Present          
|Kaare G. Foy            | Executive Chairman Director                                           | April 27, 2004 June 23, 1994        | Present Present          
|Malcolm A. Burne        | Director                                                              | June 3, 1987                        | Present                  
|John T. Kopcheff        | Director                                                              | August 16, 2001                     | Present                  
|Martin B. Carsky        | Director                                                              | February 9, 2009                    | Present                  
|Raakel S. Iskanius      | Chief Financial Officer                                               | May 22, 2007                        | Present                  
|Charles Brown           | Chief Operating Officer                                               | August 15, 2007                     | Present                  
|Francisco Ramos Sánchez | Vice President, Business Development
      Vice President, Operations | November 13, 2007 April 30, 2004    | Present November 13, 2007
|Robert F. Brown         | Vice President, Exploration                                           | April 30, 2004                      | Present                  

---

- 74 -

Summary Compensation Table

|                        |         | Annual
      Compensation | Long
      Term Compensation |                                           
|----------------------- | ------- | ------------------------- | ---------------------------- | ------------------------------------------
|Awards                  | Payouts
|Name                    | Year    | Salary ($)                | Bonus ($)                    | Other Annual
      Compe
      nsation ($)
|Robert A. Archer        | 2010    | 30,000(1)                 | 100,000                      | nil                                       
|Malcolm Burne           | 2010    | 30,000(1)                 | nil                          | nil                                       
|Kaare G. Foy            | 2010    | 30,000(1)                 | 50,000                       | nil                                       
|John T. Kopcheff        | 2010    | 30,000(1)                 | nil                          | nil                                       
|Martin B. Carsky        | 2010    | 40,000(1)                 | nil                          | nil                                       
|Francisco Ramos Sánchez | 2010    | 185,039                   | 25,000                       | nil                                       
|Robert F. Brown         | 2010    | 160,000                   | 30,000                       | nil                                       
|Charles Brown           | 2010    | 210,000                   | 30,000                       | nil                                       
|Raakel S. Iskanius      | 2010    | 195,000                   | 45,000                       | nil                                       

|(1) | Directors' fees.                                                                                                                                                                                     
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                      
|(2) | Consulting fees and other benefits paid to Platoro
      Resource Corp., a company controlled by Robert A. Archer.                                                                                   
|    |                                                                                                                                                                                                      
|(3) | Of this amount, $220,563 was paid for consulting and
      other benefits and $86,095 was paid for rent and other services to Oceanic
      Management Limited, a company controlled by Kaare G.
Foy.

Compensation of Directors

During the financial year ended December 31, 2010, the
remuneration paid or accrued to directors in their capacity as directors of our
company was as follows:

|Kaare G. Foy     | $ | 30,000 | 
|---------------- | - | ------ | 
|Robert A. Archer | $ | 30,000 | 
|Malcolm A. Burne | $ | 30,000 | 
|John T. Kopcheff | $ | 30,000 | 
|Martin B. Carsky | $ | 40,000 | 

We have an incentive stock option plan in which directors are
eligible to participate. No stock options were granted to directors during the
year ended December 31, 2010 as outlined in the Summary Compensation Table.

|C. | Board Practices
|-- | ---------------

The election and retirement of our directors are provided for
in our by-laws. An election of directors takes place at each annual meeting of
shareholders and all the directors then in office retire but, if qualified, are
eligible for re-election. A director retains office only until the election of
his successor. The number of directors to be elected at such meeting is the
number of directors then in office, unless the directors or the shareholders otherwise determine. The election
is by ordinary resolution of shareholders. If an election of directors is not
held at the proper time, the incumbent directors continue in office until their
successors are elected. Our last annual general meeting was held on June 30,
2010.

---

- 75 -

Our by-laws also permit the directors to add additional
directors to the board between annual general meetings as long as the number
appointed does not exceed one-third of the number directors elected at the last
annual general meeting. Individuals appointed as directors to fill casual
vacancies created on the board or added as additional directors hold office like
any other director until the next annual general meeting at which time they may
be re-elected or replaced.

Our officers are re-elected at a directors' meeting following
each annual general meeting.

The members of our audit committee included Martin B. Carsky
(Chairman), Malcolm A. Burne and John T. Kopcheff. The audit committee reviews
and approves the scope of the audit procedures employed by our independent
auditors, reviews the results of the auditor's examination, the scope of audits,
the auditor's opinion on the adequacy of internal controls and quality of
financial reporting and our accounting and reporting principles, policies and
practices, as well as our accounting, financial and operating controls. The
audit committee also reports to the board of directors with respect to such
matters and recommends the selection of independent auditors. Before financial
statements that are to be submitted to the shareholders at an annual general
meeting are considered by the board of directors, such financial statements are
submitted to the audit committee for review with the independent auditors,
following which the report of the audit committee on the financial statements is
submitted to the board of directors.

The members of the nominating and corporate governance
committee included Malcolm A. Burne (Chairman), John T. Kopcheff and Martin
B.Carsky. The mandate of the nominating and corporate governance committee is to
identify individuals qualified to be nominated for election as directors of the
Company or any of the Board's committees, evaluate the qualifications and
independence of each member of the Board and its committees and recommend to the
Board any appropriate changes in the composition of the Board and any of its
committees, evaluate the performance of the Board and its committees; and
develop and recommend to the Board corporate governance principles.

The members of the compensation committee included John T.
Kopcheff (Chairman), Malcolm A. Burne and Martin B. Carsky. The compensation
committee reviews and approves the total compensation package for the
Corporations senior executives including, without limitation, their base
salaries, annual incentives, deferred compensation, stock options and other
equity-based compensation, incentive compensation, special benefits,
perquisites, and incidental benefits.

|D. | Employees
|-- | ---------

During the fiscal years ended December 31, 2010, December 31,
2009 and December 31, 2008, we had direct employees as outlined below:

|Company                                        |  | 2010 |  |  | 2009 |  |  | 2008 | 
|---------------------------------------------- |  | ---- |  |  | ---- |  |  | ---- | 
|Great Panther Silver Limited.                  |  | 17   |  |  | 14   |  |  | 10   | 
|Minera Mexicana el Rosario, S.A. de C.V.       |  | Nil  |  |  | Nil  |  |  | Nil  | 
|Metalicos de Durango, S.A. de C.V.             |  | 109  |  |  | 81   |  |  | 46   | 
|Minera de Villa Seca, S.A. de C.V.             |  | 80   |  |  | 63   |  |  | 54   | 
|Exploraciones Mineras el Rosario, S.A. de C.V. |  | 0 1  |  |  | 0 1  |  |  | 4    | 
|TOTAL                                          |  | 206  |  |  | 158  |  |  | 114  | 

| | 1 | On November 30, 2009, Exploraciones Mineras el Rosario,
      S.A. de C.V., the Companys subsidiary responsible for exploration and
      further development of the Companys mineral properties, was merged with
      Minera de Villa Seca, S.A. de C.V.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We do not currently have a collective bargaining arrangement
with any labour union or association.

---

- 76 -

|E. | Share Ownership
|-- | ---------------

Our authorized share capital consists of an unlimited number of
common shares without par value, an unlimited number of Class A preferred shares
without par value issuable in series, and an unlimited number of Class B
preferred shares without par value issuable in series.

The following table sets out, as at March 14, 2011, the number
of securities beneficially owned by our directors, officers and senior
management, whom, to our knowledge, possess sole voting and investment power
with respect to the securities shown:

|                                |  | Number of Securities |  |  |                    | 
|------------------------------- |  | -------------------- |  |  | ------------------ | 
|Name of
      Beneficial Holder |  | Beneficially Owned   |  |  | **Percentage (1)** | 
|Robert A. Archer                |  | 1,975,100            |  |  | 1.48%              | 
|Erick J. Bertsch                |  | 100,000              |  |  | 0.08%              | 
|Charles P. Brown                |  | 598,000              |  |  | 0.45%              | 
|Robert F. Brown                 |  | 212,500              |  |  | 0.16%              | 
|Malcolm A. Burne                |  | 340,033              |  |  | 0.26%              | 
|Martin B. Carsky                |  | Nil                  |  |  | 0.00%              | 
|Kaare G. Foy                    |  | 262,600              |  |  | 0.20%              | 
|Enriqueta Hernandez Dominguez   |  | 50,000               |  |  | 0.04%              | 
|Raakel S. Iskanius              |  | 270,000              |  |  | 0.20%              | 
|John T. Kopcheff                |  | 280,000              |  |  | 0.21%              | 
|Craig H. Mackay                 |  | 92,500               |  |  | 0.07%              | 
|Eduardo Ortiz-Briones           |  | Nil                  |  |  | 0.00%              | 
|Francisco Ramos Sanchez         |  | 1,296,000            |  |  | 0.97%              | 
|Wendy M. Ratcliffe              |  | 205,000              |  |  | 0.15%              | 

|(1) | Based on the following securities issued and outstanding
      as at March 14, 2011:
|--- | ------------------------------------------------------------------------------------
|    |                                                                                     
|    |                                                                                     
|    |                                                                                     

The voting rights attached to the common shares owned by our
directors, officers and senior management do not differ from those voting rights
attached to shares owned by people who are not directors, officers or senior
management of our company.

As at March 14, 2011, our directors, officers and senior
management held, as a group, directly or indirectly, an aggregate of 3,804,733
common shares, 1,821,000 options exercisable within 60 days and 56,000 warrants
exercisable within 60 days.

---

- 77 -

The total number of options outstanding as at March 14, 2011,
all exercisable within 60 days, granted to our directors, officers and senior
management are set out below:

|Name                          |  | Number of Options                                                       |  |  | Exercise Price              |  |  | Expiry Date                                                                                    | 
|----------------------------- |  | ----------------------------------------------------------------------- |  |  | --------------------------- |  |  | ---------------------------------------------------------------------------------------------- | 
|                              |  | Outstanding                                                             |  |  |                             |  |  |                                                                                                | 
|Robert A. Archer              |  | 250,000                     
    175,000                                |  |  | $0.45
    $0.70             |  |  | February 8, 2014             
      September
      3, 2014                                    | 
|Erick J. Bertsch              |  | 100,000                                                                 |  |  | $1.15                       |  |  | October 17, 2015                                                                               | 
|Charles P. Brown              |  | 75,000                      
    75,000                                 |  |  | $0.70 
    $0.90            |  |  | September 3, 2014              
      December
      2, 2014                                   | 
|Robert F. Brown               |  | 150,000                     
    50,000                                 |  |  | $0.45
    $0.90             |  |  | February 8, 2014             
    December 2, 2014                                             | 
|Malcolm A. Burne              |  | Nil                                                                     |  |  |                             |  |  |                                                                                                | 
|Martin B. Carsky              |  | Nil                                                                     |  |  |                             |  |  |                                                                                                | 
|Kaare G. Foy                  |  | Nil                                                                     |  |  |                             |  |  |                                                                                                | 
|Enriqueta Hernandez Dominguez |  | 25,000                     
    25,000                                  |  |  | $0.90
    $1.90             |  |  | December 2, 2014             
    November 21, 2015                                            | 
|Raakel S. Iskanius            |  | 50,000                     
    125,000                     
    25,000 |  |  | $0.45
    $0.70
      $0.90 |  |  | February 8, 2014             
      September
      3, 2014              
    December 2, 2014 | 
|John T. Kopcheff              |  | 200,000                                                                 |  |  | 0.45                        |  |  | February 8, 2014                                                                               | 
|Craig H. Mackay               |  | 25,000                     
    50,000                                  |  |  | $0.70
    $1.90             |  |  | September 3, 2014             
      November
      21, 2015                                   | 
|Eduardo Ortiz-Briones         |  | Nil                                                                     |  |  |                             |  |  |                                                                                                | 
|Francisco Ramos Sanchez       |  | 221,000                                                                 |  |  | $0.45                       |  |  | February 8, 2014                                                                               | 
|Wendy M. Ratcliffe            |  | 200,000                                                                 |  |  | $0.45                       |  |  | February 8, 2014                                                                               | 

The total number of warrants outstanding as at March 14, 2011,
all exercisable within 60 days, issued to our directors, officers and senior
management are set out below:

|                   |  | Number of Warrants |  |  |                |  |  |                   | 
|------------------ |  | ------------------ |  |  | -------------- |  |  | ----------------- | 
|Name               |  | Outstanding        |  |  | Exercise Price |  |  | Expiry Date       | 
|Charles P. Brown   |  | 36,000             |  |  | $0.90          |  |  | November 17, 2011 | 
|Raakel S. Iskanius |  | 7,500              |  |  | $0.90          |  |  | November 17, 2011 | 
|Craig H. Mackay    |  | 7,500              |  |  | $0.90          |  |  | November 17, 2011 | 
|Wendy Ratcliffe    |  | 5,000              |  |  | $0.90          |  |  | November 17, 2011 | 

Stock Option Plan

We have an incentive stock option plan that provides for the
grant of incentive stock options to purchase our common shares to our directors,
officers and key employees and other persons providing ongoing services to us.
Our stock option plan is administered by our board of directors. The maximum
number of our common shares which may be reserved and set aside for issuance
under our stock option plan is equal to 10% of the number of common shares
outstanding from time to time on a non-diluted basis. Each option upon its
exercise entitles the grantee to one common share. The exercise price of common
shares subject to an option will be determined by the board of directors at the
time of grant and will be not less than the discounted market price of the
common shares at the date of grant, as determined under the policies of the Toronto Stock Exchange. Options may be granted
under our stock option plan for an exercise period of up to five years from the
date of grant of the option or such lesser periods as may be determined by our
board of directors.

---

- 78 -

On March 7, 2008, the Board of Directors approved the adoption
of a Shareholder Rights Plan (the "Plan") as part of its procedures for dealing
with any parties who may seek to acquire control of the Company through a
take-over bid or other transaction. To implement the Plan, the Board of
Directors of the Company authorized the issue of one Right in respect of each
common share of the Company outstanding to holders of record on March 7, 2008.
Until the occurrence of certain specific events, the Rights will trade with the
common shares of the Company.

The Rights become exercisable only when a person, including any
party related to it or acting jointly with it, acquires or announces its
intention to acquire 20% or more of the outstanding common shares of the Company
without complying with the "Permitted Bid" provisions of the Plan. Under the
Plan, a Permitted Bid is a bid made to all shareholders on identical terms and
conditions that is open for at least 60 days. If at the end of 60 days more than
50% of the outstanding shares, other than those owned by the offeror and certain
persons related to the offeror or acting jointly with it, have been tendered,
the offeror may take up and pay for the shares but must extend the bid for a
further 10 business days to allow all other shareholders to tender. Should a
non-permitted acquisition occur, each Right would entitle each holder of common
shares (other than the offeror and certain parties related to the offeror or
acting jointly with it) to purchase additional common shares of the Company at a
50% discount to the market price at the time.

Although the Plan became effective upon its adoption by the
Board of Directors, in accordance with stock exchange requirements it was
submitted to shareholders of the Company for ratification at the annual
shareholders meeting on June 27, 2008, when it was passed and ratified. The Plan
will continue until the annual general meeting of shareholders in 2012. The Plan
was accepted by the Toronto Stock Exchange.

The total number of options outstanding as at March 14, 2011,
granted to our directors and executive officers as a group, to our non-executive
officers and senior management as a group, to our employees as a group and to
our consultants as a group, are set out below:

---

- 79 -

|                                                   |  | Number of Options                                                                                                                                                            |  |  |                                                               |  |  |                                                                                                                                                                                                                   | 
|-------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Name                                               |  | Outstanding                                                                                                                                                                  |  |  | Exercise Price                                                |  |  | Expiry Date                                                                                                                                                                                                       | 
|                                                   |  |                                                                                                                                                                              |  |  |                                                               |  |  |                                                                                                                                                                                                                   | 
|Directors and Executive Officers                   |  | 871,000                     
      375,000                         
    150,000                                                                                              |  |  | $0.45
    $0.70
    $0.90                                     |  |  | February 8, 2014              
      September
      3, 2014              
    December 2, 2014                                                                                                                   | 
|                                                   |  |                                                                                                                                                                              |  |  |                                                               |  |  |                                                                                                                                                                                                                   | 
|Non-executive Officers and Senior
      Management |  | 200,000                     
      25,000                     
      25,000                         
    100,000                     
    75,000                             |  |  | $0.45
    $0.70
    $0.90
      $1.15
      $1.90             |  |  | February 8, 2014              
      September
      3, 2014              
    December 2, 2014              
    October 17, 2015              
    November 21, 2015                                            | 
|                                                   |  |                                                                                                                                                                              |  |  |                                                               |  |  |                                                                                                                                                                                                                   | 
|Employees                                          |  | 45,000                    
      140,000                    
      62,500                         
    200,000                    
    1,500                    
    240,000 |  |  | $0.45
    $0.70
    $0.90
      $0.90
      $1.15
      $1.90 |  |  | February 8, 2014              
      September
      3, 2014              
      December 2, 2014              
      July 11, 2015              
      October 17, 2015                   
    November 21, 2015 | 
|                                                   |  |                                                                                                                                                                              |  |  |                                                               |  |  |                                                                                                                                                                                                                   | 
|Consultants                                        |  | 70,000                    
    100,000                    
    90,000                    
    50,000                                                                         |  |  | $0.45
    $0.70
    $0.90
    $1.90                           |  |  | February 8, 2014              
      September 3, 2014              
      February 29, 2012                   
    November 21, 2015                                                                             | 

|ITEM 7 | Major Shareholders and Related Party
      Transactions
|------ | -------------------------------------------------------

|A. | Major Shareholders
|-- | ------------------

As of February 28, 2011, Computershare Trust Company of Canada,
our registrar and transfer agent reported that we had 122,133,166 common shares
issued and outstanding. Of those common shares, 113,226,676 common shares were
registered to Canadian residents (22 shareholders); 8,082,326 common shares were
registered to residents of the United States (85 shareholders); and 824,164
common shares were registered to residents of other foreign countries (18
shareholders). There are no persons known to us to be the beneficial owners of
more than five (5%) of those common shares.

To the best of our knowledge, we are not directly or indirectly
owned or controlled by another corporation, by any foreign government or by any
other natural or legal person.

There are no arrangements known to us, the operation of which
may at a subsequent date result in a change in the control of our company.

|B. | Related Party Transactions
|-- | --------------------------

Other than as disclosed below or elsewhere in this annual
report, to the best of our knowledge, there have been no material transactions
or loans from the commencement of our 2010 fiscal year to the date of this
annual report between our company and: (a) enterprises that directly or
indirectly through one or more intermediaries, control or are controlled by, or
are under common control with, our company; (b) associates; (c) individuals
owning, directly or indirectly, an interest in the voting power of our company
that gives them significant influence over our company, and close members of any
such individual's family; (d) key management personnel of our company, including
directors and senior management of our company and close members of such individuals' families; and
(e) enterprises in which a substantial interest in the voting power is owned,
directly or indirectly, by any person described in (c) or (d) or over which such
a person is able to exercise significant influence.

---

- 80 -

During the year ended December 31, 2010, we entered into the
following transactions with related parties (in thousands of dollars):

|                                                                                                          |   | 2010 |  |   | 2009 |  |   | 2008 | 
|--------------------------------------------------------------------------------------------------------- | - | ---- |  | - | ---- |  | - | ---- | 
|                                                                                                          |   |      |  |   |      |  |   |      | 
|Consulting fees paid or accrued to
      companies controlled by directors of the Company                 | $ | 702  |  | $ | 648  |  | $ | 596  | 
|                                                                                                          |   |      |  |   |      |  |   |      | 
|Consulting fees paid or accrued to
      companies controlled by officers of the Company                  |   | 215  |  |   | 171  |  |   | 266  | 
|                                                                                                          |   |      |  |   |      |  |   |      | 
|Cost recoveries received or accrued from a
      company with a common director of the Company            |   | 51   |  |   | 80   |  |   | 82   | 
|                                                                                                          |   |      |  |   |      |  |   |      | 
|Office and administration fees paid or accrued to a company
      controlled by a director of the Company |   | 86   |  |   | 69   |  |   | 36   | 

As at December 31, 2010, $0.2 million (2009  $0.1 million) was
due to companies controlled by officers and directors of the Company and was
included in accounts payable. Amounts due from companies with a common director
were $0.1 million (2009  $0.1 million) and were included in amounts receivable.

On April 12, 2010, the Company received 1,117,866 common shares
of Altair at a deemed issue price of $0.15 per share in full payment of Altairs
indebtedness to the Company as at January 31, 2011. Altair is a company with a
common director of the Company.

The above transactions occurred in the normal course of
operations and are measured at the exchange amount which is the amount of
consideration established and agreed to by the parties.

|ITEM 8 | Financial Information
|------ | ---------------------

Our financial statements are stated in Canadian dollars and are
prepared in accordance with Canadian generally accepted accounting principles
with a reconciliation to United States generally accepted accounting principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in Canadian dollars.

Financial Statements filed as part of this Annual Report,
under item 17 Financial Statements:

- Report of Independent Registered Public Accounting Firm dated March 14,
  2011.
- Consolidated balance sheets for the fiscal years ended December 31, 2010,
  and 2009.
- Consolidated statements of operations and comprehensive income (loss) for
  the fiscal years ended December 31, 2010, 2009, and 2008.

---

- 81 -

- Consolidated statements of deficit for the fiscal years ended December 31,
  2010, 2009 and 2008.
- Consolidated statements of cash flows for the fiscal years ended December
  31, 2010, 2009, and 2008.
- Notes to consolidated financial statements

Dividend Distributions

Holders of our common shares are entitled to receive such
dividends as may be declared from time to time by our board, in its discretion,
out of funds legally available for that purpose. We intend to retain future
earnings, if any, for use in the operation and expansion of our business and do
not intend to pay any cash dividends in the foreseeable future.

Significant Changes

Other than as disclosed in this annual report, no significant
change has occurred in our company's financial statements since the financial
year ended December 31, 2010.

|ITEM 9 | The Offer and Listing
|------ | ---------------------

|A. | Offer and Listing Details
|-- | -------------------------

Price History

On June 18, 1980, our common shares were listed on the TSX
Venture Exchange (formerly known as the CDNX, and the Vancouver Stock Exchange).
Our common shares traded on the TSX Venture Exchange under the symbol "GPR", and
we were classified by the TSX Venture Exchange as a Tier 2 company.

On October 2, 2003, our common share capital was consolidated
on the basis of one new common share for each ten old common shares.

On February 28, 2006, we were elevated to Tier 1 of the TSX
Venture Exchange.

