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

FORM 20-F

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

OR

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

For the fiscal year ended December 31, 2008

OR

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

For the transition period from ____________ to ____________

Commission file number **333-78481**

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 Applicable

Title 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 81,654,521 common shares, without par value,
issued and outstanding as of December 31, 2008.

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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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

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

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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.

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.

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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", and
"Great Panther" mean Great Panther Resources Limited, and our subsidiaries,
Minera Mexicana el Rosario, S.A. de C.V., Metalicos de Durango, S.A. de C.V.,
Minera de Villa Seca, S.A. de C.V., Exploraciones Mineras el Rosario S.A. de
C.V. and/or New Age Investments Inc., 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.

**ITEM
2**           ****Offer Statistics and Expected Timetable**

Not applicable.

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**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)

Canadian GAAP
      2008
      2007 (restated)1
      2006 (restated)1
      2005
      2004Sales or Operating Revenue
      22,445,438
      15,523,094
      6,333,034
      -
      -Loss
      for the year
      (14,285,852)
      (19,700,861)
      (15,084,437)
      (5,231,685)
      (2,893,657)Loss per Common Share  basic and diluted
      (0.18)
      (0.27)
      (0.25)
      (0.22)
      (0.22)Total Assets
      21,379,188
      31,053,110
      32,132,259
      19,218,970
      3,788,331Capital Stock
      57,865,462
      56,988,447
      46,393,145
      21,536,440
      7,068,595Number of Common Shares (adjusted to reflect
      consolidation of common shares)
      81,654,521
      80,744,352
      69,797,348
      47,349,431
      15,818,677Long-Term Debt2
      5,544,976
      4,117,236
      2,450,740
      5,587,217
      -Cash Dividends per Common Share
      Nil
      Nil
      Nil
      Nil
      Nil


|1 | Revenue and cost of sales have been restated to include
      treatment and processing charges as a reduction of revenue instead of an
      expense included in cost of sales  see Restatementin Item
    5.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                 
|2 | 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)

United States GAAP
    2008
    2007
      (restated)1
    2006
      (restated)1
    2005
    2004Sales or Operating Revenue
    22,445,438
    15,523,094
    6,333,034
    -
    -Loss
      for the year
    (13,662,773)
    (19,323,049)
    (14,934,638)
    (5,231,685)
    (2,893,657)Loss per Common Share  basic and diluted
    (0.17)
    (0.27)
    (0.25)
    (0.22)
    (0.22)Total Assets
    21,379,188
    31,053,110
    32,132,259
    19,218,970
    3,789,696Capital Stock
    64,076,667
    63,199,652
    52,604,350
    27,747,645
    13,279,800Number of Common Shares (adjusted to reflect
      consolidation of common shares)
    81,654,521
    80,744,352
    69,797,348
    47,349,431
    15,818,677Long-Term Debt2
    6,963,286
    6,158,625
    3,306,941
    5,587,217
    -Cash Dividends per Common Share
    Nil
    Nil
    Nil
    Nil
    Nil


|1 | Revenue and cost of sales have been restated to include
      treatment and processing charges as a reduction of revenue instead of an
      expense included in cost of sales  see Restatementin Item
    5.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                 
|2 | Excludes asset retirement obligations and future income
      tax liability.                                                                                                                                    

Disclosure of Exchange Rate History

On March 18, 2009, 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 $1.2715.

For the past five fiscal years ended December 31, 2008 the
average exchange rates were in effect, and for each of the previous six months,
the 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/HighDecember 31, 2004
    $1.3017
    not applicableDecember 31, 2005
    $1.2115
    not applicableDecember 31, 2006
    $1.1340
    not applicableDecember 31, 2007
    $1.0734
    not applicableDecember 31, 2008
    $1.0660
    not applicableSeptember 30, 2008
    not applicable
    $1.0338/$1.0797October 31, 2008
    not applicable
    $1.0607/$1.2942November 30, 2008
    not applicable
    $1.1502/$1.2850


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Year/Month End
    Average
    Low/HighDecember 31, 2008
    not applicable
    $1.1962/$1.2971January 31, 2009
    not applicable
    $1.1822/$1.2749February 29, 2009
    not applicable
    $1.2190/$1.2710


*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.

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 also 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

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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. While the Mexican economy has experienced
growth in recent years, such growth may not continue in the future at similar
rates or at all. If the economy of Mexico fails to continue its growth or
suffers a recession, we may not be able to continue our operations in that
country. 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.
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.

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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.

We have a limited operating history on which to base an
evaluation of our business and prospects.

Since we have only relatively recently begun mining and
furthering development of our mining properties, we only have a limited
operating history on which to base an evaluation of our future prospects. Our
operating activities from 2004 through 2006, consisted primarily of locating and
acquiring the interest in the properties that we currently hold. In the first
part of 2006, we commenced production at the Topia Mine and limited production
at the Guanajuato Mine Complex, and only increased production at both locations
in the second half of 2006. 2007 was the first year in which both mines were in
full production. At this early stage of our operation, we also expect to face
the risks, uncertainties, expenses and difficulties frequently encountered by
companies at the early stage of their business development. We cannot be sure
that we will be successful in addressing these risks and uncertainties and our
failure to do so could have a materially adverse effect on our financial
condition. Aside from the professional track record of our Companys management
team, there is no history upon which to base any assumption as to the likelihood
that our Company will prove successful and we can provide investors with no
assurance that we will generate any net operating revenues or achieve profitable
operations.