On November 3, 2006, we received conditional approval for our
TSX listing.

On November 14, 2006, our common shares became listed on the
TSX.

On February 8, 2011, the Companys shares were listed on NYSE
Amex stock exchange in the United States under the trading symbol GPL.

The annual high and low market prices for our common shares for
the five most recent full fiscal years were as follows:

|Year Ended        | High  | Low  
|----------------- | ----- | -----
|December 31, 2006 | $2.79 | $0.80
|December 31, 2007 | $2.53 | $1.07
|December 31, 2008 | $1.72 | $0.18

---

- 82 -

|Year Ended        | High  | Low  
|----------------- | ----- | -----
|December 31, 2009 | $1.25 | $0.23
|December 31, 2010 | $2.90 | $0.67

The high and low market prices for our common shares for each
full financial quarter for the two most recent full fiscal years were as
follows:

|Quarter Ended      | High  | Low  
|------------------ | ----- | -----
|March 31, 2009     | $0.56 | $0.23
|June 30, 2009      | $0.67 | $0.41
|September 30, 2009 | $1.25 | $0.45
|December 31, 2009  | $0.94 | $0.66
|March 31, 2010     | $1.14 | $0.73
|June 30, 2010      | $0.96 | $0.73
|September 30, 2010 | $1.04 | $0.67
|December 31, 2010  | $2.90 | $0.97

The high and low market prices for our common shares for each
of the most recent six months, from September, 2010 through February, 2011 were
as follows:

|Month Ended        | High  | Low  
|------------------ | ----- | -----
|September 30, 2010 | $1.04 | $0.80
|October 31, 2010   | $1.25 | $0.97
|November 30, 2010  | $2.10 | $1.21
|December 31, 2010  | $2.90 | $2.04
|January 31, 2011   | $2.76 | $1.79
|February 28, 2011  | $3.94 | $2.15

The transfer of our common shares is managed by our transfer
agent, Computershare Trust Company of Canada.

|B. | Plan of Distribution
|-- | --------------------

Not applicable.

---

- 83 -

|C. | Markets
|-- | -------

Our common shares trade on the Toronto Stock Exchange (TSX) and
the New York Stock Exchange (NYSE) Amex, trading under the symbol "GPR and
GPL effective November 14, 2006 and February 8, 2011 respectively. Our CUSIP
number is 39115V 101.

|D. | Selling Shareholders
|-- | --------------------

Not applicable.

|E. | Dilution
|-- | --------

Not applicable

|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.

|ITEM 10 | Additional Information
|------- | ----------------------

|A. | Share Capital
|-- | -------------

Not applicable

|B. | Memorandum and Articles of
      Association
|-- | --------------------------------------------

The information required by this section is incorporated by
reference from our Registration Statement on Form 20-F, filed on August 10,
2004.

|C. | Material Contracts
|-- | ------------------

The following is a summary of each material contract, other
than contracts entered into in the ordinary course of business, to which we or
any of our subsidiaries is a party, for the two years immediately preceding
publication of the document, including dates, parties, general nature of the
contracts, terms and conditions, and amount of any consideration passing to or
from us or any other member of the group:

On January 23, 2009, we closed a private placement offering of
5,125,000 units of the Company (Units) at a price of $0.20 per Unit to raise
gross proceeds of $1.0 million. Each Unit comprised of one common share and
one-half of one share purchase warrant. Each whole warrant entitled the holder,
upon exercise, to acquire one common share of the Company at a price of $0.35
per share until January 22, 2010. The Company authorized and created 169,050
non-transferable share purchase warrants (the Finders Warrants) to purchase
up to 169,050 common shares and entitling the holder to purchase one common
share at a price of $0.35 until January 22, 2010.

On November 17, 2009, we closed an equity offering of
17,617,500 units of the Company (Units) at a price of $0.70 per Unit to raise
gross proceeds of $12.3 million. Each Unit comprised of one common share and
one-half of one transferable share purchase warrant. Each whole warrant entitles
the holder, upon exercise, to purchase one common share of the Company at a
price of $0.90 per share until November 17, 2011. The Company authorized and
created non-transferable share purchase warrants (the Agents Warrants) to
purchase up to 6% of the Units sold, net of sales arranged by the Company. Each
Agents Warrants entitles the holder to purchase one common
share at a price of $0.90 until November 17, 2011.

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|D. | Exchange Controls
|-- | -----------------

There are no government laws, decrees or regulations in Canada
which restrict the export or import of capital or which affect the remittance of
dividends, interest or other payments to non-resident holders of our common
shares. Any remittances of dividends to United States residents and to other
non-residents are, however, subject to withholding tax. See "Taxation" below.

|E. | Taxation
|-- | --------

Canadian Federal Income Taxation

We consider that the following summary fairly describes the
principal Canadian federal income tax consequences applicable to a holder of our
common shares who at all material times deals at arm's length with our company,
who holds all common shares as capital property, who is resident in the United
States, who is not a resident of Canada and who does not use or hold, and is not
deemed to use or hold, his common shares of our company in connection with
carrying on a business in Canada (a "non-resident holder"). It is assumed that
the common shares will at all material times be listed on a stock exchange that
is prescribed for purposes of the Income Tax Act (Canada) (the "ITA") and
regulations thereunder. Investors should be aware that the Canadian federal
income tax consequences applicable to holders of our common shares will change
if, for any reason, we cease to be listed on a prescribed stock exchange.
Accordingly, holders and prospective holders of our common shares should consult
with their own tax advisors with respect to the income tax consequences of them
purchasing, owing and disposing of our common shares should we cease to be
listed on a prescribed stock exchange.

This summary is based upon the current provisions of the ITA,
the regulations thereunder, the Canada-United States Tax Convention as amended
by the Protocols thereto (the "Treaty") as at the date of the registration
statement and the currently publicly announced administrative and assessing
policies of the Canada Revenue Agency (the "CRA"). This summary does not take
into account Canadian provincial income tax consequences. This description is
not exhaustive of all possible Canadian federal income tax consequences and does
not take into account or anticipate any changes in law, whether by legislative,
governmental or judicial action. This summary does, however, take into account
all specific proposals to amend the ITA and regulations thereunder, publicly
announced by the Government of Canada to the date hereof.

This summary does not address potential tax effects relevant to
our company or those tax considerations that depend upon circumstances specific
to each investor. Accordingly, holders and prospective holders of our common
shares should consult with their own tax advisors with respect to the income tax
consequences to them of purchasing, owning and disposing of common shares in our
company.

Dividends

The ITA provides that dividends and other distributions deemed
to be dividends paid or deemed to be paid by a Canadian resident corporation
(such as our company) to a non-resident of Canada shall be subject to a
non-resident withholding tax equal to 25% of the gross amount of the dividend or
deemed dividend. Provisions in the ITA relating to dividend and deemed dividend
payments to and gains realized by non-residents of Canada, who are residents of
the United States, are subject to the Treaty. The Treaty may reduce the
withholding tax rate on dividends as discussed below.

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Article X of the Treaty as amended by the US-Canada Protocol
ratified on November 9, 1995 provides a 5% withholding tax on gross dividends or
deemed dividends paid to a United States corporation which beneficially owns at
least 10% of the voting stock of the company paying the dividend. In cases where
dividends or deemed dividends are paid to a United States resident (other than a
corporation) or a United States corporation which beneficially owns less than
10% of the voting stock of a company, a withholding tax of 15% is imposed on the
gross amount of the dividend or deemed dividend paid. We would be required to
withhold any such tax from the dividend and remit the tax directly to CRA for
the account of the investor.

The reduction in withholding tax from 25%, pursuant to the
Treaty, will not be available:

(a) if the shares in respect of which the dividends are paid
formed part of the business property or were otherwise effectively connected
with a permanent establishment or fixed base that the holder has or had in
Canada within the 12 months preceding the disposition, or

(b) the holder is a U.S. LLC which is not subject to tax in the
U.S.

The Treaty generally exempts from Canadian income tax dividends
paid to a religious, scientific, literary, educational or charitable
organization or to an organization exclusively administering a pension,
retirement or employee benefit fund or plan, if the organization is resident in
the U.S. and is exempt from income tax under the laws of the U.S.

Capital Gains

A non-resident holder is not subject to tax under the ITA in
respect of a capital gain realized upon the disposition of one of our shares
unless the share represents "taxable Canadian property" to the holder thereof.
Our common shares will be considered taxable Canadian property to a non-resident
holder only if:

|(a) | the non-resident holder;                                                            
|--- | ------------------------------------------------------------------------------------
|    |                                                                                     
|(b) | persons with whom the non-resident holder did not deal at
      arm's length; or    
|    |                                                                                     
|(c) | the non-resident holder and persons with whom he did not
      deal at arm's length,

owned not less than 25% of the issued shares of any class or
series of our company at any time during the five year period preceding the
disposition. In the case of a non-resident holder to whom shares of our company
represent taxable Canadian property and who is resident in the United States, no
Canadian taxes will generally be payable on a capital gain realized on such
shares by reason of the Treaty unless:

(a) the value of such shares is derived principally from real
property (including resource property) situated in Canada,

(b) the holder was resident in Canada for 120 months during any
period of 20 consecutive years preceding, and at any time during the 10 years
immediately preceding, the disposition and the shares were owned by him when he
ceased to be a resident of Canada,

(c) they formed part of the business property or were otherwise
effectively connected with a permanent establishment or fixed base that the
holder has or had in Canada within the 12 months preceding the disposition, or

(d) the holder is a U.S. LLC which is not subject to tax in the
U.S.

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- 86 -

If subject to Canadian tax on such a disposition, the
taxpayer's capital gain (or capital loss) from a disposition is the amount by
which the taxpayer's proceeds of disposition exceed (or are exceeded by) the
aggregate of the taxpayer's adjusted cost base of the shares and reasonable
expenses of disposition. For Canadian income tax purposes, the "taxable capital
gain" is equal to one-half of the capital gain.

United States Federal Income Taxation

The following is a discussion of the material United States
Federal income tax consequences, under current law, applicable to a U.S. Holder
(as defined below) of our common shares who holds such shares as capital assets.
This discussion does not address all potentially relevant Federal income tax
matters and it does not address consequences peculiar to persons subject to
special provisions of Federal income tax law, such as those described below as
excluded from the definition of a U.S. Holder. In addition, this discussion does
not cover any state, local, or foreign tax consequences. (See "Canadian Federal
Income Tax Consequences" above).

The following discussion is based on the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury Regulations, published Internal
Revenue Service ("IRS") rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of any recently proposed legislation which, if enacted,
could be applied, possibly on a retroactive basis, at any time.

The discussion below does not address potential tax effects
relevant to our company or those tax considerations that depend upon
circumstances specific to each investor. In addition, this discussion does not
address the tax consequences that may be relevant to particular investors
subject to special treatment under certain U.S. Federal income tax laws, such
as, dealers in securities, tax-exempt entities, banks, insurance companies and
non-U.S. Holders. Purchasers of the common stock should therefore satisfy
themselves as to the overall tax consequences of their ownership of the common
stock, including the State, local and foreign tax consequences thereof (which
are not reviewed herein), and should consult their own tax advisors with respect
to their particular circumstances.

U.S. Holders

As used herein, a "U.S. Holder" includes a beneficial holder of
common shares of our company who is a citizen or resident of the United States,
a corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, any trust if a US court
is able to exercise primary supervision over the administration of the trust and
one or more US persons have the authority to control all substantial decisions
of the trust, any entity created or organized in the United States which is
taxable as a corporation for U.S. tax purposes and any other person or entity
whose ownership of common shares of our company is effectively connected with
the conduct of a trade or business in the United States. A U.S. Holder does not
include persons subject to special provisions of Federal income tax law, such as
tax-exempt organizations, qualified retirement plans, financial institutions,
insurance companies, real estate investment trusts, regulated investment
companies, broker-dealers, non-resident alien individuals or foreign
corporations whose ownership of our common shares is not effectively connected
with the conduct of a trade or business in the United States and shareholders
who acquired their shares through the exercise of employee stock options or
otherwise as compensation.

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- 87 -

Dividend Distribution on Shares of our Company

U.S. Holders receiving dividend distributions (including
constructive dividends) with respect to the common shares of our company are
required to include in gross income for United States Federal income tax
purposes the gross amount of such distributions to the extent that we have
current or accumulated earnings and profits, without reduction for any Canadian
income tax withheld from such distributions. Such Canadian tax withheld may be
deducted or may be credited against actual tax payable, subject to certain
limitations and other complex rules, against the U.S. Holder's United States
Federal taxable income. See "Foreign Tax Credit" below. To the extent that
distributions exceed our current or accumulated earnings and profits, they will
be treated first as a return of capital to the extent of the shareholder's basis
in the common shares of our company and thereafter as gain from the sale or
exchange of the common shares of our company. Preferential tax rates for net
long term capital gains may be applicable to a U.S. Holder which is an
individual, estate or trust.

In general, dividends paid on our common shares will not be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations.

Foreign Tax Credit

A U.S. Holder who pays (or who has had withheld from
distributions) Canadian income tax with respect to the ownership of our common
shares may be entitled, at the election of the U.S. Holder, to either a
deduction or a tax credit for such foreign tax paid or withheld. This election
is made on a year by year basis and generally applies to all foreign income
taxes paid by (or withheld from) the U.S. Holder during that year. There are
significant and complex limitations which apply to the credit, among which is
the general limitation that the credit cannot exceed the proportionate share of
the U.S. Holder's United States income tax liability that the U.S. Holder's
foreign source income bears to his or its world-wide taxable income. In
determining the application of this limitation, the various items of income and
deduction must be classified into foreign and domestic sources. Complex rules
govern income such as "passive income", "high withholding tax interest",
"financial services income", "shipping income" and certain other classifications
of income. A U.S. Holder who is treated as a domestic U.S. corporation owning
10% or more of our voting stock is also entitled to a deemed paid foreign tax
credit in certain circumstances for the underlying foreign tax of our company
related to dividends received or Subpart F income received from us. (See the
discussion below of Controlled Foreign Corporations). The availability of the
foreign tax credit and the application of the limitations on the foreign tax
credit are fact specific and holders and prospective holders of our common
shares should consult their own tax advisors regarding their individual
circumstances.

Disposition of Common Shares

If a "U.S. Holder" is holding shares as a capital asset, a gain
or loss realized on a sale of our common shares will generally be a capital gain
or loss, and will be long-term if the shareholder has a holding period of more
than one year. However, gains realized upon sale of our common shares may, under
certain circumstances, be treated as ordinary income, if we were determined to
be a "collapsible corporation" within the meaning of Code Section 341 based on
the facts in existence on the date of the sale (See below for definition of
"collapsible corporation"). The amount of gain or loss recognized by a selling
U.S. Holder will be measured by the difference between (i) the amount realized
on the sale and (ii) his tax basis in our common shares. Capital losses are
deductible only to the extent of capital gains. However, in the case of
taxpayers other than corporations US$3,000 ($1,500 for married individuals
filing separately) of capital losses are deductible against ordinary income
annually. In the case of individuals and other non-corporate taxpayers, capital
losses that are not currently deductible may be carried forward to other years.
In the case of corporations, capital losses that are not currently deductible
are carried back to each of the three years preceding the loss
year and forward to each of the five years succeeding the loss year.

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- 88 -

A "collapsible corporation" is a corporation that is formed or
availed principally to manufacture, construct, produce, or purchase prescribed
types or property that the corporation holds for less than three years and that
generally would produce ordinary income on its disposition, with a view to the
stockholders selling or exchanging their stock and thus realizing gain before
the corporation realizes two thirds of the taxable income to be derived from
prescribed property. Prescribed property includes: stock in trade and inventory;
property held primarily for sale to customers in the ordinary course of
business; unrealized receivables or fees, consisting of rights to payment for
non-capital assets delivered or to be delivered, or services rendered or to be
rendered to the extent not previously included in income, but excluding
receivables from selling property that is not prescribed; and property gain on
the sale of which is subject to the capital gain/ordinary loss rule. Generally,
a shareholder who owns directly or indirectly 5 percent or less of the
outstanding stock of the corporation may treat gain on the sale of his shares as
capital gain.

Other Considerations for U.S. Holders

In the following circumstances, the above sections of this
discussion may not describe the United States Federal income tax consequences
resulting from the holding and disposition of common shares of the Registrant.
Our management is of the opinion that there is little, if not, any likelihood
that we will be deemed a "Foreign Personal Holding Company", a "Foreign
Investment Company" or a "Controlled Foreign Corporation" (each as defined
below) under current and anticipated conditions.

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total
combined voting power or the total value of our outstanding shares is owned,
actually or constructively, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of our gross income for such year
was derived from certain passive sources (e.g., from dividends received from its
subsidiaries), we would be treated as a "foreign personal holding company". In
that event, U.S. Holders that hold common shares in our capital would be
required to include in income for such year their allocable portion of our
passive income which would have been treated as a dividend had that passive
income actually been distributed.

Foreign Investment Company

If 50% or more of the combined voting power or total value of
our outstanding shares are held, actually or constructively, by citizens or
residents of the United States, United States domestic partnerships or
corporations, or estates or trusts other than foreign estates or trusts (as
defined by the Code Section 7701(a)(31)), and we are found to be engaged
primarily in the business of investing, reinvesting, or trading in securities,
commodities, or any interest therein, it is possible that we might be treated as
a "foreign investment company" as defined in Section 1246 of the Code, causing
all or part of any gain realized by a U.S. Holder selling or exchanging our
common shares to be treated as ordinary income rather than capital gains.

Passive Foreign Investment Company

A U.S. Holder who holds stock in a foreign corporation during
any year in which such corporation qualifies as a passive foreign investment
company ("PFIC") is subject to U.S. federal income taxation of that foreign
corporation under one of two alternative tax methods at the election of each
such U.S. Holder.

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- 89 -

Section 1297 of the Code defines a PFIC as a corporation that
is not formed in the United States and, for any taxable year, either (i) 75% or
more of its gross income is "passive income," which includes interest, dividends
and certain rents and royalties or (ii) the average percentage, by value (or, if
the company is a controlled foreign corporation or makes an election, adjusted
tax basis), of its assets that produce or are held for the production of
"passive income" is 50% or more. For taxable years of U.S. persons beginning
after December 31, 1997, and for tax years of foreign corporations ending with
or within such tax years, the Taxpayer Relief Act of 1997 provides that publicly
traded corporations must apply this test on a fair market value basis only. The
Registrant does not believe that it is a PFIC.

As a PFIC, each U.S. Holder must determine under which of the
alternative tax methods it wishes to be taxed. Under one method, a U.S. Holder
who elects in a timely manner to treat the Registrant as a Qualified Electing
Fund ("QEF"), as defined in the Code, (an "Electing U.S. Holder") will be
subject, under Section 1293 of the Code, to current federal income tax for any
taxable year in which our company qualifies as a PFIC on his pro-rata share of
our companys (i) "net capital gain" (the excess of net long-term capital gain
over net short-term capital loss), which will be taxed as long-term capital gain
to the Electing U.S. Holder and (ii) "ordinary earnings" (the excess of earnings
and profits over net capital gain), which will be taxed as ordinary income to
the Electing U.S. Holder, in each case, for the U.S. Holder's taxable year in
which (or with which) our taxable year ends, regardless of whether such amounts
are actually distributed. Such an election, once made shall apply to all
subsequent years unless revoked with the consent of the IRS.

A QEF election also allows the Electing U.S. Holder to (i)
generally treat any gain realized on the disposition of his common shares (or
deemed to be realized on the pledge of his common shares) as capital gain; (ii)
treat his share of our net capital gain, if any, as long-term capital gain
instead of ordinary income, and (iii) either avoid interest charges resulting
from PFIC status altogether (see discussion of interest charge below), or make
an annual election, subject to certain limitations, to defer payment of current
taxes on his share of our annual realized net capital gain and ordinary earnings
subject, however, to an interest charge. If the Electing U.S. Holder is an
individual, such an interest charge would be not deductible.

The procedure a U.S. Holder must comply with in making a timely
QEF election will depend on whether the year of the election is the first year
in the U.S. Holder's holding period in which our company is a PFIC. If the U.S.
Holder makes a QEF election in such first year, (sometimes referred to as a
"Pedigreed QEF Election"), then the U.S. Holder may make the QEF election by
simply filing the appropriate documents at the time the U.S. Holder files its
tax return for such first year. If, however, our company qualified as a PFIC in
a prior year, then the U.S. Holder may make an "Unpedigreed QEF Election" by
recognizing as an "excess distribution" (i) under the rules of Section 1291
(discussed below), any gain that he would otherwise recognize if the U.S. Holder
sold his stock on the qualification date (Deemed Sale Election) or (ii) if we
are a controlled foreign corporation ("CFC"), the Holder's pro rata share of the
corporation's earnings and profits (Deemed Dividend Election) (But see
"Elimination of Overlap Between Subpart F Rules and PFIC Provisions"). The
effect of either the deemed sale election or the deemed dividend election is to
pay all prior deferred tax, to pay interest on the tax deferral and to be
treated thereafter as a Pedigreed QEF as discussed in the prior paragraph. With
respect to a situation in which a Pedigreed QEF election is made, if our company
no longer qualifies as a PFIC in a subsequent year, normal Code rules and not
the PFIC rules will apply.

If a U.S. Holder has not made a QEF Election at any time (a
"Non-electing U.S. Holder"), then special taxation rules under Section 1291 of
the Code will apply to (i) gains realized on the disposition (or deemed to be
realized by reason of a pledge) of his common shares and (ii) certain "excess
distributions", as specially defined, by our company. An "excess distribution"
is any current-year distribution in respect of PFIC stock that represents a
rateable portion of the total distributions in respect of the stock during the
year that exceed 125 percent of the average amount of
distributions in respect of the stock during the three preceding years.

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- 90 -

A Non-electing U.S. Holder generally would be required to
pro-rate all gains realized on the disposition of his common shares and all
excess distributions over the entire holding period for the common shares. All
gains or excess distributions allocated to prior years of the U.S. Holder (other
than years prior to our first taxable year during such U.S. Holder's holding
period and beginning after January, 1987 for which it was a PFIC) would be taxed
at the highest tax rate for each such prior year applicable to ordinary income.
The Non-electing U.S. Holder also would be liable for interest on the deferred
tax liability for each such prior year calculated as if such liability had been
due with respect to each such prior year. A Non-electing U.S. Holder that is an
individual is not allowed a deduction for interest on the deferred tax
liability. The portions of gains and distributions that are not characterized as
"excess distributions" are subject to tax in the current year under the normal
tax rules of the Internal Revenue Code.

If, our company is a PFIC for any taxable year during which a
Non-electing U.S. Holder holds common shares, then we will continue to be
treated as a PFIC with respect to such common Shares, even if it is no longer by
definition a PFIC. A Non-electing U.S. Holder may terminate this deemed PFIC
status by electing to recognize gain (which will be taxed under the rules
discussed above for Non-Electing U.S. Holders) as if such common shares had been
sold on the last day of the last taxable year for which it was a PFIC.

Under Section 1291(f) of the Code, the Department of the
Treasury has issued proposed regulations that would treat as taxable certain
transfers of PFIC stock by Non-electing U.S. Holders that are generally not
otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations,
and transfers at death. If a U.S. Holder makes a QEF Election that is not a
Pedigreed Election (i.e., it is made after the first year during which we are
our company is a PFIC and the U.S. Holder holds our shares) (a "Unpedigreed
Election"), the QEF rules apply prospectively but do not apply to years prior to
the year in which the QEF first becomes effective. U.S. Holders should consult
their tax advisors regarding the specific consequences of making a Non-Pedigreed
QEF Election.

Certain special, generally adverse, rules will apply with
respect to the common shares while our company is we are a PFIC whether or not
it is treated as a QEF. For example under Section 1297(b)(6) of the Code (as in
effect prior to the Taxpayer Relief Act of 1997), a U.S. Holder who uses PFIC
stock as security for a loan (including a margin loan) will, except as may be
provided in regulations, be treated as having made a taxable disposition of such
stock.

The foregoing discussion is based on currently effective
provisions of the Code, existing and proposed regulations thereunder, and
current administrative rulings and court decisions, all of which are subject to
change. Any such change could affect the validity of this discussion. In
addition, the implementation of certain aspects of the PFIC rules requires the
issuance of regulations which in many instances have not been promulgated and
which may have retroactive effect. There can be no assurance that any of these
proposals will be enacted or promulgated, and if so, the form they will take or
the effect that they may have on this discussion. Accordingly, and due to the
complexity of the PFIC rules, U.S. Holders of the Registrants common shares are
strongly urged to consult their own tax advisors concerning the impact of these
rules on their investment in our company. For a discussion of the impact of the
Taxpayer Relief Act of 1997 on a U.S. Holder of a PFIC, see "Mark-to-Market
Election For PFIC Stock Under the Taxpayer Relief Act of 1997" and "Elimination
of Overlap Between Subpart F Rules and PFIC Provisions" below.

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- 91 -

Mark-to-Market Election for PFIC Stock Under the Taxpayer
Relief Act of 1997

The Taxpayer Relief Act of 1997 provides that a U.S. Holder of
a PFIC may make a mark-to-market election with respect to the stock of the PFIC
if such stock is marketable as defined below. This provision is designed to
provide a current inclusion provision for persons that are Non-Electing Holders.
Under the election, any excess of the fair market value of the PFIC stock at the
close of the tax year over the Holder's adjusted basis in the stock is included
in the Holder's income. The Holder may deduct any excess of the adjusted basis
of the PFIC stock over its fair market value at the close of the tax year.
However, deductions are limited to the net mark-to-market gains on the stock
that the Holder included in income in prior tax years, or so called "unreversed
inclusions". For purposes of the election, PFIC stock is marketable if it is
regularly traded on (1) a national securities exchange that is registered with
the SEC, (2) the national market system established under Section II A of the
Securities Exchange Act of 1934, or (3) an exchange or market that the IRS
determines has rules sufficient to ensure that the market price represents
legitimate and sound fair market value.

A Holder's adjusted basis of PFIC stock is increased by the
income recognized under the mark-to-market election and decreased by the
deductions allowed under the election. If a U.S. Holder owns PFIC stock
indirectly through a foreign entity, the basis adjustments apply to the basis of
the PFIC stock in the hands of the foreign entity for the purpose of applying
the PFIC rules to the tax treatment of the U.S. owner. Similar basis adjustments
are made to the basis of the property through which the U.S. persons hold the
PFIC stock.

Income recognized under the mark-to-market election and gain on
the sale of PFIC stock with respect to which an election is made is treated as
ordinary income. Deductions allowed under the election and loss on the sale of
PFIC with respect to which an election is made, to the extent that the amount of
loss does not exceed the net mark-to-market gains previously included, are
treated as ordinary losses. The U.S. or foreign source of any income or losses
is determined as if the amount were a gain or loss from the sale of stock in the
PFIC.

If PFIC stock is owned by a CFC (discussed below), the CFC is
treated as a U.S. person that may make the mark-to-market election. Amounts
includible in the CFC's income under the election are treated as foreign
personal holding company income, and deductions are allocable to foreign
personal holding company income.

The above provisions apply to tax years of U.S. persons
beginning after December 31, 1997, and to tax years of foreign corporations
ending with or within such tax years of U.S. persons.

The rules of Code Section 1291 applicable to non-qualified
funds as discussed above generally do not apply to a U.S. Holder for tax years
for which a mark-to-market election is in effect. If Code Section 1291 is
applied and a mark-to-market election was in effect for any prior tax year, the
U.S. Holder's holding period for the PFIC stock is treated as beginning
immediately after the last tax year of the election. However, if a taxpayer
makes a mark-to-market election for PFIC stock that is a non-qualified fund
after the beginning of a taxpayer's holding period for such stock, a
co-ordination rule applies to ensure that the taxpayer does not avoid the
interest charge with respect to amounts attributable to periods before the
election.

Controlled Foreign Corporation Status

If more than 50% of the voting power of all classes of stock or
the total value of the stock of our company is owned, directly or indirectly, by
U.S. Holders, each of whom own after applying rules of attribution 10% or more
of the total combined voting power of all classes of stock of our company, we
would be treated as a "controlled foreign corporation" or "CFC" under
Subpart F of the Code. This classification would bring into effect many complex
results including the required inclusion by such 10% U.S. Holders in income of
their pro rata shares of "Subpart F income" (as defined by the Code) of our
company and our earnings invested in "U.S. property" (as defined by Section 956
of the Code). In addition, under Section 1248 of the Code if we are considered a
CFC at any time during the five year period ending with the sale or exchange of
its stockshares, gain from the sale or exchange of common shares of our company
by such a 10% U.S. Holder of our common stock at any time during the five year
period ending with the sale or exchange is treated as ordinary dividend income
to the extent of our earnings and profits attributable to the stock sold or
exchanged. Because of the complexity of Subpart F, and because we may never be a
CFC, a more detailed review of these rules is beyond of the scope of this
discussion.

---

- 92 -

Elimination of Overlap Between Subpart F Rules and PFIC
Provisions

Under the Taxpayer Relief Act of 1997, a PFIC that is also a
CFC will not be treated as a PFIC with respect to certain 10% U.S. Holders. For
the exception to apply, (i) the corporation must be a CFC within the meaning of
section 957(a) of the Code and (ii) the U.S. Holder must be subject to the
current inclusion rules of Subpart F with respect to such corporation (i.e., the
U.S. Holder is a "United States Shareholder," see "Controlled Foreign
Corporation," above). The exception only applies to that portion of a U.S.
Holder's holding period beginning after December 31, 1997. For that portion of a
United States Holder before January 1, 1998, the ordinary PFIC and QEF rules
continue to apply.

As a result of this new provision, if we were ever to become a
CFC, U.S. Holders who are currently taxed on their pro rata shares of Subpart F
income of a PFIC which is also a CFC will not be subject to the PFIC provisions
with respect to the same stock if they have previously made a Pedigreed QEF
Election. The PFIC provisions will however continue to apply to U.S Holders for
any periods in which Subpart F does not apply (for example he is no longer a 10%
Holder or we are no longer a CFC) and to U.S. Holders that did not make a
Pedigreed QEF Election unless the U.S. Holder elects to recognize gain on the
PFIC shares held in our company as if those shares had been sold.

ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE
COMMON SHARES OF OUR COMPANY.

|F. | Dividends and Paying Agents
|-- | ---------------------------

Not applicable.

|G. | Statements by Experts
|-- | ---------------------

Not applicable.

|H. | Documents on Display
|-- | --------------------

Documents concerning our company referred to in this annual
report may be viewed during normal business hours at our office at 2100, 1177
West Hastings Street, Vancouver, British Columbia, Canada, V6E 2K3 by making an
appointment.

---

- 93 -

|I. | Subsidiary Information
|-- | ----------------------

As at the date of this annual report, we have three
wholly-owned subsidiaries: (i) Minera Mexicana el Rosario, S.A. de C.V.; (ii)
Metalicos de Durango, S.A. de C.V.; and (iv) Minera de Villa Seca, S.A. de
C.V.

|ITEM 11 | Quantitative and Qualitative Disclosures
      About Market Risk
|------- | ----------------------------------------------------------------

The significant market risks to which the Company is exposed
are currency, interest rate and commodity price risk.

Currency risk

The operating results and financial position of the Company are
reported in Canadian dollars. As the Company operates in an international
environment, some of the Companys financial instruments and transactions are
denominated in currencies other than the Canadian dollar. The results of the
Companys operations are subject to currency transaction and translation
risk.

The Companys exploration, development, operating costs, and a
significant portion of its administrative costs are in Mexico and are
denominated in Mexican pesos or US dollars. Revenues from the sale of
concentrates are denominated in US dollars. The fluctuation of the US dollar and
Mexican peso in relation to the Canadian dollar will consequently impact the
profitability of the Company and may also affect the value of the Companys
assets and the amount of shareholders equity.

Comparative foreign exchange rates as at December 31, 2010 and
2009 are as follows:

|                              |  | 2010  |  |  | 2009  | 
|----------------------------- |  | ----- |  |  | ----- | 
|                              |  |       |  |  |       | 
|MXN Peso to CDN Dollar        |  | 0.081 |  |  | 0.080 | 
|US Dollar to CDN
      Dollar |  | 0.995 |  |  | 1.051 | 

The Company has not entered into any agreements or purchased
any foreign currency hedging arrangements to hedge possible currency risks at
this time. Management believes the foreign exchange risk derived from currency
conversions for the Mexican operations is not significant and therefore does not
hedge its foreign exchange risk. Additionally, the US dollar trade accounts
receivable are short term in nature and foreign currency risk exposure is
minimal.

Interest rate risk

The Companys policy is to invest cash in high interest savings
accounts and guaranteed investment certificates at fixed or floating rates of
interest and cash equivalents are to be maintained in floating rates of interest
in order to maintain liquidity, while achieving a satisfactory return for
shareholders. Fluctuations in interest rates impact the value of cash and cash
equivalents. The Company manages risk by monitoring changes in interest rates in
comparison to prevailing market rates. As at December 31, 2010, the Company held
$13.0 million in high interest savings accounts and guaranteed investment
certificates.

With respect to financial liabilities, the convertible loan
notes and promissory notes carry fixed interest rates of 8.0%, and 6.0% per
annum, respectively, and three capital leases carry fixed interest rates of at
10.5% to 10.74% per annum. As such, the Company is not subject to fluctuations
in interest rates.

---

- 94 -

Commodity price risk

The value of the Companys mineral resource properties depends
on the price of silver, gold, lead and zinc and the outlook for these minerals.
As at December 31, 2010, market prices were US$30.63/oz for silver, US$1,410/oz
for gold, US$2,586/tonne for lead, and US$2,432/tonne for zinc.

Silver and gold, as well as lead and zinc prices have
historically fluctuated widely and are affected by numerous factors outside of
the Companys control, including, but not limited to, market fluctuations,
government regulations relating to prices, taxes, royalties, allowable
production, import, exports and supply and demand, industrial and retail demand,
forward sales by producers and speculators, levels of worldwide production,
short-term changes in supply and demand because of speculative hedging
activities, and certain other factors related specifically to silver and gold.
The value of trade receivables depends on changes in metal prices over the
quotational period.

The profitability of the Companys operations is highly
correlated to the market price of silver and gold. If metal prices decline for a
prolonged period below the cost of production of the Companys Topia and
Guanajuato mines, it may not be economically feasible to continue production.

During the year, the Company entered into derivative financial
instruments to mitigate fluctuations in lead and zinc prices.

Sensitivity analysis

Based on historic trends over the last twelve months,
volatilities in the above-noted market risks, and managements knowledge and
experience in the financial markets, the Company believes the following
movements are reasonably possible over a twelve-month period.

- A parallel shift of +1%/-1% from the prevailing market interest rates on
  deposits as of December 31, 2010.
- Proportional foreign exchange movement of -10% (depreciation of CAD) and
  +10% (appreciation of CAD) against the USD, from the December 31, 2010 CAD to
  USD exchange rate of 1.005.
- Proportional foreign exchange movement of -10% (depreciation of CAD) and
  +10% (appreciation of CAD) against the Mexican peso, from the December 31,
  2010 CAD to Mexican peso exchange rate of 12.410
- A parallel shift of +10%/-10% from the prevailing commodity prices of
  US$30.63/oz for silver, US$1,410/oz for gold, US$2,586/tonne for lead, and
  US$2,432/tonne for zinc as of December 31, 2010.

---

- 95 -

If these movements were to occur, the impact on the
consolidated net loss for each category of financial instrument held at the
balance sheet date is presented below (in thousands of dollars):

|                                         |  |          |  |  | Interest Rate Risk |   |  | Currency Rate Risk |  |  | Commodity Price Risk |  
|---------------------------------------- |  | -------- |  |  | ------------------ | - |  | ------------------ |  |  | -------------------- | -
|                                         |  |          |  |  | -1%                |   |  | +1%                |  |  | -10%                 |  
|                                         |  | Carrying |  |  |                    |   |  |                    |  |  |                      |  
|                                         |  | Amount   |  |  | Income             |   |  | Income             |  |  | Income               |  
|Financial assets                         |  |          |  |  |                    |   |  |                    |  |  |                      |  
|                                         |  |          |  |  |                    |   |  |                    |  |  |                      |  
|Cash and cash equivalents                |  |          |  |  |                    |   |  |                    |  |  |                      |  
|CAD                                      |  | 11,436   |  |  | (114               | ) |  | 114                |  |  | -                    |  
|USD                                      |  | 2,336    |  |  | (23                | ) |  | 23                 |  |  | 260                  |  
|Pesos                                    |  | 195      |  |  | (2                 | ) |  | 2                  |  |  | 22                   |  
|Amounts receivable                       |  |          |  |  |                    |   |  |                    |  |  |                      |  
|USD                                      |  | 5,159    |  |  | -                  |   |  | -                  |  |  | 573                  |  
|Pesos                                    |  | 4,221    |  |  | -                  |   |  | -                  |  |  | 469                  |  
|                                         |  |          |  |  |                    |   |  |                    |  |  |                      |  
|Financial liabilities                    |  |          |  |  |                    |   |  |                    |  |  |                      |  
|Accounts payable and accrued liabilities |  |          |  |  |                    |   |  |                    |  |  |                      |  
|USD                                      |  | 158      |  |  | -                  |   |  | -                  |  |  | (18                  | )
|Pesos                                    |  | 3,814    |  |  | -                  |   |  | -                  |  |  | (424                 | )
|Capital lease obligation                 |  |          |  |  |                    |   |  |                    |  |  |                      |  
|USD                                      |  | 497      |  |  | -                  |   |  | -                  |  |  | (55                  | )
|Total Increase (Decrease)                |  |          |  |  | (139               | ) |  | 139                |  |  | 827                  |  

|ITEM 12 | Description of Securities Other Than Equity
      Securities
|------- | ------------------------------------------------------------

|A. | Debt Securities
|-- | ---------------

Not applicable.

|B. | Warrants and Rights
|-- | -------------------

Not applicable.

|C. | Other Securities
|-- | ----------------

Not applicable.

|D. | American Depository Shares
|-- | --------------------------

Not applicable.

PART II

|ITEM 13 | Defaults, Dividend Arrearages and
      Delinquencies
|------- | -----------------------------------------------------

Not applicable.

---

- 96 -

|ITEM 14 | Material Modifications to the Rights of
      Security Holders and Use of Proceeds
|------- | ----------------------------------------------------------------------------------

Not applicable.

|ITEM 15 | Controls and Procedures
|------- | -----------------------

Our disclosure controls and procedures are designed to ensure
that information required to be disclosed in our reports filed under Canadian
and U.S. securities regulations is recorded, processed, summarized and reported
within the time periods specified and is accumulated and communicated to our
management, including our Chief Executive Officer and our Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.

An evaluation was carried out under the supervision of, and
with the participation of, our management, including our Chief Executive Officer
and our Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures (as such term is defined in the Exchange Act, as amended, Rules
13a-15(e) and 15d-15(e)) as of December 31, 2010. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of December 31, 2010.

Managements Annual Report on Internal Controls over
Financial Reporting

Management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (the
Exchange Act).

Under the supervision and with the participation of our
company's Chief Executive Officer and Chief Financial Officer, management
conducted an evaluation of the effectiveness of our internal control over
financial reporting, as of December 31, 2010, based on the framework set forth
in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this evaluation,
management concluded that our internal control over financial reporting was
effective as of December 31, 2010.

KPMG LLP (KPMG), an independent registered public accounting
firm, who audited and reported on our consolidated financial statements, has
issued an attestation report on the effectiveness of our internal control over
financial reporting as of December 31, 2010. The attestation report is included
with the consolidated financial statements in this Annual Report on Form
20-F.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over
financial reporting during the period covered by the annual report, being the
fiscal year ended December 31, 2010, that has materially affected, or is
reasonably likely to materially affect our internal control over financial
reporting. The Company advises that it has taken steps to increase the
efficiency of its internal controls to ensure continued accuracy and timeliness
of the Companys financial reporting.

|ITEM 16  | Reserved                        
|-------- | --------------------------------
|         |                                 
|ITEM 16A | Audit Committee Financial Expert

Our board of directors has determined that the Chairman of the
Company's Audit Committee, Mr. Martin B. Carsky CA, qualifies as an "audit
committee financial expert" as that term is defined in Item 16A(b) of Form
20-F.

---

- 97 -

More information regarding Mr. Carskys experience can be found
in Item 6 A. Directors, Officers and Senior Management.

Mr. Carsky qualifies as "independent" as the term is used in
Section 803 of the AMEX Company Guide.

|ITEM 16B | Code of Ethics
|-------- | --------------

Code of Ethics

Effective June 30, 2005 our company's Board of Directors
adopted a Code of Ethic and Business Conduct (the Code) that applies to, among
other persons, our companys Chief Executive Officer, President, Chief Financial
Officer, Chief Operating Officer and Controller.

The Code was amended and updated on September 16, 2008, to
describe the process to be taken if a manager or supervisor directs another
employee to disregard Company policy or internal controls and designates the
Business Ethics Officer as the main contact for reports of violations of the
Code.

The Code was amended and updated on September 24, 2010 for
minor changes.

The Code is available on our website at
http://www.greatpanther.com/.

|ITEM 16C | Principal Accountant Fees and Services
|-------- | --------------------------------------

Audit Fees

Our board of directors appointed KPMG LLP, Chartered
Accountants, as independent auditors to audit our financial statements for the
fiscal year ended December 31, 2010. The aggregate fees billed by KPMG LLP,
Chartered Accountants, for professional services rendered for the audit of our
2010 annual financial statements included in this annual report for the year
ended December 31, 2010 was $260,000. For the year ended December 31, 2009, the
audit fees were $352,000, of which $272, 000 related to the year-end audit and
$80,000 related to a review of interim periods in connection with the short form
prospectus.

Audit Related Fees

The aggregate fees billed for professional services by KPMG
LLP, Chartered Accountants, that are reasonably related to the performance of
the audit or review of our financial statements and which are not reported under
the caption "Audit Fees" above, were $6,500 for the year ended December 31, 2010
and $5,000 for the year ended December 31, 2009.

Tax Fees

The aggregate fees billed for tax compliance, tax advice and
tax planning by KPMG LLP, Chartered Accountants, were $7,500 for the year ended
December 31, 2010, compared to $5,000 for the year ended December 31, 2009.

All Other Fees

The aggregate fees billed by KPMG LLP, Chartered Accountants,
for other non-audit professional services, other than those services listed
above, were $nil for the year ended December 31, 2010 and $6,000 for the year
ended December 31, 2009.

---

- 98 -

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before KPMG LLP, Chartered Accountants, is
engaged by us or our subsidiaries to render any auditing or permitted non-audit
related service, the engagement be:

| | a. | Approved by our audit committee; or                                                                                                                                                                                                                                                                                                                                                 
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                     
| | b. | Entered into pursuant to pre-approval policies and
      procedures established by the audit committee, provided the policies and
      procedures are detailed as to the particular service, the audit committee
      is informed of each service, and such policies and procedures do not
      include delegation of the audit committee's responsibilities to
      management.

The Audit Committee pre-approves all services provided by our
independent auditors. All of the above services and fees were reviewed and
pre-approved by the audit committee.

The Audit Committee has considered the nature and amount of the
fees billed by KPMG LLP, Chartered Accountants, and believes that the provision
of the services for activities unrelated to the audit is compatible with
maintaining KPMG LLP, Chartered Accountants, independence.

|ITEM 16D. | Exemption from the Listing Standards for
      Audit Committees
|--------- | ---------------------------------------------------------------

Not Applicable.

|ITEM 16E | Purchases of Equity Securities of the
      Company and Affiliated Purchasers
|-------- | -----------------------------------------------------------------------------

Not Applicable.

|ITEM 16F | Change in Registrants Certifying
      Accountant
|-------- | --------------------------------------------------

Not Applicable.

PART III

|ITEM 17 | Financial Statements
|------- | --------------------

Financial Statements Filed as Part of the Annual Report:

- Report of Independent Registered Public Accounting Firm dated March 14,
  2011.
- Consolidated balance sheets for the fiscal years ended December 31, 2010
  and 2009.
- Consolidated statements of operations and comprehensive income (loss) for
  the fiscal years ended December 31, 2010, 2009, and 2008.
- Consolidated statements of deficit for the fiscal years ended December 31,
  2010, 2009 and 2008.
- Consolidated statements of cash flows for the fiscal years ended December
  31, 2010, 2009, and 2008.
- Notes to consolidated financial statements.

---

- 99 -

|ITEM 18 | Financial Statements
|------- | --------------------

Refer to Item 17 - Financial Statements.

|ITEM 19 | Exhibits
|------- | --------

The following exhibits are being filed as part of this annual
report, or are incorporated by reference where indicated:

|1.  | Articles of Incorporation and By-laws:                                                                                                                                                                                                                                                                                                                       
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                              
|1.1 | Continuation Application under the Business
      Corporation Act(British Columbia) (incorporated by reference from our
      Registration Statement on Form 20-F, filed on August 10, 2004).                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                              
|1.2 | Certificate of Continuation dated July 9, 2004
      (incorporated by reference from our Registration Statement on Form 20-F,
      filed on August 10, 2004).                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                              
|1.3 | Notice of Articles (incorporated by reference from our
      Registration Statement on Form 20-F, filed on August 10, 2004).                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                              
|1.4 | Bylaws (incorporated by reference from our Registration
      Statement on Form 20-F, filed on August 10, 2004).                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                              
|1.5 | Certificate of Name Change to Great Panther Silver
      Limited.                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                              
|2.  | Instruments Defining Rights of Security
    Holders                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                              
|2.1 | Shareholder Rights Plan (incorporated by reference from
      our Registration Statement on Form 20-F, filed on August 10, 2004, amended
      March 7, 2008).                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                              
|3.  | Material Contracts                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                              
|3.1 | Share Purchase Agreement dated December 9, 2003 with
      Robert A. Archer and Ing. Francisco Ramos Sánchez (incorporated by
      reference from our Registration Statement on Form 20-F, filed on August
      10, 2004).                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                              
|3.2 | Option Agreement dated February 11, 2004 between our
      subsidiary, Minera Mexicana el Rosario, S. A. de C.V. and Eduardo
      Rodriguez Chávez, acting in representation of Alfredo Rodriguez Chávez
      (incorporated by reference from our Registration Statement on Form 20-F,
      filed on August 10, 2004).                                    
|    |                                                                                                                                                                                                                                                                                                                                                              
|3.3 | Agreement dated February 18, 2004 between our subsidiary,
      Minera Mexicana el Rosario, S.A. de C. V. and Cia. Minera des Canelas y
      Topia, S.A. de C.V., MET-MEX Peñoles, S.A. de C.V. and Minera Mexicana la
      Ciénega, S.A. de C.V. (incorporated by reference from our Registration
      Statement on Form 20-F, filed on August 10, 2004).
|    |                                                                                                                                                                                                                                                                                                                                                              
|3.4 | Agreement dated February 28, 2004 between our subsidiary,
      Minera Mexicana el Rosario, S.A. de C. V. and Carolos Teodoro Ortiz
      Rodriquez, Abelardo Garza Hernanadez and Minera San Miguel de los Tarros,
      S.A. de C.V. (incorporated by reference from our Registration Statement on
      Form 20-F, filed on August 10, 2004).             
|    |                                                                                                                                                                                                                                                                                                                                                              
|3.5 | Letter of Intent dated January 19, 2005 with Minera Acero
      del Fuego, S.A. de C.V. (Virimoa Project) (incorporated by reference from
      our Registration Statement on Form 20-F, filed on July 15,
  2005).                                                                                                                                          

---

- 100 -

|3.6   | Letter of Intent
        dated January 4, 2005 between our company and Compania Minera de Canelas
        y Topia, S.A. de C.V.                                                                                                             
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                             
|3.7   | Purchase Agreement
        dated June 30, 2005 between our company and Compania Minera de Canelas
        y Topia, S.A. de C.V.                                                                                                             
|      |                                                                                                                                                                                                                                             
|3.8   | Purchase Agreement
        dated October 25, 2005 between our company and the Sociedad Coopertiva
        Minero Metalúrgics Santa Fe de Guanajuato.                                                                                        
|      |                                                                                                                                                                                                                                             
|3.9   | Letter of Intent
        dated April 26, 2006 between our company and Minera Apollo S.A. de C.V.                                                                                                                                            
|      |                                                                                                                                                                                                                                             
|3.10  | Letter of Intent
        dated December 7, 2006 between our company and Altair Ventures Incorporated.                                                                                                                                       
|      |                                                                                                                                                                                                                                             
|3.11  | Option Agreement
        dated February 2, 2007 between our company and Altair Ventures Incorporated
        (incorporated by reference from our Registration Statement on Form 20-F,
        filed on April 3, 2008).                      
|      |                                                                                                                                                                                                                                             
|3.12  | Shareholder Rights
        Plan Agreement dated March 7, 2008 between the Company and Computershare
        Investor Services Inc. (incorporated by reference from our Registration
        Statement on Form 20-F, filed on April 3, 2008).
|      |                                                                                                                                                                                                                                             
|3.13  | Option Termination
        and Debt Settlement Agreement with Altair on the San Antonio property
        dated February 1, 2010.                                                                                                            
|      |                                                                                                                                                                                                                                             
|4.    | Subsidiaries                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                             
|4.1   | Minera Mexicana
        el Rosario, S.A. de C.V. (incorporated by reference from our Registration
        Statement on Form 20-F, filed on August 10, 2004).                                                                                
|      |                                                                                                                                                                                                                                             
|4.2   | Metalicos de
        Durango, S.A. de C.V.                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                             
|4.3   | Minera de Villa
        Seca, S.A. de C.V.                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                             
|5.    | Code of Ethics                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                             
|5.1   | Code of Ethics
        (incorporated by reference from our Registration Statement on Form 20-F,
        filed on July 15, 2005, updated August 2007, September 2008 and September
        2010).                                            
|      |                                                                                                                                                                                                                                             
|12.   | 302 Certification                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                             
|12.1* | Section
        302 Certification under Sarbanes-Oxley Act of 2002 for Robert A. Archer.                                                                                                                                                    
|      |                                                                                                                                                                                                                                             
|12.2* | Section
        302 Certification under Sarbanes-Oxley Act of 2002 for Raakel S. Iskanius.                                                                                                                                                  
|      |                                                                                                                                                                                                                                             
|13.   | 906 Certification                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                             
|13.1* | Section
        906 Certification under Sarbanes-Oxley Act of 2002 for Robert A. Archer.                                                                                                                                                    
|      |                                                                                                                                                                                                                                             
|13.2* | Section
        906 Certification under Sarbanes-Oxley Act of 2002 for Raakel S. Iskanius.                                                                                                                                                  
|      |                                                                                                                                                                                                                                             
|15.   | Additional
        Exhibits                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                             
|15.1  | Summary Report
        on the San Antonio Gold Prospect dated November 2003 (incorporated by
        reference from our Registration Statement on Form 20-F, filed on August
        10, 2004).                                             

---

- 101 -

|15.2 | Summary Report on the Topia Project dated November 20,
      2003 (incorporated by reference from our Registration Statement on Form
      20-F, filed on August 10, 2004).
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                            
|15.3 | Map of Topia Property (incorporated by reference from our
      Registration Statement on Form 20- F/A, filed on February 6, 2009).                                        
|     |                                                                                                                                                                            
|15.4 | Map of Guanajuato Property (incorporated by reference
      from our Registration Statement on Form 20-F/A, filed on February 6,
      2009).                              
|     |                                                                                                                                                                            
|15.5 | Map of Mapimi Property (incorporated by reference from
      our Registration Statement on Form 20- F/A, filed on February 6, 2009).                                       
|     |                                                                                                                                                                            
|*    | Filed herewith.                                                                                                                                                            

____________________________________i This
definition was obtained from the Canadian Institute of Mining, Metallurgy, and
Petroleum, and was adopted August 20, 2000.

ii This definition was obtained from the Canadian
Institute of Mining, Metallurgy, and Petroleum, and was adopted August 20, 2000.

---

SIGNATURES

The registrant hereby certifies that it meets all of the
  requirements for filing on Form 20-F and that it has duly caused and authorized
  the undersigned to sign this annual report on its behalf.

GREAT PANTHER SILVER LIMITED(Registrant)

|/s/ Robert A. Archer                                                 | 
|-------------------------------------------------------------------- | 
|Robert A. Archer                                                     | 
|President and Chief Executive Officer                                | 
|(Principal Executive Officer)                                        | 
|                                                                     | 
|                                                                     | 
|/s/ Raakel S. Iskanius                                               | 
|Raakel S. Iskanius                                                   | 
|Chief Financial Officer                                              | 
|(Principal Financial Officer and Principal Accounting
      Officer) | 
|                                                                     | 
|Date: March 15, 2011                                                 | 

---



GREAT PANTHER SILVER LIMITED

CONSOLIDATED FINANCIAL STATEMENTS 
  FOR THE YEARS ENDEDDECEMBER 31, 2010 and 2009Expressed in Canadian Dollars

---

GREAT PANTHER SILVER LIMITED

MANAGEMENTS STATEMENT OF RESPONSIBILITY FOR
  FINANCIAL REPORTING

The management of Great Panther Silver Limited is responsible
  for the presentation and preparation of the accompanying consolidated financial
  statements of Great Panther Silver Limited and all related financial information
  contained in this Annual Report, including Managements Discussion and Analysis.

The consolidated financial statements have been prepared in
  accordance with Canadian generally accepted accounting principles. They include
  certain amounts that are based on estimates and judgments of management.
  Financial information presented elsewhere in the Annual Report is consistent
  with that contained in the consolidated financial statements.

Management is responsible for establishing and maintaining
  adequate internal control over financial reporting. Under the supervision and
  with the participation of the Companys Chief Executive Officer and Chief
  Financial Officer, management has a process in place to evaluate internal
  control over financial reporting based on the criteria established by the
  Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. We, as Chief Executive Officer and
  Chief Financial Officer, will certify our annual filings with the CSA and SEC as
  required in Canada by National Instrument 52-109 and in the United States as
  required by the Securities Exchange Act of 1934.

The Companys Audit Committee is appointed by the Board of
  Directors annually and is comprised of three independent directors. The Audit
  Committee meets quarterly to review the Companys consolidated financial
  statements and Managements Discussion and Analysis, and on an annual basis, the
  independent auditors report. The Audit Committee recommends to the Board of
  Directors the external auditors to be appointed by the shareholders at each
  annual meeting and reviews the independence and effectiveness of their work. The
  independent auditors have unrestricted access to the Company, the Audit
  Committee, and the Board of Directors.

MANAGEMENTS REPORT ON INTERNAL CONTROL OVER
  FINANCIAL REPORTING

Management is responsible for establishing and maintaining
  adequate internal control over financial reporting, as such term is defined in
  Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (the
  Exchange Act).

Under the supervision and with the participation of our
  Company's Chief Executive Officer and Chief Financial Officer, management
  conducted an evaluation of the effectiveness of our internal control over
  financial reporting, as of December 31, 2010, based on the framework set forth
  in Internal Control-Integrated Frameworkissued by the Committee of
  Sponsoring Organizations of the Treadway Commission (COSO). Based on this
  evaluation, management concluded that our internal control over financial
  reporting was effective as of December 31, 2010.

KPMG LLP, an independent registered public accounting firm, has
  audited the effectiveness of our internal control over financial reporting as of
  December 31, 2010, as stated in their report which appears herein.

|Robert A. Archer      | Raakel S. Iskanius   
|----------------------- | -----------------------
|Chief Executive Officer | Chief Financial Officer
|                        |                        
|March 14, 2011          | March 14, 2011         

---

| | KPMG LLPChartered Accountants
      PO Box 10426 777 Dunsmuir Street 
      Vancouver BC V7Y 1K3 
      Canada | Telephone (604) 691-3000 
      Fax (604) 691-3031 
      Internet www.kpmg.ca
| | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------

INDEPENDENT AUDITORS REPORT OF REGISTERED PUBLIC ACCOUNTING
  FIRM

To Shareholders & Board of Directors of Great Panther
  Silver Limited

We have audited the accompanying consolidated financial
  statements of Great Panther Silver Limited, which comprise the consolidated
  balance sheets as at December 31, 2010 and 2009, the consolidated statements of
  operations and comprehensive income (loss), deficit and cash flows for each of
  the years in the three year period ended December 31, 2010, and notes,
  comprising a summary of significant accounting policies and other explanatory
  information.

Management's Responsibility for the consolidated Financial
  Statements

Management is responsible for the preparation and fair
  presentation of these consolidated financial statements in accordance with
  Canadian generally accepted accounting principles, and for such internal control
  as management determines is necessary to enable the preparation of consolidated
  financial statements that are free from material misstatement, whether due to
  fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these
  consolidated financial statements based on our audits. We conducted our audits
  in accordance with Canadian generally accepted auditing standards and the
  standards of the Public Company Accounting Oversight Board (United States).
  Those standards require that we comply with ethical requirements and plan and
  perform the audit to obtain reasonable assurance about whether the consolidated
  financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit
  evidence about the amounts and disclosures in the consolidated financial
  statements. The procedures selected depend on our judgment, including the
  assessment of the risks of material misstatement of the consolidated financial
  statements, whether due to fraud or error. In making those risk assessments, we
  consider internal control relevant to the entity's preparation and fair
  presentation of the consolidated financial statements in order to design audit
  procedures that are appropriate in the circumstances. An audit also includes
  evaluating the appropriateness of accounting policies used and the
  reasonableness of accounting estimates made by management, as well as evaluating
  the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our
  audits is sufficient and appropriate to provide a basis for our audit
  opinion.

KPMG LLP is a Canadian
  limited liability partnership and a member firm of the
  KPMG
   network of independent member firms affiliated
    with KPMG International Cooperative(KPMG
        International), a Swiss entity.KPMG Canada provides
        services to KPMG LLP.

---



Opinion

In our opinion, the consolidated financial statements present
  fairly, in all material respects, the financial position of Great Panther Silver
  Limited as at December 31, 2010 and December 31, 2009 and its consolidated
  results of operations and its consolidated cash flows for each of the years in
  the three year period ended December 31, 2010, in accordance with Canadian
  generally accepted accounting principles.

Other Matter

We also have audited, in accordance with the standards of the
  Public Company Accounting Oversight Board (United States), Great Panther Silver
  Limited's internal control over financial reporting as of December 31, 2010,
  based on the criteria established in Internal Control  Integrated Framework
  issued by the Committee of Sponsoring Organizations of the Treadway Commission
  (COSO), and our report dated March 14, 2011 expressed an unmodified opinion on
  the effectiveness of Great Panther Silver Limiteds internal control over
  financial reporting.

KPMG LLP (Signed)

Chartered Accountants

Vancouver, Canada 
  March 14, 2011

2

---

| | KPMG LLPChartered Accountants
      PO Box 10426 777 Dunsmuir Street 
      Vancouver BC V7Y 1K3 
      Canada | Telephone (604) 691-3000 
      Fax (604) 691-3031 
      Internet www.kpmg.ca
| | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
  FIRM

To the Shareholders and Board of Directors Great Panther Silver
  Limited

We have audited Great Panther Silver Limiteds ("the Company")
  internal control over financial reporting as of December 31, 2010 based on the
  criteria established in Internal ControlIntegrated Framework issued by the
  Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
  Company's management is responsible for maintaining effective internal control
  over financial reporting and for its assessment of the effectiveness of internal
  control over financial reporting. Our responsibility is to express an opinion
  the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). Those standards
  require that we plan and perform the audit to obtain reasonable assurance about
  whether effective internal control over financial reporting was maintained in
  all material respects. Our audit included obtaining an understanding of internal
  control over financial reporting, assessing the risk that a material weakness
  exists, and testing and evaluating the design and operating effectiveness of
  internal control based on the assessed risk. Our audit also included performing
  such other procedures as we considered necessary in the circumstances. We
  believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a
  process designed to provide reasonable assurance regarding the reliability of
  financial reporting and the preparation of financial statements for external
  purposes in accordance with generally accepted accounting principles. A
  company's internal control over financial reporting includes those policies and
  procedures that (1) pertain to the maintenance of records that, in reasonable
  detail, accurately and fairly reflect the transactions and dispositions of the
  assets of the company; (2) provide reasonable assurance that transactions are
  recorded as necessary to permit preparation of financial statements in
  accordance with generally accepted accounting principles, and that receipts and
  expenditures of the company are being made only in accordance with
  authorizations of management and directors of the company; and (3) provide
  reasonable assurance regarding prevention or timely detection of unauthorized
  acquisition, use, or disposition of the company's assets that could have a
  material effect on the financial statements.

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

KPMG LLP is a Canadian
  limited liability partnership and a member firm of the KPMGnetwork of independent member firms affiliated with KPMG International
      Cooperative(KPMG International), a Swiss entity.KPMG Canada provides services to KPMG LLP.

---



In our opinion, the Company maintained, in all material
  respects, effective internal control over financial reporting as of December 31,
  2010, based on the criteria established in Internal ControlIntegrated Framework
  issued by the Committee of Sponsoring Organizations of the Treadway Commission
  (COSO).

We also have audited, in accordance with the standards of the
  Public Company Accounting Oversight Board (United States), the consolidated
  balance sheets of the Company as of December 31, 2010 and 2009, and the related
  consolidated statements of operations and comprehensive income (loss), deficit
  and cash flows for each of the years in the three year period ended December 31,
  2010, and our report dated March 14, 2011 expressed an unqualified opinion on
  those consolidated financial statements.

KPMG LLP (Signed)

Chartered Accountants

Vancouver, Canada 
  March 14, 2011

2

---

|GREAT PANTHER SILVER LIMITED                
|--------------------------------------------
|CONSOLIDATED BALANCE SHEETS                 
|(Expressed in thousands of Canadian Dollars)
|December 31, 2010 and 2009                  

|                                                                |   | 2010    |   |   | 2009    |  
|--------------------------------------------------------------- | - | ------- | - | - | ------- | -
|                                                                |   |         |   |   |         |  
|Assets                                                          |   |         |   |   |         |  
|                                                                |   |         |   |   |         |  
|Current assets:                                                 |   |         |   |   |         |  
|Cash and cash equivalents                                       | $ | 13,967  |   | $ | 13,312  |  
|Restricted cash (note 14)                                       |   | 151     |   |   | -       |  
|Marketable securities                                           |   | 200     |   |   | 23      |  
|Amounts
      receivable (note 5)                               |   | 9,635   |   |   | 5,539   |  
|Income taxes recoverable                                        |   | 239     |   |   | 342     |  
|Inventories (note 6)                                            |   | 2,615   |   |   | 1,438   |  
|Prepaid expenses, deposits and advances                         |   | 1,240   |   |   | 1,585   |  
|                                                                |   | 28,047  |   |   | 22,239  |  
|                                                                |   |         |   |   |         |  
|Mineral properties, plant and equipment (note 7)                |   | 17,538  |   |   | 14,935  |  
|                                                                |   |         |   |   |         |  
|                                                                | $ | 45,585  |   | $ | 37,174  |  
|                                                                |   |         |   |   |         |  
|Liabilities and Shareholders Equity                            |   |         |   |   |         |  
|                                                                |   |         |   |   |         |  
|Current liabilities:                                            |   |         |   |   |         |  
|Accounts payable and
      accrued liabilities                  | $ | 4,724   |   | $ | 2,658   |  
|Current
      portion of capital lease obligations (note 19(f)) |   | 369     |   |   | 801     |  
|Current portion of
      promissory notes (note 9(a))           |   | 373     |   |   | 122     |  
|Current
      portion of convertible loan notes (note 9(b))     |   | 3,792   |   |   | -       |  
|Current portion of future
      income tax liability (note 17)  |   | -       |   |   | 506     |  
|Liabilities under derivative
      instruments (note 14)        |   | 53      |   |   | -       |  
|                                                                |   | 9,311   |   |   | 4,087   |  
|Long-term liabilities:                                          |   |         |   |   |         |  
|Capital lease obligations
      (note 19(f))                    |   | 128     |   |   | 63      |  
|Promissory notes (note 9(a))                                    |   | 77      |   |   | 118     |  
|Convertible loan notes
      (note 9(b))                        |   | -       |   |   | 3,356   |  
|Asset
      retirement obligations (note 10)                    |   | 516     |   |   | 1,382   |  
|Future income tax liability (note 17)                           |   | -       |   |   | 1,312   |  
|                                                                |   | 10,032  |   |   | 10,318  |  
|Shareholders equity:                                           |   |         |   |   |         |  
|Share
      capital (note 11(b))                                |   | 83,470  |   |   | 75,910  |  
|Contributed surplus (note
      11(c))                          |   | 9,470   |   |   | 10,268  |  
|Equity
      component of convertible loan notes (note 9(b)(i)) |   | 1,563   |   |   | 1,563   |  
|Accumulated other
      comprehensive loss (note 12)            |   | (3,058  | ) |   | (23     | )
|Deficit                                                         |   | (55,892 | ) |   | (60,862 | )
|                                                                |   | 35,553  |   |   | 26,856  |  
|Nature of operations (note 1)                                   |   |         |   |   |         |  
|Commitments and contingencies (note 19)                         |   |         |   |   |         |  
|Subsequent events (note 21)                                     |   |         |   |   |         |  
|                                                                |   |         |   |   |         |  
|                                                                | $ | 45,585  |   | $ | 37,174  |  

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

|Martin B.
      Carsky | Director | Kaare G. Foy | Director
|------------------------ | -------- | -------------- | --------

1

---

|GREAT PANTHER SILVER LIMITED                                               
|---------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
      INCOME (LOSS)
|(Expressed in thousands of Canadian Dollars, except shares
      data)     
|Years ended December 31, 2010, 2009 and 2008                               

|                                                                                      |   | 2010        |   |   | 2009       |   |   | 2008       |  
|------------------------------------------------------------------------------------- | - | ----------- | - | - | ---------- | - | - | ---------- | -
|                                                                                      |   |             |   |   |            |   |   |            |  
|Mineral sales                                                                         | $ | 42,206      |   | $ | 31,732     |   | $ | 22,445     |  
|Cost of sales                                                                         |   | (21,161     | ) |   | (16,768    | ) |   | (18,144    | )
|Amortization and depletion of mineral 
       
       properties, plant and equipment |   | (2,362      | ) |   | (3,494     | ) |   | (4,183     | )
|                                                                                      |   | 18,683      |   |   | 11,470     |   |   | 118        |  
|                                                                                      |   |             |   |   |            |   |   |            |  
|Expenses:                                                                             |   |             |   |   |            |   |   |            |  
|Amortization and depreciation                                                         |   | 52          |   |   | 83         |   |   | 102        |  
|Accretion on asset retirement
      obligation                                        |   | 206         |   |   | 277        |   |   | 282        |  
|Mineral property exploration expenditures
      (note 8)                              |   | 7,110       |   |   | 1,582      |   |   | 6,328      |  
|General and administrative                                                            |   | 5,858       |   |   | 5,803      |   |   | 5,965      |  
|Stock-based compensation                                                              |   | 869         |   |   | 2,378      |   |   | 1,608      |  
|                                                                                      |   | 14,095      |   |   | 10,123     |   |   | 14,285     |  
|                                                                                      |   | 4,588       |   |   | 1,347      |   |   | (14,167    | )
|                                                                                      |   |             |   |   |            |   |   |            |  
|Income (expenses):                                                                    |   |             |   |   |            |   |   |            |  
|Interest income                                                                       |   | 116         |   |   | 59         |   |   | 241        |  
|Interest expense                                                                      |   | (934        | ) |   | (1,169     | ) |   | (1,155     | )
|Debt settlement expense (note
      9(b)(ii))                                         |   | -           |   |   | (51        | ) |   | -          |  
|Foreign exchange gain (loss)                                                          |   | (373        | ) |   | (383       | ) |   | 113        |  
|Gain (loss) on disposal of
      capital assets                                       |   | (16         | ) |   | (2         | ) |   | 31         |  
|Loss
      on derivative instruments (note 14)                                        |   | (148        | ) |   | -          |   |   | -          |  
|                                                                                      |   | (1,355      | ) |   | (1,546     | ) |   | (770       | )
|                                                                                      |   |             |   |   |            |   |   |            |  
|Income (loss) before provision for income
      taxes                                 |   | 3,233       |   |   | (199       | ) |   | (14,937    | )
|                                                                                      |   |             |   |   |            |   |   |            |  
|Recovery of (provision for) income taxes (note 17)                                    |   | 1,737       |   |   | (668       | ) |   | 1,176      |  
|                                                                                      |   |             |   |   |            |   |   |            |  
|Income (loss) for the year                                                            |   | 4,970       |   |   | (867       | ) |   | (13,761    | )
|                                                                                      |   |             |   |   |            |   |   |            |  
|Other comprehensive income (loss), net of
      tax:                                  |   |             |   |   |            |   |   |            |  
|Cumulative translation adjustment                                                     |   | (3,025      | ) |   | -          |   |   | -          |  
|Unrealized gain (loss) on marketable securities                                       |   | (10         | ) |   | 15         |   |   | (43        | )
|                                                                                      |   |             |   |   |            |   |   |            |  
|Comprehensive income (loss) for the year                                              | $ | 1,935       |   | $ | (852       | ) | $ | (13,804    | )
|                                                                                      |   |             |   |   |            |   |   |            |  
|Earnings (loss) per share                                                             |   |             |   |   |            |   |   |            |  
|Basic                                                                                 | $ | 0.04        |   | $ | (0.01      | ) | $ | (0.17      | )
|Diluted                                                                               | $ | 0.04        |   | $ | (0.01      | ) | $ | (0.17      | )
|                                                                                      |   |             |   |   |            |   |   |            |  
|Weighted average number of common shares                                              |   |             |   |   |            |   |   |            |  
|Basic (note 11(f))                                                                    |   | 114,422,226 |   |   | 90,210,438 |   |   | 81,321,733 |  
|Diluted (note 11(f))                                                                  |   | 118,932,620 |   |   | 90,210,438 |   |   | 81,321,733 |  

See accompanying notes to consolidated financial statements.

2

---

|GREAT PANTHER SILVER LIMITED                
|--------------------------------------------
|CONSOLIDATED STATEMENTS OF DEFICIT          
|(Expressed in thousands of Canadian Dollars)
|Years ended December 31, 2010, 2009 and 2008

|                                                    |   | 2010    |   |   | 2009    |   |   | 2008    |  
|--------------------------------------------------- | - | ------- | - | - | ------- | - | - | ------- | -
|                                                    |   |         |   |   |         |   |   |         |  
|Deficit, beginning of year                          | $ | (60,862 | ) | $ | (58,389 | ) | $ | (44,628 | )
|Settlement of convertible loan note (note 9(b)(ii)) |   | -       |   |   | (1,606  | ) |   | -       |  
|Income (loss) for the year                          |   | 4,970   |   |   | (867    | ) |   | (13,761 | )
|                                                    |   |         |   |   |         |   |   |         |  
|Deficit, end of year                                | $ | (55,892 | ) | $ | (60,862 | ) | $ | (58,389 | )

See accompanying notes to consolidated financial statements.

3

---

|GREAT PANTHER SILVER LIMITED                
|--------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS       
|(Expressed in thousands of Canadian Dollars)
|Years ended December 31, 2010, 2009 and 2008

|                                                                      |   | 2010   |   |   | 2009   |   |   | 2008    |  
|--------------------------------------------------------------------- | - | ------ | - | - | ------ | - | - | ------- | -
|                                                                      |   |        |   |   |        |   |   |         |  
|Cash flows provided by (used in)
      operating activities:          |   |        |   |   |        |   |   |         |  
|Income (loss) for the
      year                                      | $ | 4,970  |   | $ | (867   | ) | $ | (13,761 | )
|Items not
      involving cash:                                       |   |        |   |   |        |   |   |         |  
|Amortization and depletion of mineral properties, plant and equipment |   | 2,414  |   |   | 3,577  |   |   | 4,285   |  
|Foreign exchange (gain) loss                                          |   | 50     |   |   | (184   | ) |   | 135     |  
|Stock-based compensation                                              |   | 869    |   |   | 2,378  |   |   | 1,608   |  
|Shares issued for mineral exploration
      expenditures              |   | -      |   |   | -      |   |   | 191     |  
|Future income taxes                                                   |   | (1,853 | ) |   | 603    |   |   | (1,045  | )
|Interest accretion on convertible loan notes                          |   | 436    |   |   | 628    |   |   | 623     |  
|Debt settlement expense                                               |   | -      |   |   | 51     |   |   | -       |  
|Accretion on asset retirement obligations                             |   | 206    |   |   | 277    |   |   | 282     |  
|Write-down of inventory                                               |   | -      |   |   | -      |   |   | 241     |  
|Write-down of mineral properties (note 8(a))                          |   | 69     |   |   | -      |   |   | -       |  
|Loss on derivative instruments (note 14)                              |   | 53     |   |   | -      |   |   | -       |  
|Loss (gain) on disposal of capital assets                             |   | 16     |   |   | 2      |   |   | (31     | )
|Other                                                                 |   | -      |   |   | (1     | ) |   | 25      |  
|                                                                      |   | 7,230  |   |   | 6,464  |   |   | (7,447  | )
|Changes in non-cash
      operating working capital:                  |   |        |   |   |        |   |   |         |  
|Amounts receivable                                                    |   | (4,286 | ) |   | (1,801 | ) |   | 2,278   |  
|Inventories                                                           |   | (1,086 | ) |   | (471   | ) |   | (358    | )
|Prepaid expenses, deposits and advances                               |   | 327    |   |   | (1,090 | ) |   | 371     |  
|Accounts payable and accrued liabilities                              |   | 1,926  |   |   | (1,840 | ) |   | 1,960   |  
|Income taxes                                                          |   | 104    |   |   | 89     |   |   | (68     | )
|Net cash provided by (used in) operating activities                   |   | 4,215  |   |   | 1,351  |   |   | (3,264  | )
|                                                                      |   |        |   |   |        |   |   |         |  
|Cash flows provided by (used in) investing activities:                |   |        |   |   |        |   |   |         |  
|Mineral
      properties, plant and equipment                         |   | (8,036 | ) |   | (1,762 | ) |   | (1,928  | )
|Proceeds from disposal of
      capital assets                        |   | 37     |   |   | 5      |   |   | 101     |  
|Restricted cash                                                       |   | (151   | ) |   | -      |   |   | -       |  
|Net cash used in investing activities                                 |   | (8,150 | ) |   | (1,757 | ) |   | (1,827  | )
|                                                                      |   |        |   |   |        |   |   |         |  
|Cash flows provided by (used in) financing activities:                |   |        |   |   |        |   |   |         |  
|Repayment
      of long-term debt                                     |   | -      |   |   | -      |   |   | (105    | )
|Repayment of capital
      lease obligations                          |   | (938   | ) |   | (364   | ) |   | (181    | )
|Repayment
      of promissory note                                    |   | (292   | ) |   | (10    | ) |   | -       |  
|Proceeds from advances on
      share subscriptions                   |   | -      |   |   | -      |   |   | 85      |  
|Proceeds
      from exercise of warrants (note 11(b))                 |   | 3,054  |   |   | 519    |   |   | 143     |  
|Proceeds from exercise of
      options (note 11(b))                  |   | 2,871  |   |   | 731    |   |   | 398     |  
|Issuance of shares for cash,
      net of issue costs                 |   | (32    | ) |   | 12,288 |   |   | -       |  
|Net cash provided by financing activities                             |   | 4,663  |   |   | 13,164 |   |   | 340     |  
|                                                                      |   | 728    |   |   | 12,758 |   |   | (4,751  | )
|Effect of exchange
      rate changes on cash and cash equivalents    |   | (73    | ) |   | (52    | ) |   | (1      | )
|                                                                      |   |        |   |   |        |   |   |         |  
|Increase (decrease) in cash and cash equivalents                      |   | 655    |   |   | 12,706 |   |   | (4,752  | )
|                                                                      |   |        |   |   |        |   |   |         |  
|Cash and cash
      equivalents, beginning of year                    |   | 13,312 |   |   | 606    |   |   | 5,358   |  
|                                                                      |   |        |   |   |        |   |   |         |  
|Cash and cash
      equivalents, end of year                          | $ | 13,967 |   | $ | 13,312 |   | $ | 606     |  

See accompanying notes to consolidated financial statements.

4

---

|GREAT PANTHER SILVER LIMITED                
|--------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS       
|(Expressed in thousands of Canadian Dollars)
|Years ended December 31, 2010, 2009 and 2008

|                                                                                        |   | 2010 |   |   | 2009  |  |   | 2008 |  
|--------------------------------------------------------------------------------------- | - | ---- | - | - | ----- |  | - | ---- | -
|                                                                                        |   |      |   |   |       |  |   |      |  
|Supplementary cash flow information:                                                    |   |      |   |   |       |  |   |      |  
|Income taxes received                                                                   | $ | -    |   | $ | 24    |  | $ | 63   |  
|Income
      taxes paid                                                                 |   | 112  |   |   | -     |  |   | -    |  
|Interest expense paid                                                                   |   | 436  |   |   | 366   |  |   | 497  |  
|Interest
      income received                                                          |   | 116  |   |   | 59    |  |   | 250  |  
|                                                                                        |   |      |   |   |       |  |   |      |  
|Non-cash financing and investing
      transactions:                                    |   |      |   |   |       |  |   |      |  
|Mineral
      property adjustment from changes in asset retirement obligation (note 10) |   | (282 | ) |   | -     |  |   | (278 | )
|Assumption of
      capital lease obligation on purchase of equipment                   |   | 640  |   |   | 408   |  |   | 785  |  
|Value added tax on
      capital lease obligation                                       |   | -    |   |   | 80    |  |   | 136  |  
|Warrants
      issued for financing fee (note 11(b))                                    |   | -    |   |   | 442   |  |   | -    |  
|Issuance
      of shares pursuant to mineral property option agreements                 |   | -    |   |   | -     |  |   | 192  |  
|Issuance
      of promissory note for equipment (note 9(a))                             |   | 501  |   |   | 250   |  |   | -    |  
|Shares issued
      on conversion of convertible notes (note 9(b)(i))                   |   | -    |   |   | 4,587 |  |   | -    |  

See accompanying notes to consolidated financial
  statements.

5

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|1. | Nature of operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Great Panther Silver Limited (the Company) was
      continued under the Business Corporations Act (Yukon) on March 22, 1996
      and continued under the Business Corporations Act (British Columbia) on
      July 9, 2004. On October 2, 2003, the Company changed its name from Great
      Panther Inc. to Great Panther Resources Limited and the common shares were
      consolidated whereby ten common shares were exchanged for one new common
      share. On December 17, 2009, the Companys shareholders approved changing
      the Company's name from Great Panther Resources Limited to Great Panther
      Silver Limited which became effective as of January 1, 2010. No change to
      the Company's capital structure was involved and the common shares of the
      Company trade on the main board of the Toronto Stock Exchange under the
      symbol GPR. On February 8, 2011, the Companys shares were listed on
      NYSE Amex stock exchange in the United States under the trading symbol
      GPL.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The Company is in the business of acquisition, development,
      exploration, and operation of mineral properties and mines in Mexico.
      Among the properties in which the Company has interests, the Topia and
      Guanajuato mines are in production. The Companys other mineral property
      interests are in the exploration stage and it has not yet been determined
      as to whether these properties contain ore reserves that are economically
      viable. Costs associated with these exploration stage properties have been
      expensed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | These financial statements have been prepared by
      management on a going concern basis, which assumes the realization of
      assets and liquidation of liabilities in the normal course of business.
      The business of mining and exploring for minerals involves a high degree
      of risk and there can be no assurance that the current exploration and
      development programs will result in the discovery and development of
      economic ore reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | Significant accounting policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

6

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|2. | Significant accounting policies
      (continued)
|-- | -------------------------------------------------
|   |                                                  
|   | (b)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   | (c)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   | (d)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   | (e)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   | (f)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  

7

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|2. | Significant accounting policies
      (continued)
|-- | -------------------------------------------------
|   |                                                  
|   | (f)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  

| | Computer equipment     | straight-line over the
      estimated useful life
| | ---------------------- | --------------------------------------------------
| | Furniture and fixtures | straight-line over the estimated useful life      
| | Office equipment       | straight-line over the
      estimated useful life
| | Leasehold improvements | straight-line over the term of the lease          

| | (g) | Impairment of long-lived assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The Company reviews and evaluates its long-lived assets,
      including mineral properties, plant and equipment, for impairment when
      events or changes in circumstances indicate that the related carrying
      amounts may not be recoverable. Recoverability of assets to be held and
      used is measured by a comparison of the carrying amount of an asset to its
      estimated undiscounted future cash flows expected to be generated by the
      asset. Estimated cash flows include assumptions about long-term silver,
      gold, lead and zinc prices, future production levels, and future
      operating, capital and reclamation costs. If carrying value exceeds
      estimated discounted future cash flows, an impairment loss is recognized
      based on the excess of carrying value over the estimated fair value of the
      asset.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Management's estimates are subject to risks and
      uncertainties of changes affecting the recoverability of the Company's
      investment in its mineral property, plant, equipment and mine development.
      Management's estimates of these factors are based on current
      conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

8

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|2. | Significant accounting policies
      (continued)
|-- | -------------------------------------------------
|   |                                                  
|   | (h)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   | (i)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   | (j)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   | (k)                                              
|   |                                                  
|   |                                                  

9

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|2. | Significant accounting policies
      (continued)
|-- | -------------------------------------------------
|   |                                                  
|   | (k)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  

10

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|2. | Significant accounting policies
      (continued)
|-- | -------------------------------------------------
|   |                                                  
|   | (k)                                              
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   |                                                  
|   | (l)                                              
|   |                                                  
|   |                                                  

11

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|2. | Significant accounting policies
      (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (m)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | (n)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | Change in accounting policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Effective January 1, 2010, the economic facts and
      circumstances surrounding the Companys foreign operations changed such
      that operations that were previously classified as integrated are now
      reported as self-sustaining. This change is the result of continuous
      improvement in the foreign operations profitability as evidenced by
      positive cash flows from operations in all four quarters of 2009 and
      continuing throughout 2010 among other factors. Thus, the Company has
      changed the translation of the results of its foreign operations from the
      temporal to the current rate method on a prospective basis.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Under the current rate method, assets and liabilities are
      translated into the reporting currency using the exchange rate at the
      balance sheet date and revenue and expense items are translated at the
      average exchange rate prevailing during the period. Differences arising
      from foreign currency translation are recorded in accumulated other
      comprehensive income (loss) as a translation adjustment until they are
      realized.                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4. | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | International Financial Reporting Standards
      (IFRS):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In February 2008, the AcSB announced that 2011 is the
      changeover date for publicly-listed companies to use IFRS, replacing
      Canada's own GAAP. The transition date is for interim and annual financial
      statements relating to fiscal years beginning on or after January 1, 2011.
      The transition date of January 1, 2011 will require the restatement for
      comparative purposes of amounts reported by the Company for the year ended
      December 31, 2010 and restatement of the opening balance sheet as at
      January 1, 2010.                                                                                                       

12

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|5. | Amounts receivable
|-- | ------------------

| |                                |   | 2010  |   |   | 2009  |  
| | ------------------------------ | - | ----- | - | - | ----- | -
| |                                |   |       |   |   |       |  
| | Trade accounts receivable      | $ | 5,151 |   | $ | 3,472 |  
| | Value added tax recoverable    |   | 4,399 |   |   | 2,024 |  
| | Other                          |   | 317   |   |   | 251   |  
| |                                |   | 9,867 |   |   | 5,747 |  
| | Allowance for doubtful amounts |   | (232  | ) |   | (208  | )
| |                                |   |       |   |   |       |  
| |                                | $ | 9,635 |   | $ | 5,539 |  

The Company, through its Mexican
  subsidiaries, previously paid value added tax on the purchase and sale of goods
  and services at a rate of 15%. Effective January 1, 2010, the value added tax
  rate increased to 16%. The net amount paid or payable is recoverable, but such
  recovery is subject to review and assessment by local tax authorities.

|6. | Inventories
|-- | -----------

| |                        |   | 2010  |  |   | 2009  | 
| | ---------------------- | - | ----- |  | - | ----- | 
| |                        |   |       |  |   |       | 
| | Finished product       | $ | 831   |  | $ | 410   | 
| | Ore stockpile          |   | 370   |  |   | 80    | 
| | Materials and supplies |   | 993   |  |   | 681   | 
| | Silver bullion         |   | 421   |  |   | 267   | 
| |                        |   |       |  |   |       | 
| |                        | $ | 2,615 |  | $ | 1,438 | 

The amount of inventory recognized as
  an expense for the years ended December 31, 2010 and 2009 is included in cost of
  sales.

13

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|7. | Mineral properties, plant and equipment                                                            
|-- | ---------------------------------------------------------------------------------------------------
|   |                                                                                                    
|   | The major components of the Company's mineral properties,
      plant and equipment are as follows:

| |                                                                                                                          |   | 2010   |   |   | 2009   |  
| | ------------------------------------------------------------------------------------------------------------------------ | - | ------ | - | - | ------ | -
| |                                                                                                                          |   |        |   |   |        |  
| | Topia mine:                                                                                                              |   |        |   |   |        |  
| | Mineral properties                                                                                                       | $ | 2,642  |   | $ | 3,115  |  
| | Plant and
      equipment                                                                                                |   | 7,632  |   |   | 6,132  |  
| | Buildings and mobile
      equipment                                                                                     |   | 316    |   |   | 396    |  
| | Land                                                                                                                     |   | 14     |   |   | 14     |  
| | Asset retirement obligations (note 10)                                                                                   |   | 148    |   |   | 231    |  
| |                                                                                                                          |   | 10,752 |   |   | 9,888  |  
| | Accumulated depreciation and depletion                                                                                   |   | (4,565 | ) |   | (4,652 | )
| |                                                                                                                          |   | 6,187  |   |   | 5,236  |  
| |                                                                                                                          |   |        |   |   |        |  
| | Guanajuato mine:                                                                                                         |   |        |   |   |        |  
| | Mineral properties                                                                                                       |   | 4,296  |   |   | 4,450  |  
| | Plant and
      equipment                                                                                                |   | 10,768 |   |   | 7,792  |  
| | Buildings and mobile
      equipment                                                                                     |   | 2,116  |   |   | 1,777  |  
| | Land                                                                                                                     |   | 2,200  |   |   | 2,845  |  
| | Asset retirement obligations (note 10)                                                                                   |   | 279    |   |   | 569    |  
| |                                                                                                                          |   | 19,659 |   |   | 17,433 |  
| | Accumulated depreciation and depletion                                                                                   |   | (8,450 | ) |   | (7,958 | )
| |                                                                                                                          |   | 11,209 |   |   | 9,475  |  
| |                                                                                                                          |   |        |   |   |        |  
| | Santo Nino (note 8(a))                                                                                                   |   | -      |   |   | 69     |  
| |                                                                                                                          |   |        |   |   |        |  
| | Leasehold improvements and other equipment, net of 
                accumulated
      depreciation of $338 (2009 - $284) |   | 142    |   |   | 155    |  
| |                                                                                                                          |   |        |   |   |        |  
| |                                                                                                                          | $ | 17,538 |   | $ | 14,935 |  

| | (a) | Topia mine:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | On June 30, 2005, the Company purchased 100% of the
      ownership rights in and to all the fixed assets, machinery, equipment and
      Topia mining concessions located in the municipality of Topia in the state
      of Durango, Mexico.                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (b) | Guanajuato mine:                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | On October 25, 2005, the Company purchased a 100%
      ownership interest in a group of producing silver- gold mines in
      Guanajuato, Mexico which includes two main properties, a plant, workshops
      and administration facilities, mining infrastructure, equipment, and
      certain surface rights (real estate).                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (c) | La Prieta concession:                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | On December 15, 2009, the Company acquired a 100%
      interest in the La Prieta concession in the Topia district for $347
      (US$330). US$300 was paid on closing with the remaining US$30 paid on
      March 31, 2010. The La Prieta concession is a 94 hectare claim which hosts
      two previously mined silver-gold-lead- zinc-quartz vein structures and is
      situated approximately two kilometres south of the principal veins
      presently being mined by the Company.

14

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|8. | Mineral property exploration
      expenditures                                                                     
|-- | --------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                     
|   | The continuity of expenditures on mineral properties for
      the year ended December 31, 2010 is as
      follows:

San
        Antonio
      
      
      Santo
        Nino
      
      
      Topia
      
      
      Guanajuato
      
      
      MapimiNote
        8(a)
      
      
      Note
        8(a)
      
      
      Note
        7(a)
      
      
      Note
        7(b)
      
      
      Note
        8(b)
      
      
      TotalAnalysis
      $
      -
      
      $
      -
      
      $
      60
      
      $
      311
      
      $
      -
      
      $
      371Drilling
      
      -
      
      
      -
      
      
      1,230
      
      
      1,759
      
      
      -
      
      
      2,989Field costs
      
      -
      
      
      -
      
      
      71
      
      
      -
      
      
      -
      
      
      71Geology
      
      -
      
      
      -
      
      
      306
      
      
      501
      
      
      -
      
      
      807Project administration
      
      66
      
      
      69
      
      
      121
      
      
      223
      
      
      -
      
      
      479Mine exploration
        costs
      
      -
      
      
      -
      
      
      535
      
      
      1,909
      
      
      -
      
      
      2,44466
      
      
      69
      
      
      2,323
      
      
      4,703
      
      
      -
      
      
      7,161Cost recoveries
      
      (51
      )
      
      
      
      
      -
      
      
      -
      
      
      -
      
      
      (51
      )15
      
      
      69
      
      
      2,323
      
      
      4,703
      
      
      -
      
      
      7,110Cumulative
        expenditures, beginning of year
      
      116
      
      
      490
      
      
      9,326
      
      
      6,675
      
      
      5,329
      
      
      22,307Cumulative expenditures, end of year
      $
      131
      
      $
      559
      
      $
      11,649
      
      $
      11,378
      
      $
      5,329
      
      $
      29,417


The continuity of expenditures on
  mineral properties for the year ended December 31, 2009 is as follows:

San
        Antonio
      
      
      Santo
        Nino
      
      
      Topia
      
      
      Guanajuato
      
      
      MapimiNote
        8(a)
      
      
      Note
        8(a)
      
      
      Note
        7(a)
      
      
      Note
        7(b)
      
      
      Note
        8(b)
      
      
      TotalAnalysis
      $
      -
      
      $
      -
      
      $
      18
      
      $
      26
      
      $
      4
      
      $
      48Drilling
      
      -
      
      
      -
      
      
      293
      
      
      -
      
      
      -
      
      
      293Field costs
      
      -
      
      
      -
      
      
      38
      
      
      -
      
      
      -
      
      
      38Geology
      
      -
      
      
      -
      
      
      305
      
      
      264
      
      
      85
      
      
      654Project administration
      
      30
      
      
      -
      
      
      7
      
      
      94
      
      
      34
      
      
      165Mine exploration
        costs
      
      -
      
      
      -
      
      
      464
      
      
      -
      
      
      -
      
      
      46430
      
      
      -
      
      
      1,125
      
      
      384
      
      
      123
      
      
      1,662Cost recoveries
      
      (80
      )
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (80
      )(50
      )
      
      -
      
      
      1,125
      
      
      384
      
      
      123
      
      
      1,582Cumulative
        expenditures, beginning of year
      
      166
      
      
      490
      
      
      8,201
      
      
      6,291
      
      
      5,206
      
      
      20,725Cumulative expenditures, end of year
      $
      116
      
      $
      490
      
      $
      9,326
      
      $
      6,675
      
      $
      5,329
      
      $
      22,307


15

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|8. | Mineral property exploration expenditures
      (continued)                                                         
|-- | --------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                     
|   | The continuity of expenditures on mineral properties for
      the year ended December 31, 2008 is as
      follows:

San
        Antonio
      
      
      Santo
        Nino
      
      
      Topia
      
      
      Guanajuato
      
      
      MapimiNote
        8(a)
      
      
      Note
        8(a)
      
      
      Note
        7(a)
      
      
      Note
        7(b)
      
      
      Note
        8(b)
      
      
      TotalOption payments:
      
      Cash
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      375
      
      $
      375Shares
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      192
      
      
      192Analysis
      
      
      
      
      -
      
      
      -
      
      
      45
      
      
      210
      
      
      118
      
      
      373Drilling
      
      
      
      
      -
      
      
      -
      
      
      302
      
      
      891
      
      
      643
      
      
      1,836Field costs
      
      
      
      
      1
      
      
      -
      
      
      36
      
      
      15
      
      
      55
      
      
      107Geology
      
      
      
      
      5
      
      
      -
      
      
      268
      
      
      695
      
      
      557
      
      
      1,525Project administration
      
      
      32
      
      
      -
      
      
      16
      
      
      222
      
      
      183
      
      
      453Mine
        exploration costs
      
      
      -
      
      
      -
      
      
      1,549
      
      
      -
      
      
      -
      
      
      1,54938
      
      
      -
      
      
      2,216
      
      
      2,033
      
      
      2,123
      
      
      6,410Cost recoveries
      
      
      
      
      (82
      )
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (82
      )(44
      )
      
      -
      
      
      2,216
      
      
      2,033
      
      
      2,123
      
      
      6,328Cumulative expenditures, beginning of year
      
      
      210
      
      
      490
      
      
      5,985
      
      
      4,258
      
      
      3,083
      
      
      14,397Cumulative expenditures, end of year
      
      $
      166
      
      $
      490
      
      $
      8,201
      
      $
      6,291
      
      $
      5,206
      
      $
      20,725


| | (a) | San Antonio and Santo Nino projects:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | On March 13, 2007, the Company satisfied all conditions
      of an option agreement by paying the final installment payment. By making
      cumulative payments of US$165 over a three year period, the Company was
      granted ownership to the Santo Nino mining concession located in the
      Guadalupe y Calvo mining district in the state of Chihuahua,
      Mexico.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | On February 2, 2007, the Company entered into an option
      agreement with Altair Ventures Incorporated (Altair). Terms of the
      agreement allowed Altair to acquire a 70% interest in the four mining
      claims named San Antonio, Iran, Chiripa, and Santo Nino by making
      scheduled cash payments totaling US$200, issuing a total of 200,000 shares
      of Altair and fulfilling certain work commitments on the property over a
      three year period. As at December 31, 2009, US$60 and 200,000 shares of
      Altair had been received in accordance with the agreement. There was no
      underlying Net Smelter Return royalty or other royalties and Great Panther
      owned 100% of all four concessions as at December 31, 2009. On February 1,
      2010, Altair decided not to continue its option and as a result forfeited
      all rights and options to the property.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | On December 21, 2010, the Company relinquished its rights
      to the San Antonio and Santo Nino mining concessions which resulted in the
      Company writing down its carrying value of $69.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (b) | Mapimi Project:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | On September 9, 2009, the Company terminated its option
      agreement dated September 11, 2006, to earn a 100% interest of the
      ownership rights to seventeen mining concessions collectively known as the
      Mapimi project (formerly known as Km 66) in eastern Durango state,
      Mexico.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

16

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|9. | Long-term debt
|-- | --------------
|   |               
|   | (a)           

| |                             |   | 2010 |  |   | 2009 | 
| | --------------------------- | - | ---- |  | - | ---- | 
| | Promissory notes            | $ | 450  |  | $ | 240  | 
| | Less: current
      portion |   | 373  |  |   | 122  | 
| |                             | $ | 77   |  | $ | 118  | 

| |     | During the year ended December 31, 2010, the Company
      purchased equipment under the terms of two promissory notes requiring
      equal blended monthly payments of $11 for 24 months, commencing on the
      first day of the month after delivery of the equipment. The promissory
      notes bear interest at 6% per annum, compounded and calculated
      semi-annually and are secured by the equipment. As at December 31, 2010,
      the Company has three promissory notes with the same vendor and the same
      terms. The total interest paid on the promissory notes totaled $29 in 2010
      (2009  $1).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (b) | Convertible loan notes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                                                                                                                              |   | 2010  |  |   | 2009  | 
| | ---------------------------------------------------------------------------------------------------------------------------- | - | ----- |  | - | ----- | 
| |                                                                                                                              |   |       |  |   |       | 
| | $4,050 notes due July 14, 2011, interest rate of 8% per annum 
      payable quarterly; effective interest rate of 25.1% (i) | $ | 3,792 |  | $ | 3,356 | 

| | (i) | On July 13, 2007, the Company completed financing
      agreements for cash proceeds of $4,050. The financing consisted of two 8%
      per annum unsecured convertible notes maturing July 14, 2011, convertible
      into common shares of the Company at a price of $2.25 per share at the
      holders option at any time. On issuance, the conversion feature of the
      note had a fair value of $1,563 using the Black-Scholes valuation model.
      The assumptions used in the valuation model were a risk-free interest rate
      of 4.7%, volatility of 57.9%, dividends paid of 0.0%, and an expected life
      of the option of 4 years. Interest accreted on the notes payable during
      2010 was $436 (2009 - $385).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The fair value of the conversion feature has been
      recorded in equity, reducing the amount assigned to the debt component.
      The debt component is accreted to its fair value over the term to maturity
      as a non-cash interest charge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Subsequent to year end, the two convertible loan notes
      were converted (note 21(b)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

17

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|9.  | Long-term debt (continued)                                                                                                                                                                                                                                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                            
|    | (b)                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                            
|10. | Asset retirement obligations                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                            
|    | The Companys asset retirement obligations relate to site
      restoration, clean-up and ongoing treatment and monitoring of the Topia
      and Guanajuato mines. A reconciliation of the provision for asset
      retirement obligations is as follows:

| |                                    |   | 2010   |   |   | 2009  | 
| | ---------------------------------- | - | ------ | - | - | ----- | 
| | Balance, beginning of year         | $ | 1,382  |   | $ | 1,105 | 
| | Changes due to mine life extension |   | (1,072 | ) |   | -     | 
| | Accretion expense                  |   | 206    |   |   | 277   | 
| | Balance, end of
      year         | $ | 516    |   | $ | 1,382 | 

The provision for asset retirement
  obligations is based on the following assumptions:

- The increase in mine life (note 2(f)) at both the
      Guanajuato and Topia mines had the effect of decreasing the asset retirement
      obligations and their corresponding assets by $1,072 and $282, respectively.
      The excess of the reduction in the liability over the remaining unamortized
      asset retirement cost was recognized as a reduction in depreciation expense of
      $790 in 2010.
- The total undiscounted estimated cash flows
      required to settle the Companys estimated obligations is US$2,735 (2009 
      US$2,893).
- The expected timing of payments totaling US$2,735
      is estimated as follows: US$908 in 2015, US$156 in 2016, US$161 in 2017,
      US$1,129 in 2020, US$187 in 2021 and US$194 in 2022. This timing matches the
      estimated remaining life of the mines, which is 5 years for Guanajuato and 10
      years for Topia.
- A credit-adjusted risk-free rate of 25.1% (2009 
      25.1%) has been used to discount cash flows.

18

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|11. | Share capital
|--- | -------------
|    |              
|    | (a)          
|    |              
|    |              
|    |              
|    | (b)          

Number
        of
      
      
      Statedcommon shares
      
      
      valueBalance, January 1, 2008
      
      80,744,352
      
      $
      56,988Exercise of options
      
      465,000
      
      
      398Exercise of warrants
      
      100,500
      
      
      143Issue of shares pursuant to mineral property agreement
      
      344,669
      
      
      192Reclassification from contributed surplus
        on exercise of options and warrants (note 11(c))
      
      -
      
      
      158Repricing of agent
        warrants
      
      -
      
      
      (14
      )Balance, December 31, 2008
      
      81,654,521
      
      
      57,865Exercise of L warrants
      
      1,385,000
      
      
      485Exercise of finders warrants
      
      98,294
      
      
      34Exercise of stock options
      
      1,618,575
      
      
      731Private placement at $0.20 per unit, net of
        costs
      
      5,125,000
      
      
      969Issue of agent warrants
      
      -
      
      
      (23
      )Short form prospectus financing at $0.70
        per unit, net of costs
      
      17,617,500
      
      
      11,404Issue of agent warrants
      
      -
      
      
      (419
      )Issue of shares for convertible note
      
      3,740,741
      
      
      4,587Reclassification
        from contributed surplus on exercise of options and warrants (note 11(c))
      
      -
      
      
      277Balance, December 31, 2009
      
      111,239,631
      
      
      75,910Exercise of L warrants
      
      1,177,500
      
      
      412Exercise of SFPO warrants
      
      2,493,100
      
      
      2,244Exercise of agents warrants
      
      414,154
      
      
      373Exercise of finders warrants
      
      70,756
      
      
      25Exercise of stock options
      
      4,518,625
      
      
      2,871Share issue cost
      
      -
      
      
      (32
      )Reclassification
        from contributed surplus on exercise of options and warrants (note 11(c))
      
      -
      
      
      1,667Balance, December
        31, 2010
      
      119,913,766
      
      $
      83,470


No preferred shares have been issued.

19

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|11. | Share capital (continued)
|--- | -------------------------
|    |                          
|    | (c)                      

| |                                                                                          |   | Stated value |  
| | ---------------------------------------------------------------------------------------- | - | ------------ | -
| | Balance, January 1, 2008                                                                 |   | 6,261        |  
| | Reclassification to common shares on exercise of options
      and warrants (note 11(b)) |   | (158         | )
| | Stock-based compensation                                                                 |   | 1,165        |  
| | Repricing of agent warrants                                                              |   | 14           |  
| | Repricing of stock options                                                               |   | 443          |  
| | Balance, December 31, 2008                                                               |   | 7,725        |  
| | Reclassification to common shares on
      exercise of options and warrants (note 11(b)) |   | (277         | )
| | Issue of agent warrants                                                                  |   | 442          |  
| | Stock-based compensation                                                                 |   | 2,378        |  
| | Balance, December 31, 2009                                                               |   | 10,268       |  
| | Reclassification to common shares on
      exercise of options and warrants (note 11(b)) |   | (1,667       | )
| | Stock-based
      compensation                                                           |   | 869          |  
| | Balance, December 31, 2010                                                               | $ | 9,470        |  

| | (d) | Stock options:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company, in accordance with the policies of the
      Toronto Stock Exchange (the Exchange), is authorized to grant incentive
      stock options (options) to officers, directors, employees and
      consultants as incentive for their services, subject to limits with
      respect to insiders. Pursuant to the Companys Amended and Restated
      Incentive Share Option Plan (2007) (the 2007 Plan), options are
      non-transferable, subject to permitted transferees, and the aggregate may
      not exceed 10% of the outstanding issue at the time of an option grant and
      the aggregate to any one person may not exceed 5% of the outstanding
      issue. The exercise price of options is determined by the board of
      directors but shall not be less than the closing price of the common
      shares on the Exchange on the last business day immediately preceding the
      date of grant. Options have expiry dates of no later than 10 years after
      the date of grant and will cease to be exercisable 30 days following the
      termination of the participants employment or engagement. Vesting of
      options is generally at the time of grant.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The 2007 Plan allows a participant the right, when
      entitled to exercise an option, to terminate the option and in lieu of
      receiving common shares pursuant to the exercise of the option, receive at
      no cost to the participant, that number of common shares which when
      multiplied by the closing price of the common shares on the day
      immediately prior to the exercise, have a total value equal to the product
      of that number of common shares subject to the option multiplied by the
      difference between the closing price on the day immediately prior to the
      exercise of the right and the option exercise price. In the year ended
      December 31, 2010, nil (2009  nil; 2008  nil) common shares were issued
      upon cashless exercises.                                                                                                                                                                                                                                                                                                                                                                                                      

20

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|11. | Share capital (continued)
|--- | -------------------------
|    |                          
|    | (d)                      
|    |                          
|    |                          

Balance
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      BalanceExercise
      
      
      
      
      December 31,
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      December 31,Price
      
      Expiry date
      
      
      2009
      
      
      Granted
      
      
      Cancelled
      
      
      Expired
      
      
      Exercised
      
      
      20100.45
      
      February 27,
        2010
      
      
      125,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (125,000
      )
      
      -0.45
      
      July 26, 2010
      
      
      400,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (400,000
      )
      
      -0.90
      
      January 5, 2011
      
      
      830,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (705,000
      )
      
      125,0000.45
      
      February 8, 2014
      
      
      3,944,125
      
      
      -
      
      
      -
      
      
      -
      
      
      (1,956,125
      )
      
      1,988,0000.45
      
      February 29,
        2012
      
      
      160,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      160,0000.52
      
      March 25, 2011
      
      
      310,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (110,000
      )
      
      200,0000.70
      
      September 3,
        2014
      
      
      1,290,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (325,000
      )
      
      965,0000.90
      
      December 3, 2010
      
      
      185,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (185,000
      )
      
      -0.90
      
      February 29,
        2012
      
      
      90,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      90,0000.90
      
      December 2, 2014
      
      
      580,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (242,500
      )
      
      337,5000.90
      
      July 11, 2015
      
      
      -
      
      
      670,000
      
      
      (65,000
      )
      
      -
      
      
      (360,000
      )
      
      245,0001.15
      
      October 17, 2015
      
      
      -
      
      
      240,000
      
      
      (25,000
      )
      
      -
      
      
      (110,000
      )
      
      105,0001.90
      
      November 21, 2015
      
      
      -
      
      
      415,000
      
      
      -
      
      
      -
      
      
      -
      
      
      415,0007,914,125
      
      
      1,325,000
      
      
      (90,000
      )
      
      -
      
      
      (4,518,625
      )
      
      4,630,500Weighted average exercise price
      
      $
      0.59
      
      $
      1.24
      
      $
      0.93
      
      
      -
      
      $
      0.64
      
      $
      0.73


As at December 31, 2010, all share
  options are fully vested. The weighted average remaining contractual life of the
  options outstanding as at December 31, 2010 is 3.25 years.

| | (i)   | On April 29, 2010, the Companys Board of Directors
      approved the extension of the expiry date from December 3, 2010 to
      February 29, 2012 of the 90,000 incentive stock options granted to a
      consultant.                                                                                 
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                           
| | (ii)  | On July 12, 2010, the Company granted incentive stock
      options to employees to purchase up to an aggregate of 670,000 common
      shares under the Companys 2007 Plan. The options are exercisable for a
      period of five years from the date of grant at a price of $0.90 per
      share.    
| |       |                                                                                                                                                                                                                                                                                                           
| | (iii) | On October 18, 2010, the Company granted incentive stock
      options to employees to purchase up to an aggregate of 240,000 common
      shares under the Companys 2007 Plan. The options are exercisable for a
      period of five years from the date of grant at a price of $1.15 per
      share. 
| |       |                                                                                                                                                                                                                                                                                                           
| | (iv)  | On November 22, 2010, the Company granted incentive stock
      options to employees to purchase up to an aggregate of 415,000 common
      shares under the Companys 2007 Plan. The options are exercisable for a
      period of five years from the date of grant at a price of $1.90 per
      share.

21

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|11. | Share capital (continued)
|--- | -------------------------
|    |                          
|    | (d)                      
|    |                          
|    |                          

Balance
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      BalanceExercise
      
      
      
      
      December 31,
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      December 31,Price
      
      Expiry date
      
      
      2008
      
      
      Granted
      
      
      Cancelled
      
      
      Expired
      
      
      Exercised
      
      
      20090.45
      
      February 8, 2009
      
      
      490,000
      
      
      -
      
      
      -
      
      
      (490,000
      )
      
      -
      
      
      -0.52
      
      April 5, 2009
      
      
      30,000
      
      
      -
      
      
      -
      
      
      (30,000
      )
      
      -
      
      
      -0.45
      
      May 25, 2009
      
      
      40,000
      
      
      -
      
      
      -
      
      
      (40,000
      )
      
      -
      
      
      -0.45
      
      February 27, 2010
      
      
      125,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      125,0000.45
      
      July 26, 2010
      
      
      400,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      400,0000.90
      
      January 5, 2011
      
      
      1,181,700
      
      
      -
      
      
      (351,700
      )
      
      -
      
      
      -
      
      
      830,0001.42
      
      December 6, 2011
      
      
      1,685,000
      
      
      -
      
      
      (1,685,000
      )
      
      -
      
      
      -
      
      
      -1.42
      
      March 11, 2012
      
      
      100,000
      
      
      -
      
      
      (100,000
      )
      
      -
      
      
      -
      
      
      -1.42
      
      June 5, 2012
      
      
      250,000
      
      
      -
      
      
      (250,000
      )
      
      -
      
      
      -
      
      
      -1.42
      
      September 10, 2012
      
      
      525,000
      
      
      -
      
      
      (525,000
      )
      
      -
      
      
      -
      
      
      -1.42
      
      April 30, 2010
      
      
      350,000
      
      
      -
      
      
      (350,000
      )
      
      -
      
      
      -
      
      
      -1.42
      
      May 14, 2013
      
      
      1,220,000
      
      
      -
      
      
      (1,220,000
      )
      
      -
      
      
      -
      
      
      -1.42
      
      July 31, 2013
      
      
      125,000
      
      
      -
      
      
      (125,000
      )
      
      -
      
      
      -
      
      
      -0.45
      
      February 8, 2014
      
      
      -
      
      
      5,752,700
      
      
      (200,000
      )
      
      -
      
      
      (1,608,575
      )
      
      3,944,1250.45
      
      February 29,
        2012
      
      
      -
      
      
      160,000
      
      
      -
      
      
      -
      
      
      -
      
      
      160,0000.52
      
      March 25, 2011
      
      
      -
      
      
      310,000
      
      
      -
      
      
      -
      
      
      -
      
      
      310,0000.70
      
      September 3,
        2014
      
      
      -
      
      
      1,300,000
      
      
      -
      
      
      -
      
      
      (10,000
      )
      
      1,290,0000.90
      
      December 3, 2010
      
      
      -
      
      
      275,000
      
      
      -
      
      
      -
      
      
      -
      
      
      275,0000.90
      
      December 2, 2014
      
      
      -
      
      
      580,000
      
      
      -
      
      
      -
      
      
      -
      
      
      580,0006,521,700
      
      
      8,377,700
      
      
      (4,806,700
      )
      
      (560,000
      )
      
      (1,618,575
      )
      
      7,914,125Weighted average exercise price
      
      $
      1.16
      
      $
      0.54
      
      $
      1.34
      
      $
      0.45
      
      $
      0.45
      
      $
      0.59


The continuity of common stock options
  for 2008 is as follows:

Balance
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      BalanceExercise
      
      
      
      
      December 31,
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      December 31,price
      
      Expiry date
      
      
      2007
      
      
      Granted
      
      
      Cancelled
      
      
      Expired
      
      
      Exercised
      
      
      20080.45
      
      February 8, 2009
      
      
      490,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      490,0000.52
      
      April 5, 2009
      
      
      30,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      30,0000.45
      
      May 25, 2009
      
      
      60,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (20,000
      )
      
      40,0000.45
      
      February 27, 2010
      
      
      150,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (25,000
      )
      
      125,0000.45
      
      July 26, 2010
      
      
      400,000
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      400,0000.90
      
      January 5, 2011
      
      
      1,201,700
      
      
      -
      
      
      -
      
      
      -
      
      
      (20,000
      )
      
      1,181,7000.90
      
      January 14, 2008
      
      
      400,000
      
      
      -
      
      
      -
      
      
      -
      
      
      (400,000
      )
      
      -2.65
      
      January 14, 2008
      
      
      400,000
      
      
      -
      
      
      -
      
      
      (400,000
      )
      
      -
      
      
      -1.42
      
      December 6, 2011
      
      
      2,105,000
      
      
      -
      
      
      (420,000
      )
      
      -
      
      
      -
      
      
      1,685,0001.42
      
      March 11, 2012
      
      
      115,000
      
      
      -
      
      
      (15,000
      )
      
      -
      
      
      -
      
      
      100,0001.42
      
      June 5, 2012
      
      
      375,000
      
      
      -
      
      
      (125,000
      )
      
      -
      
      
      -
      
      
      250,0001.42
      
      September 10, 2012
      
      
      550,000
      
      
      -
      
      
      (25,000
      )
      
      -
      
      
      -
      
      
      525,0001.42
      
      April 30, 2010
      
      
      -
      
      
      350,000
      
      
      -
      
      
      -
      
      
      -
      
      
      350,0001.42
      
      May 14, 2013
      
      
      -
      
      
      1,485,000
      
      
      (265,000
      )
      
      -
      
      
      -
      
      
      1,220,0001.42
      
      July 31, 2013
      
      
      -
      
      
      125,000
      
      
      -
      
      
      -
      
      
      -
      
      
      125,0006,276,700
      
      
      1,960,000
      
      
      (850,000
      )
      
      (400,000
      )
      
      (465,000
      )
      
      6,521,700Weighted average exercise price
      
      $
      1.22
      
      $
      1.42
      
      $
      1.64
      
      $
      2.65
      
      $
      0.86
      
      $
      1.16


22

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|Years ended
      December 31, 2010, 2009 and 2008                    

|11. | Share capital (continued)
|--- | -------------------------
|    |                          
|    | (d)                      
|    |                          
|    |                          

| |                         |  | 2010      |  |  | 2009      |  |  | 2008      | 
| | ----------------------- |  | --------- |  |  | --------- |  |  | --------- | 
| |                         |  |           |  |  |           |  |  |           | 
| | Risk-free interest rate |  | 1.6%      |  |  | 2.0%      |  |  | 3.0%      | 
| | Dividend paid           |  | 0.0%      |  |  | 0.0%      |  |  | 0.0%      | 
| | Expected life           |  | 2.1 years |  |  | 4.7 years |  |  | 4.1 years | 
| | Volatility              |  | 108.3%    |  |  | 90.7%     |  |  | 66.6%     | 

| | (e) | Warrants:                                               
| | --- | --------------------------------------------------------
| |     |                                                         
| |     | The continuity of warrants for 2010 is as
      follows:

Balance
      
      
      
      
      
      
      
      
      
      
      
      BalanceExercise
      
      
      
      
      
      December 31,
      
      
      
      
      
      
      
      
      
      
      
      December 31,Series
      
      price
      
      
      Expiry date
      
      
      2009
      
      
      Issued
      
      
      Exercised
      
      
      Expired
      
      
      2010Series L Warrants
      
      0.35
      
      
      January 22, 2010
      
      
      1,177,500
      
      
      -
      
      
      (1,177,500
      )
      
      -
      
      
      -SFPO Warrants
      
      0.90
      
      
      November 17, 2011
      
      
      8,808,750
      
      
      -
      
      
      (2,493,100
      )
      
      -
      
      
      6,315,650Finders Warrants
      
      0.35
      
      
      January 22, 2010
      
      
      70,756
      
      
      -
      
      
      (70,756
      )
      
      -
      
      
      -Agent Warrants
      
      0.90
      
      
      November 17, 2011
      
      
      963,150
      
      
      -
      
      
      (414,154
      )
      
      -
      
      
      548,99611,020,156
      
      
      -
      
      
      (4,155,510
      )
      
      -
      
      
      6,864,646


The continuity of warrants for 2009 is
  as follows:

Balance
      
      
      
      
      
      
      
      
      
      
      
      BalanceExercise
      
      
      
      
      
      December 31,
      
      
      
      
      
      
      
      
      
      
      
      December 31,Series
      
      price
      
      
      Expiry date
      
      
      2008
      
      
      Issued
      
      
      Exercised
      
      
      Expired
      
      
      2009Series L Warrants
      
      0.35
      
      
      January 22, 2010
      
      
      -
      
      
      2,562,500
      
      
      (1,385,000
      )
      
      -
      
      
      1,177,500SFPO Warrants
      
      0.90
      
      
      November 17, 2011
      
      
      -
      
      
      8,808,750
      
      
      -
      
      
      -
      
      
      8,808,750Finders Warrants
      
      0.35
      
      
      January 22, 2010
      
      
      -
      
      
      169,050
      
      
      (98,294
      )
      
      -
      
      
      70,756Agent Warrants
      
      0.90
      
      
      November 17, 2011
      
      
      -
      
      
      963,150
      
      
      -
      
      
      -
      
      
      963,150-
      
      
      12,503,450
      
      
      (1,483,294
      )
      
      -
      
      
      11,020,156


23

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|11. | Share capital (continued)
|--- | -------------------------
|    |                          
|    | (e)                      
|    |                          
|    |                          

Balance
      
      
      
      
      
      
      
      
      
      
      
      BalanceExercise
      
      
      
      
      
      December 31,
      
      
      
      
      
      
      
      
      
      
      
      December 31,Series
      
      price
      
      
      Expiry date
      
      
      2007
      
      
      Issued
      
      
      Exercised
      
      
      Expired
      
      
      2008Series K Warrants
      
      1.42
      
      
      June 1, 2008
      
      
      3,621,999
      
      
      -
      
      
      (100,500
      )
      
      (3,521,499
      )
      
      -Broker Warrants
      
      1.42
      
      
      June 1, 2008
      
      
      479,375
      
      
      -
      
      
      -
      
      
      (479,375
      )
      
      -4,101,374
      
      
      -
      
      
      (100,500
      )
      
      (4,000,874
      )
      
      -


| | (f) | Diluted earnings per share:                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                           
| |     | Diluted earnings per share is calculated based on the
      following weighted average number of shares
      outstanding:

2010
      
      
      2009
      
      
      2008Basic weighted average number of shares
        outstanding
      
      114,422,226
      
      
      90,210,438
      
      
      81,321,733Effect of dilutive securitiesStock options
      
      2,836,319
      
      
      -
      
      
      -Warrants
      
      1,674,075
      
      
      -
      
      
      -Diluted weighted
        average number of shares outstanding
      
      118,932,620
      
      
      90,210,438
      
      
      81,321,733


| |     | For the year ended December 31, 2010, there were 35,609
      (2009  nil, 2008  nil) potentially dilutive shares that have not been
      included in the diluted earnings per share calculation for the period
      presented. The exercise price of the potentially dilutive shares exceeded
      the average market value of the common shares of $1.09 for the year ended
      December 31, 2010.                                                                                                                                                                                                                 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (g) | Shareholder Rights Plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | On March 7, 2008, the Board of Directors approved the
      adoption of a Shareholder Rights Plan (the "Plan") as part of its
      procedures for dealing with any parties who may seek to acquire control of
      the Company through a take-over bid or other transaction. To implement the
      Plan, the Board of Directors of the Company authorized the issue of one
      Right in respect of each common share of the Company outstanding to
      holders of record on March 7, 2008. Until the occurrence of certain
      specific events, the Rights will trade with the common shares of the
      Company.

24

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|11. | Share capital (continued)                 
|--- | ------------------------------------------
|    |                                           
|    | (g)                                       
|    |                                           
|    |                                           
|    |                                           
|    |                                           
|    |                                           
|12. | Accumulated other comprehensive
      loss

| |                                                  |   | 2010   |   |   | 2009 |  
| | ------------------------------------------------ | - | ------ | - | - | ---- | -
| | Balance, beginning of year                       | $ | (23    | ) | $ | (38  | )
| | Foreign currency translation adjustment (note 3) |   | (3,025 | ) |   | -    |  
| | Unrealized gain (loss) on marketable securities  |   | (10    | ) |   | 15   |  
| | Balance, end of
      year                       | $ | (3,058 | ) | $ | (23  | )

25

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|13. | Capital management                                          
|--- | ------------------------------------------------------------
|    |                                                             
|    | The Companys objectives when managing capital are
      to:

- ensure there are adequate capital resources to
      safeguard the Companys ability to continue as a going concern;
- maintain adequate levels of funding to support the
      acquisition, exploration and development of mineral properties, and the
      operation of producing mines;
- maintain investor, creditor and market confidence
      to sustain future development of the business; and
- provide returns to shareholders and benefits for
      other stakeholders.

The Topia and Guanajuato mines are in
  production, but exploration activities are also performed at these properties in
  order to identify further resources. The Company plans to use funds from the
  sale of concentrates to fund operations and exploration activities.

The Company manages its capital in a
  manner that provides sufficient funding for operational activities. Annual
  capital and operating expenditure budgets, and rolling forecasts, are used to
  determine the necessary capital requirements. These budgets are approved by
  management and the Board of Directors and updated for changes in the underlying
  assumptions, economic conditions and risk characteristics of the underlying
  assets, as necessary. For the year ended December 31, 2010, the Companys
  management assessed changes in quantitative and qualitative data with respect to
  the Companys objectives, policies and processes for managing capital
  implemented in the prior year to ensure their continued appropriateness. Going
  forward, the Company will continue to focus on internally generated cash flow to
  reduce or eliminate its reliance on equity and debt financing.

As at December 31, 2010, total managed
  capital was $26,325, comprised of:

| |                                      |   | December
      31, |   |   | December
      31, |  
| | ------------------------------------ | - | ------------------ | - | - | ------------------ | -
| |                                      |   | 2010               |   |   | 2009               |  
| | Total debt (1)                       | $ | 4,739              |   | $ | 4,460              |  
| | Less: cash                           |   | 13,967             |   |   | 13,312             |  
| | Net debt (cash)                      |   | (9,228             | ) |   | (8,852             | )
| | Shareholders
      equity           |   | 35,553             |   |   | 26,856             |  
| | Adjusted capital                     | $ | 26,325             |   | $ | 18,004             |  
| | Debt to adjusted
      capital ratio |   | 0.35               |   |   | 0.49               |  

(1) Includes current and
  long term portions of capital lease obligations, promissory notes and
  convertible loan notes

The Companys capital structure is
  dependent on expected business growth and changes in the business
  environment.

26

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|13. | Capital management (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company is subject to externally imposed capital
      requirements under one of its lease financing contracts (note 19(f)),
      which expired in February 2011. The Companys subsidiary may not transfer
      or assign more than 20% of its assets to a third party or enter into a
      merger contract without prior consent or the debt becomes fully repayable.
      Neither the Company nor any of its subsidiaries are subject to any other
      externally imposed capital requirements such as loan covenants or capital
      ratios. During the year ended December 31, 2010, the Company met all
      externally imposed capital and debt repayment requirements.                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|14. | Derivative financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | On July 22, 2010, the Company entered into a zinc put and
      call option contract (the Zinc Contract) for 500 metric tonnes with a
      contract period from July 2010 to December 2010. The floor and cap price
      per metric tonne is US$1,800 and US$1,975, respectively. Under the terms
      of the Zinc Contract, the Company will receive the prevailing market zinc
      price while within the price range. Should the market price be outside the
      price range, the Company will receive a minimum of the floor price or a
      maximum of the cap price if the market is below the floor price and above
      the cap price, respectively. Also under the terms of the Zinc Contract,
      the Company pledged $104 (US$100) as cash collateral. Accordingly, this
      amount was classified as restricted cash. As at December 31, 2010, the
      cash collateral from the Zinc Contract is $50 (US$50) and the liability
      under the Zinc Contract is $30. The Zinc Contract settled in early January
      2011.              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | On November 3, 2010, the Company entered into a lead put
      and call option contract (the Lead Contract) for a total of 500 metric
      tonnes which are settled equally over ten monthly contract periods from
      December 2010 to September 2011. The floor and cap price per metric tonne
      is US$1,800 and US$3,100, respectively. Under the terms of the Lead
      Contract, the Company will receive the prevailing market lead price while
      within the price range. Should the market price be outside the price
      range, the Company will receive a minimum of the floor price or a maximum
      of the cap price if the market is below the floor price and above the cap
      price, respectively. Also under the terms of the Lead Contract, the
      Company pledged $101 (US$100) as cash collateral. Accordingly, this amount
      was also classified as restricted cash. As at December 31, 2010, the cash
      collateral from the Lead Contract is $101 (US$100) and the liability under
      the Lead Contract is $23.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The Company determined that these contracts are
      derivative financial instruments that should be measured at fair value at
      each reporting period with any gains or losses recognized in net income in
      the period in which they arise. During the year ended December 31, 2010,
      the Company recorded a mark-to-market loss of $148 (2009  nil, 2008 
      nil) of which $125 (paid or accrued) was realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|15. | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | The carrying values of cash and cash equivalents, amounts
      receivable, and accounts payable and accrued liabilities approximate their
      fair values due to the short-term nature of the items. The fair values of
      marketable securities are based on current bid prices at December 31,
      2010. The fair values of the capital lease obligations to third parties
      approximate their amortized costs as the interest rates reflect estimated
      market rates at December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | In evaluating fair value information, considerable
      judgment is required to interpret the market data used to develop the
      estimates. The use of different market assumptions and valuation
      techniques may have a material effect on the estimated fair value amounts.
      Accordingly, the estimates of fair value presented herein may not be
      indicative of the amounts that could be realized in a current market
      exchange.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

27

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|15. | Fair value of financial instruments
      (continued)                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                             
|    | Canadian GAAP requires disclosures about the inputs to
      fair value measurements, including their classification within a hierarchy
      that prioritizes the inputs to fair value measurement. The three levels of
      the fair value hierarchy are:

- Level 1  Unadjusted quoted prices in active
      markets for identical assets or liabilities;
- Level 2  Inputs other than quoted prices that are
      observable for the asset or liability either directly or indirectly; and
- Level 3  Inputs that are not based on observable
      market data

The following tables illustrate the
  classification of the Companys financial instruments within the fair value
  hierarchy as at December 31, 2010 and 2009:

Financial Assets:

| | Financial assets at fair value as at December 31, 2010 |   |               |  |   |               |  |   |               |  |  
| | ------------------------------------------------------ | - | ------------- |  | - | ------------- |  | - | ------------- |  | -
| |                                                        |   | Level
      1 |  |   | Level
      2 |  |   | Level
      3 |  |  
| |                                                        |   |               |  |   |               |  |   |               |  |  
| | Cash and cash equivalents                              | $ | 13,967        |  | $ | -             |  | $ | -             |  | $
| | Marketable
      securities                            |   | 200           |  |   | -             |  |   | -             |  |  
| |                                                        |   |               |  |   |               |  |   |               |  |  
| |                                                        | $ | 14,167        |  | $ | -             |  | $ | -             |  | $

| | Financial assets at fair value as at December 31, 2009 |   |               |  |   |               |  |   |               |  |  
| | ------------------------------------------------------ | - | ------------- |  | - | ------------- |  | - | ------------- |  | -
| |                                                        |   | Level
      1 |  |   | Level
      2 |  |   | Level
      3 |  |  
| |                                                        |   |               |  |   |               |  |   |               |  |  
| | Cash and cash equivalents                              | $ | 13,312        |  | $ | -             |  | $ | -             |  | $
| | Marketable
      securities                            |   | 23            |  |   | -             |  |   | -             |  |  
| |                                                        |   |               |  |   |               |  |   |               |  |  
| |                                                        | $ | 13,335        |  | $ | -             |  | $ | -             |  | $

Financial Liabilities:

| | Financial liabilities at fair value as at December 31, 2010 |   |               |  |   |               |  |   |               |  |  
| | ----------------------------------------------------------- | - | ------------- |  | - | ------------- |  | - | ------------- |  | -
| |                                                             |   | Level
      1 |  |   | Level
      2 |  |   | Level
      3 |  |  
| | Derivative instrument liability                             | $ | -             |  | $ | 53            |  | $ | -             |  | $
| |                                                             | $ | -             |  | $ | 53            |  | $ | -             |  | $

There were no financial liabilities as
  at December 31, 2009.

During the year ended December 31,
  2010, a mark-to-market loss of $10 (2009  $15 gain) for marketable securities
  designated as available-for-sale has been recognized in other comprehensive
  loss. Available-for-sale financial assets are denominated in Canadian dollars.
  There were no disposals or impairment provisions during the year.

28

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|16. | Financial risk exposure and risk
      management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Company is exposed in varying degrees to a number of
      risks arising from financial instruments. Managements close involvement
      in the operations allows for the identification of risks and variances
      from expectations. The Company does not use financial instruments to
      mitigate these risks and has no designated hedging transactions. The
      Company has no collateral on its debts except for the equipment in note
      9(a). The Board approves and monitors the risk management processes. The
      Boards main objectives for managing risks are to ensure liquidity, the
      fulfillment of obligations, the continuation of the Companys exploration
      program, and limited exposure to credit and market risks. There were no
      changes to the objectives or the process from the prior year.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The types of risk exposure and the way in which such
      exposures are managed are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

29

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|16. | Financial risk exposure and risk management
      (continued)
|--- | -------------------------------------------------------------
|    |                                                              
|    | (c)                                                          
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    | (d)                                                          
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              
|    |                                                              

| |                               |  | December
      31, |  |  | December
      31, | 
| | ----------------------------- |  | ------------------ |  |  | ------------------ | 
| |                               |  | 2010               |  |  | 2009               | 
| |                               |  |                    |  |  |                    | 
| | MXN Peso to CDN Dollar        |  | 0.081              |  |  | 0.080              | 
| | US Dollar to CDN
      Dollar |  | 0.995              |  |  | 1.051              | 

The Company has not entered into any
  agreements or purchased any foreign currency hedging arrangements to hedge
  possible currency risks at this time. Management believes the foreign exchange
  risk derived from currency conversions for the Mexican operations is not
  significant and therefore does not hedge its foreign exchange risk.
  Additionally, the US dollar trade accounts receivable are short term in nature
  and foreign currency risk exposure is minimal.

30

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|**16.** | Financial risk exposure and risk management
      (continued)
|------- | -------------------------------------------------------------

(ii) Interest rate risk

The Companys policy is to invest cash
  in high interest savings accounts and guaranteed investment certificates at
  fixed or floating rates of interest in order to maintain liquidity, while
  achieving a satisfactory return for shareholders. Fluctuations in interest rates
  impact the value of cash and cash equivalents. The Company manages risk by
  monitoring changes in interest rates in comparison to prevailing market rates.
  As at December 31, 2010, the Company held $12,957 in high interest savings
  accounts and guaranteed investment certificates.

With respect to financial liabilities,
  the convertible loan notes and promissory notes carry fixed interest rates of
  8.0%, and 6.0% per annum, respectively, and three capital leases carry fixed
  interest rates of 10.5% to 10.74% per annum. As such, the Company is not subject
  to fluctuations in interest rates.

(iii) Commodity price risk

The value of the Companys mineral
  resource properties depends on the price of silver, gold, lead and zinc and the
  outlook for these minerals. At December 31, 2010, market prices were US$30.63/oz
  for silver, US$1,410/oz for gold, US$2,586/tonne for lead, and US$2,432/tonne
  for zinc.

Silver and gold, as well as lead and
  zinc prices have historically fluctuated widely and are affected by numerous
  factors outside of the Companys control, including, but not limited to, market
  fluctuations, government regulations relating to prices, taxes, royalties,
  allowable production, imports, exports, supply, industrial and retail demand,
  forward sales by producers and speculators, levels of worldwide production,
  short-term changes in supply and demand because of speculative hedging
  activities, and certain other factors related specifically to silver and gold.
  The value of trade receivables depends on changes in metal prices over the
  quotation period.

The profitability of the Companys
  operations is highly correlated to the market price of silver and gold. If metal
  prices decline for a prolonged period below the cost of production of the
  Companys Topia and Guanajuato mines, it may not be economically feasible to
  continue production.

During the year, the Company entered
  into derivative financial instruments to mitigate certain fluctuations in lead
  and zinc prices (note 14).

31

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|**16.** | Financial risk exposure and risk management
      (continued)
|------- | -------------------------------------------------------------

(iv) Sensitivity analysis

Based on historic trends over the last
  twelve months, volatilities in the above-noted market risks, and managements
  knowledge and experience in the financial markets, the Company believes the
  following movements are reasonably possible over a twelve-month period.

- A parallel shift of +1%/-1% from the prevailing
      market interest rates on deposits as of December 31, 2010.
- Proportional foreign exchange movement of -10%
      (depreciation of CAD) and +10% (appreciation of CAD) against the USD, from the
      December 31, 2010 CAD to USD exchange rate of 1.005. Proportional foreign
      exchange movement of -10% (depreciation of CAD) and +10% (appreciation of CAD)
      against the Mexican peso, from the December 31, 2010 CAD to Mexican peso
      exchange rate of 12.410.
- A parallel shift of +10%/-10% from the prevailing
      commodity prices of US$30.63/oz for silver, US$1,410/oz for gold,
      US$2,586/tonne for lead, and US$2,432/tonne for zinc as of December 31, 2010.

If these movements were to occur, the
  impact on the consolidated net income (loss) for each category of financial
  instrument held at the balance sheet date is presented below in thousands of
  dollars.

Interest Rate Risk
      
      
      Currency Rate Risk
      
      
      Commodity Price Risk-1%
      
      
      +1%
      
      
      -10%
      
      
      +10%
      
      
      -10%
      
      
      +10%CarryingAmount
      
      
      Income
      
      
      Income
      
      
      Income
      
      
      Income
      
      
      Income
      
      
      IncomeFinancial assetsCash and cash equivalentsCAD
      
      11,436
      
      
      (114
      )
      
      114
      
      
      -
      
      
      -
      
      
      -
      
      
      -USD
      
      2,336
      
      
      (23
      )
      
      23
      
      
      260
      
      
      (212
      )
      
      -
      
      
      -Pesos
      
      195
      
      
      (2
      )
      
      2
      
      
      22
      
      
      (18
      )
      
      -
      
      
      -Amounts receivableUSD
      
      5,159
      
      
      -
      
      
      -
      
      
      573
      
      
      (469
      )
      
      (228
      )
      
      228Pesos
      
      4,221
      
      
      -
      
      
      -
      
      
      469
      
      
      (384
      )
      
      -
      
      
      -Financial liabilitiesAccounts payable and accrued liabilitiesUSD
      
      158
      
      
      -
      
      
      -
      
      
      (18
      )
      
      14
      
      
      -
      
      
      -Pesos
      
      3,814
      
      
      -
      
      
      -
      
      
      (424
      )
      
      347
      
      
      -
      
      
      -Capital lease obligationUSD
      
      497
      
      
      -
      
      
      -
      
      
      (55
      )
      
      45
      
      
      -
      
      
      -Total Increase (Decrease)
      
      
      
      
      (139
      )
      
      139
      
      
      827
      
      
      (677
      )
      
      (228
      )
      
      228


32

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|17. | Income taxes                                   
|--- | -----------------------------------------------
|    |                                                
|    | Recovery of (provision for) income
      taxes:

| |                           |   | 2010  |   |   | 2009 |   |   | 2008  | 
| | ------------------------- | - | ----- | - | - | ---- | - | - | ----- | 
| | Current income taxes      | $ | (113  | ) | $ | (65  | ) | $ | 132   | 
| | Future income
      taxes |   | 1,850 |   |   | (603 | ) |   | 1,044 | 
| |                           | $ | 1,737 |   | $ | (668 | ) | $ | 1,176 | 

Income tax recovery (expense) differs
  from the amount which would result from applying the statutory Canadian tax
  rates for the following reasons:

2010
      
      
      2009
      
      
      2008Net income (loss) before tax
      $
      3,233
      
      $
      (199
      )
      $
      (14,937
      )Canadian income tax rate
      
      28.50%
      
      
      30.00%
      
      
      31.00%Income tax recovery (expense) expected
      
      (921
      )
      
      60
      
      
      4,631Permanent differences
      
      (828
      )
      
      (527
      )
      
      (787
      )Difference in tax rates
      
      (67
      )
      
      343
      
      
      (1,576
      )Reversal of Mexican flat tax liability
      
      1,708
      
      
      -
      
      
      -Benefit of tax
        attributes (not recognized) recognized and other items
      
      1,845
      
      
      (544
      )
      
      (1,092
      )$
      1,737
      
      $
      (668
      )
      $
      1,176


The significant components of the
  Companys future income tax assets are as follows:

| |                                                              |   | 2010   |   |   | 2009   |  
| | ------------------------------------------------------------ | - | ------ | - | - | ------ | -
| |                                                              |   |        |   |   |        |  
| | Future income tax assets:                                    |   |        |   |   |        |  
| | Mineral property, plant
      and equipment and related debt | $ | 847    |   | $ | 847    |  
| | Office
      equipment, financing and other                  |   | 420    |   |   | 450    |  
| | Capital losses                                               |   | 212    |   |   | 243    |  
| | Non-capital losses                                           |   | 9,451  |   |   | 4,904  |  
| | Total future income tax
      assets                         |   | 10,930 |   |   | 6,444  |  
| |                                                              |   |        |   |   |        |  
| | Valuation allowance                                          |   | (9,013 | ) |   | (6,444 | )
| | Future
      income tax assets, net of allowance             |   | 1,917  |   |   | -      |  
| |                                                              |   |        |   |   |        |  
| | Future income tax liabilities:                               |   |        |   |   |        |  
| | Mineral properties                                           |   | (1,917 | ) |   | (1,818 | )
| |                                                              |   |        |   |   |        |  
| | Current portion                                              |   | -      |   |   | 506    |  
| |                                                              |   |        |   |   |        |  
| | Future income tax
      liability, net                       | $ | -      |   | $ | (1,312 | )

At December 31, 2010, the Company had
  operating losses of $34,134 (2009 - $20,191; 2008 - $17,301) and capital losses
  of $1,683 (2009  $1,935; 2008 - $1,935). The operating loss at December 31,
  2010 includes $18,610 (2009 - $19,027; 2008 - $15,269) in Canada and $15,524
  (2009  $1,163; 2008  $2,032) in Mexico. The capital losses are without expiry,
  and the operating losses expire at various dates to 2030.

33

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|17. | Income taxes (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | A new tax in Mexico, referred to as a Flat Tax, was
      enacted in 2007 and came into effect on January 1, 2008. The Flat Tax is
      an alternative minimum tax. Taxpayers are required to pay the higher of
      the amount due under Income Tax or Flat Tax. The tax basis of fixed assets
      is significantly reduced and tax losses originating from prior years are
      not deductible under Flat Tax. For the year ended December 31, 2009, three
      of the Companys subsidiaries were subject to Flat Tax. During the year
      ended December 31, 2010, all three of the Companys subsidiaries became
      taxable under the Income Tax regime.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|18. | Related party transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Company entered into the following transactions with
      related parties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

2010
      
      
      2009
      
      
      2008Consulting fees paid or accrued to
        companies controlled by directors of the Company
      $
      702
      
      $
      648
      
      $
      596Consulting fees paid or accrued to
        companies controlled by officers of the Company
      
      215
      
      
      171
      
      
      266Cost recoveries received or accrued from a
        company with a common director of the Company
      
      51
      
      
      80
      
      
      82Office and administration fees paid or accrued to a company
        controlled by a director of the Company
      
      86
      
      
      69
      
      
      36


- As at December 31, 2010, $167 (2009  $110) was due
      to companies controlled by officers and directors of the Company and was
      included in accounts payable.
- Amounts due from companies with a common director
      were $75 (2009  $147) and were included in amounts receivable.
- On April 12, 2010, the Company received 1,117,866
      common shares of Altair at a deemed issue price of $0.15 per share in full
      payment of Altairs indebtedness to the Company as at January 31, 2011. Altair
      is a company with a common director of the Company.

The above transactions occurred in the
  normal course of operations and are measured at the exchange amount which is the
  amount of consideration established and agreed to by the parties.

34

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|19. | Commitments and contingencies
|--- | -----------------------------
|    |                              
|    | (a)                          
|    |                              
|    | (b)                          
|    |                              
|    | (c)                          
|    |                              
|    | (d)                          
|    |                              
|    | (e)                          
|    |                              
|    | (f)                          

December
        31,2010Years ending December 31:2011
      $
      4012012
      
      132Total minimum lease payments
      
      533Less: amount representing interest
      
      (36
      )Balance of capital lease obligation
      
      497Current portion
      
      369$
      128


| |     | Included in mineral properties, plant and equipment at
      December 31, 2010, are leased assets with a cost of $1,997 and accumulated
      depreciation of $704. Interest on the capital leases of $82 (2009 - $85)
      is included in interest expense.                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                       
| | (g) | On February 17, 2009, the Company committed to
      implementing an environmental program as a result of participating in a
      voluntary audit to ensure compliance with regulations governing the
      protection of the environment in Mexico. The Company expects to make
      expenditures of $361 in 2011 as a result of the
      program.

35

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|20. | Segmented information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | The Companys operations are all within the mining
      sector, consisting of two operating segments both of which are located in
      Mexico and one corporate segment located in Canada. Due to diversities in
      geography and production processes, the Company operates the Guanajuato
      and Topia mines separately, with separate budgeting and evaluation of
      results of operations and exploration activities. The Corporate segment
      provides financial, human resources and technical support to the two
      mining operations. The Guanajuato operations produce silver and gold, and
      Topia operations produce silver, gold, lead and
      zinc.

Year ended December 31, 2010Mexico
      
      
      CanadaGuanajuato
      
      
      Topia
      
      
      Other
      
      
      Corporate
      
      
      Total
      
      
      Corporate
      
      
      TotalMineral sales
      $
      27,983
      
      $
      14,223
      
      $
      -
      
      $
      -
      
      $
      42,206
      
      $
      -
      
      $
      42,206Cost of sales
      
      13,116
      
      
      8,045
      
      
      -
      
      
      -
      
      
      21,161
      
      
      -
      
      
      21,161Amortization and depletion of       mineral
        properties, plant and equipment
      
      1,993
      
      
      369
      
      
      -
      
      
      -
      
      
      2,362
      
      
      52
      
      
      2,414Mineral property exploration expenditures
      
      4,704
      
      
      2,323
      
      
      83
      
      
      -
      
      
      7,110
      
      
      -
      
      
      7,110General and administrative
      
      -
      
      
      -
      
      
      -
      
      
      1,169
      
      
      1,169
      
      
      4,689
      
      
      5,858Stock-based compensation
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      869
      
      
      869Income (loss) before income taxes
      
      8,020
      
      
      3,431
      
      
      (83
      )
      
      (1,873
      )
      
      9,495
      
      
      (6,262
      )
      
      3,233Income (loss) for the year
      
      8,020
      
      
      3,431
      
      
      (83
      )
      
      (136
      )
      
      11,232
      
      
      (6,262
      )
      
      4,970Capital expenditures
      
      6,429
      
      
      2,711
      
      
      -
      
      
      -
      
      
      9,140
      
      
      37
      
      
      9,177Total assets
      $
      15,251
      
      $
      9,824
      
      $
      -
      
      $
      5,638
      
      $
      30,713
      
      $
      14,872
      
      $
      45,585


Year ended December 31, 2009Mexico
      
      
      CanadaGuanajuato
      
      
      Topia
      
      
      Other
      
      
      Corporate
      
      
      Total
      
      
      Corporate
      
      
      TotalMineral sales
      $
      22,297
      
      $
      9,435
      
      $
      -
      
      $
      -
      
      $
      31,732
      
      $
      -
      
      $
      31,732Cost of sales
      
      11,101
      
      
      5,667
      
      
      -
      
      
      -
      
      
      16,768
      
      
      -
      
      
      16,768Amortization and depletion of       mineral
        properties, plant and equipment
      
      2,654
      
      
      840
      
      
      -
      
      
      -
      
      
      3,494
      
      
      83
      
      
      3,577Mineral property exploration expenditures
      
      384
      
      
      1,125
      
      
      73
      
      
      -
      
      
      1,582
      
      
      -
      
      
      1,582General and administrative
      
      -
      
      
      -
      
      
      -
      
      
      1,279
      
      
      1,279
      
      
      4,524
      
      
      5,803Stock-based compensation
      
      383
      
      
      173
      
      
      -
      
      
      169
      
      
      725
      
      
      1,653
      
      
      2,378Income (loss) before income taxes
      
      7,595
      
      
      1,532
      
      
      (73
      )
      
      (1,795
      )
      
      7,259
      
      
      (7,458
      )
      
      (199
      )Income (loss) for the year
      
      7,595
      
      
      1,532
      
      
      (73
      )
      
      (2,463
      )
      
      6,591
      
      
      (7,458
      )
      
      (867
      )Capital expenditures
      
      1,721
      
      
      681
      
      
      -
      
      
      -
      
      
      2,402
      
      
      18
      
      
      2,420Total assets
      $
      13,740
      
      $
      6,708
      
      $
      69
      
      $
      2,570
      
      $
      23,087
      
      $
      14,087
      
      $
      37,174


36

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|**20.** | Segmented information (continued)
|------- | ---------------------------------

Year ended December 31, 2008Mexico
      
      
      CanadaGuanajuato
      
      
      Topia
      
      
      Other
      
      
      Corporate
      
      
      Total
      
      
      Corporate
      
      
      TotalMineral sales
      $
      15,150
      
      $
      7,295
      
      $
      -
      
      $
      -
      
      $
      22,445
      
      $
      -
      
      $
      22,445Cost of sales
      
      12,030
      
      
      6,114
      
      
      -
      
      
      -
      
      
      18,144
      
      
      -
      
      
      18,144Amortization and depletion of       mineral
        properties, plant and equipment
      
      2,580
      
      
      1,603
      
      
      -
      
      
      -
      
      
      4,183
      
      
      102
      
      
      4,285Mineral property exploration expenditures
      
      2,033
      
      
      2,216
      
      
      2,079
      
      
      -
      
      
      6,328
      
      
      -
      
      
      6,328General and administrative
      
      -
      
      
      -
      
      
      -
      
      
      2,093
      
      
      2,093
      
      
      3,872
      
      
      5,965Stock-based compensation
      
      540
      
      
      171
      
      
      
      
      
      352
      
      
      1,063
      
      
      545
      
      
      1,608Income (loss) before income taxes
      
      (2,172
      )
      
      (2,952
      )
      
      (2,079
      )
      
      (2,143
      )
      
      (9,346
      )
      
      (5,591
      )
      
      (14,937
      )Income (loss) for the year
      
      (2,172
      )
      
      (2,952
      )
      
      (2,079
      )
      
      (967
      )
      
      (8,170
      )
      
      (5,591
      )
      
      (13,761
      )Capital expenditures
      
      1,869
      
      
      754
      
      
      -
      
      
      -
      
      
      2,623
      
      
      90
      
      
      2,713Total assets
      $
      11,577
      
      $
      7,658
      
      $
      69
      
      $
      2,585
      
      $
      21,889
      
      $
      422
      
      $
      22,311


Product Revenue:

| |                                    |   | 2010   |   |   | 2009   |   |   | 2008   |  
| | ---------------------------------- | - | ------ | - | - | ------ | - | - | ------ | -
| | Silver                             | $ | 31,665 |   | $ | 23,395 |   | $ | 17,315 |  
| | Gold                               |   | 8,366  |   |   | 6,935  |   |   | 5,082  |  
| | Lead                               |   | 2,231  |   |   | 1,545  |   |   | 1,654  |  
| | Zinc                               |   | 1,612  |   |   | 911    |   |   | 573    |  
| | Ore processing revenues            |   | 630    |   |   | 742    |   |   | 707    |  
| | Smelter and
      refining charges |   | (2,298 | ) |   | (1,796 | ) |   | (2,886 | )
| |                                    |   |        |   |   |        |   |   |        |  
| |                                    | $ | 42,206 |   | $ | 31,732 |   | $ | 22,445 |  

For the year ended December 31, 2010,
  the Company had two customers that accounted for 99% of total revenues. The
  trade accounts receivable balance of $5,151 at December 31, 2010 relates to
  these two customers (note 5). The Guanajuato segment had two customers, one of
  which accounted for 45% of total revenue and the other customer, also Topias
  customer, accounted for 54% of total revenue.

For the year ended December 31, 2009,
  the Company had two customers that accounted for 95% of total revenues. The
  trade accounts receivable balance of $3,472 at December 31, 2009 relates to
  these two customers (note 5). The Guanajuato and Topia segments each had one
  customer account for 68% and 27% of total revenue, respectively.

For the year ended December 31, 2008,
  the Company had two customers that accounted for 97% of total revenues. One
  customer accounted for 85% of total revenues, of which 56% was from the
  Guanajuato segment and 29% from the Topia segment. The other customer accounted
  for 12% of total revenues, which was all related to the Guanajuato segment.

37

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|21. | Subsequent events                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                     
|    | a)                                                                                                                                                  
|    |                                                                                                                                                     
|    | b)                                                                                                                                                  
|    |                                                                                                                                                     
|22. | Reconciliation between Canadian and United States
      generally accepted accounting principles and United States accounting
      pronouncements  
|    |                                                                                                                                                     
|    | The effect of the measurement differences between
      Canadian GAAP and US GAAP on the consolidated balance sheets is summarized
      as follows:

December 31, 2010
      
      
      December 31, 2009Canadian
      
      
      US
      
      
      Canadian
      
      
      USGAAP
      
      
      GAAP
      
      
      GAAP
      
      
      GAAPConvertible note payable (note
        22(a)(iv))
      
      3,792
      
      
      4,050
      
      
      3,356
      
      
      4,050Share capital (note 22(a)(iii)and note
        22(a)(vii))
      
      83,470
      
      
      87,185
      
      
      75,910
      
      
      79,626Contributed surplus (note 22(a)(ii) and note 22(a)(vii))
      
      9,470
      
      
      11,981
      
      
      10,268
      
      
      12,778Equity component of convertible note (note
        22(a)(iv))
      
      1,563
      
      
      -
      
      
      1,563
      
      
      -Deficit
      
      (55,892
      )
      
      (60,046
      )
      
      (60,862
      )
      
      (65,735
      )


Share capital and contributed surplus:

| |                                                                              |   | 2010   |  |   | 2009   | 
| | ---------------------------------------------------------------------------- | - | ------ |  | - | ------ | 
| |                                                                              |   |        |  |   |        | 
| | Share capital and contributed surplus,
      under Canadian GAAP             | $ | 92,940 |  | $ | 86,178 | 
| | Adjustment for stock-based compensation for employees (note
      22(a)(ii)) |   | 15     |  |   | 15     | 
| | Reversal of recapitalization of deficit (note
      22(a)(iii))              |   | 6,211  |  |   | 6,211  | 
| |                                                                              |   |        |  |   |        | 
| | Share capital and contributed surplus, under US GAAP                         | $ | 99,166 |  | $ | 92,404 | 

38

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|22. | Reconciliation between Canadian and United
      States generally accepted accounting principles and United States
        accounting pronouncements (continued)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Deficit:

2010
      
      
      2009Deficit, under Canadian GAAP
      $
      (55,892
      )
      $
      (60,862
      )Adjustment for stock-based compensation for employees (note
        22(a)(ii))
      
      (15
      )
      
      (15
      )Reversal of recapitalization of deficit
        (note 22(a)(iii))
      
      (6,211
      )
      
      (6,211
      )Interest accreted on convertible loan note (note
        22(a)(iv))
      
      2,214
      
      
      1,778Reversal of incremental fair value of
        liability component due to early conversion of convertible loan note (note
        (9)(b)(ii))
      
      -
      
      
      51Reversal of premium of the equity component upon early
        conversion of the convertible loan note (note (9)(b)(ii))
      
      -
      
      
      1,607Effect of induced early conversion of
        convertible loan note, under US GAAP (note 22(a)(iv))
      
      -
      
      
      (1,658
      )Amortization of
        option payments (note 22(a)(v))
      
      (142
      )
      
      (425
      )Deficit, under US
        GAAP
      $
      (60,046
      )
      $
      (65,735
      )


Income (loss) for the year and earnings
  (loss) per share:

2010
      
      
      2009
      
      
      2008Income (loss) for the year, under Canadian
        GAAP
      $
      4,970
      
      $
      (867
      )
      $
      (13,761
      )Reversal of incremental fair value of
        liability component due to early conversion of convertible loan
        note (note (9)(b)(ii))
      
      -
      
      
      51
      
      
      -Effect of induced early conversion of
        convertible loan note, under US GAAP (note 22(a)(iv))
      
      -
      
      
      (1,658
      )
      
      -Interest accreted on convertible loan note (note
        22(a)(iv))
      
      436
      
      
      628
      
      
      623Amortization of option payments (note 22(a)(v))
      
      (142
      )
      
      (425
      )
      
      -Income (loss) for the year, under US GAAP
      $
      5,264
      
      $
      (2,271
      )
      $
      (13,138
      )Earnings (loss) per shareBasic
      $
      0.05
      
      $
      (0.03
      )
      $
      (0.16
      )Diluted
      $
      0.04
      
      $
      (0.03
      )
      $
      (0.16
      )Weighted average number of common sharesBasic (note 11(f))
      
      114,422,226
      
      
      90,210,438
      
      
      81,321,733Diluted (note 11(f))
      
      118,932,620
      
      
      90,210,438
      
      
      81,321,733


39

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|22. | Reconciliation between Canadian and United States
      generally accepted accounting principles and United States accounting
      pronouncements (continued)
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                               
|    | (a)                                                                                                                                                           
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               
|    |                                                                                                                                                               

40

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|22. | Reconciliation between Canadian and United
      States generally accepted accounting principles and United States
        accounting pronouncements (continued)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Elimination of deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | During the year ended December 31, 1999, the Company
      reduced its paid-up capital by $6,211 to eliminate the deficit at March
      31, 1999. In order to effect these reductions, it was not necessary to
      revalue the assets of the Company. As a consequence, all conditions under
      the US GAAP quasi- reorganization rules were not met and the
      recapitalization of the deficit would not be recorded.                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (iv)  | Convertible loan notes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | Under Canadian GAAP, the proceeds of the financing
      allocated to the estimated fair value of the conversion feature of the
      debt are recorded as an equity component of the debt (note 9(b)). Under US
      GAAP, a value is assigned to the conversion feature only if the effective
      conversion rate is less than the market price of the common stock at the
      date of issuance, which it was not. Accordingly, no value would be
      assigned under US GAAP to the conversion feature on the convertible notes
      issued in 2006 and 2007.                                                                                              
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | Applying US GAAP, the convertible notes at December 31,
      2010 would be recorded as a liability at face value of $4,050 and no value
      would be assigned to the equity component of the convertible notes. In
      addition, accretion on the calculated debt discounts on the convertible
      notes under Canadian GAAP of $435 for the year ended December 31, 2010
      (2009 - $627, 2008 - $623) would not have been recorded under US GAAP,
      reducing interest expense by an equivalent amount.                                                                                                                                               
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | During the year ended
      December 31, 2009, the Company induced the early conversion of the $2,002
      convertible loan note. In accordance with Canadian GAAP, the Company
      accounted for the early conversion as described in (note 9(b)(ii)).
      Under US GAAP, the Company recognized an expense of $1,658 which is the
      fair value of the common shares transferred in excess of the fair value of
      the common shares issuable pursuant to the original conversion
      terms.                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (v)   | Mineral properties, plant, and
      equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | Production facilities and mineral property costs are
      currently amortized over the estimated remaining life of mine of 3 years
      for Guanajuato and 10 years for Topia. Under US GAAP, the Company expects
      to use the units-of-production method based on reserves as defined under
      SEC Industry Guide 7 once such reserve amounts are determinable.                                                                                                                                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |       | Under Canadian GAAP, periodic option payments related to
      mineral properties are expensed prior to commercial feasibility of mining
      operations being established. Under US GAAP, periodic option payments are
      capitalized when such payments are associated with the acquisition of
      mineral rights and amortized over their respective option term. As there
      were no option payments made to the Mapimi project (note 8(b)) during the
      year, a measurement difference of $142 resulted from the amortization of
      prior years option payments. There is no material measurement difference
      for the comparative periods.

41

---

|GREAT PANTHER SILVER LIMITED                                          
|----------------------------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS                        
|(Expressed in thousands of Canadian Dollars, except shares
      data)
|                                                                      
|Years ended
      December 31, 2010, 2009 and 2008                    

|22. | Reconciliation between Canadian and United
      States generally accepted accounting principles and United States
        accounting pronouncements (continued)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (vi)  | Statement of cash flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       | In the statement of cash flows, the presentation of the
      cash flows from operating activities includes an intermediate total which
      is not permitted under US GAAP, ASC 230, Statement of Cash
        Flows.                                                                                                                                                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (vii) | Share capital and contributed surplus                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       | Under Canadian GAAP, the Company allocates the net
      proceeds from equity financings containing common shares and share
      purchase warrants to share capital (note 11(b)). Under US GAAP, the net
      proceeds from the issuance of units are allocated between common shares
      and share purchase warrants contained in such units, based on their
      relative fair values. Accordingly, the amount of $2,496, being the portion
      of the net proceeds allocated to these warrants, is recorded to
      contributed surplus under US GAAP.

42

---