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 on any of the mineral properties.
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

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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.

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.

If we cannot locate qualified personnel, we may have to
suspend or cease operations which will result in the loss of your investment.

Not all of our directors and officers have direct training or
experience in metals exploration or mining and as a result, they may not be
fully aware of any of the specific requirements related to working within the
industry. Their decisions and choices may not take into account standard
engineering or managerial approaches that mineral exploration companies commonly
use. Consequently, our operations, earnings and ultimate financial success could
suffer irreparable harm. As a result, we may have to suspend or cease operations
which would result in the loss of your investment.

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:

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- 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
form 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.

Risks Associated with our Business

We have limited financial resources and there can be no
assurance that we will be able to obtain adequate financing in the future.
Failure to obtain such financing may result in a delay or indefinite
postponement of further exploration, development and mining of our projects.

We have limited financial resources and we have no assurances
that additional funding will be available to be used for working capital, to
further develop the Companys mines and exploration properties, to fulfil
certain contractual obligations and to fund corporate overhead costs. Although
we have been successful in the past in obtaining financing through the sale of
equity securities and, recently, through the sale of minerals, there can be no
assurance that we will be able to obtain adequate financing in the future or
that the terms of such financing will be favourable, or that our sale of
minerals will generate sufficient revenues. Failure to obtain such additional
financing could result in a delay or indefinite postponement of mining
activities, exploration and development of our projects and the possibility of
loss of such properties.

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 Mexico 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 two 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.

---

- 13 -

We are dependent on the services of certain key officers,
and the loss of these certain key personnel may have a materially 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, 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.

Risks Relating to an Investment in our Securities

Trading in our common shares on the Toronto Stock Exchange
(TSX) is limited and any sporadic trading may make it difficult for our
shareholders to sell their shares or liquidate their investments.

The trading price of our shares 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. 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.

---

- 14 -

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 key 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.

As our operating expenses currently exceed our revenue from
mineral sales, we may be required to issue additional shares to finance our
operations and, depending on the outcome of our exploration programs and mining
operations, 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, 2008, there are also outstanding common
share purchase warrants and options exercisable into 10,623,074 common shares
which, if exercised, would represent approximately 11.5% 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.

We have a history of net losses and there is no assurance
that we can reach profitability in the future.

We have a history of losses and there is no assurance that we
can reach profitability in the future. We may require significant additional
funding to meet our business objectives which include expanding our current
mining facilities and operations, further developing our existing exploration
properties and acquiring additional mineral properties. We may not be able to
obtain additional financing on reasonable terms, or at all, depending on market
conditions and the market sentiment towards the Company. If equity financing is
required, then such financings could result in significant dilution to existing
shareholders. If we are unable to obtain sufficient financing, we might have to
dramatically reduce mining and exploration activities, and/or lose control of
our projects. We have historically obtained the preponderance of our financing
through the issuance of equity as there is no limit to the number of authorized
common shares. There are no other plans to obtain financing, if needed, other
than through equity financing.

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.

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- 15 -

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 $5,000,000 or individuals
with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 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 2008 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.

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.

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- 16 -

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 Int'l 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 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 and Ontario.

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.

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 June 1, 2006 we closed a private placement offering (the
"Offering"), with Jennings Capital Inc. (Jennings), as underwriter, of
5,000,000 units of the Company ("Units"), on an underwritten basis, at a price
of $2.00 per Unit to raise gross proceeds of $10,000,000. Jennings elected to
exercise the over-allotment option to sell up to an additional 2,500,000 units
at a price of $2.00 per unit for gross aggregate proceeds of $15,000,000.
Jennings was paid a commission of $958,750 and received broker warrants equal to
6.5% of the number of units issued under the Offering.

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 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 $1,025,000. Each Unit comprises of one common share and
one-half of one share purchase warrant. Each whole warrant entitles 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

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- 17 -

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.

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 (notice must
      be given within 45 days of the one year term);                                                                   
| |     |                                                                                                                                                                                                                                                          
| | (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 is repayable out of production from concentrate sales as a
10% Net Smelter Return. After the debt was repaid, there is 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, 2008, there are no Net Smelter Return
royalties, or other royalties payable, and there are no work commitments.

On March 8, 2006, the Company purchased a 100% interest in the
Arcoiris concession. The agreement requires 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.

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

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- 18 -

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, 2008, 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
must make staged payments totaling US$3,000,000 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$500,000. As at December
31, 2008, US$800,000 has been paid and 500,000 common shares have been issued.

The Concessions are valid for 50 years from the time of grant
and most are valid until 2053.

San Antonio Project

(1) Santo Nino Concessions

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 allow 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$200,000, issuing a total
of 200,000 Altair common shares to Great Panther and incurring a minimum of
US$1,000,000 of exploration expenditures over a three-year period. As at
December 31, 2008, US$60,000 and 150,000 shares of Altair have been received in
accordance with the agreement.

There is no underlying Net Smelter Return royalty or other
royalties and no work commitments on the concession.

(2) San Taco Concessions

Effective February 28, 2004, we entered into the San Taco
Option Agreement, which granted us the right and option, for a period of three
years plus 30 days, to purchase 100% of the ownership rights in and to

---

- 19 -

the San Taco Mining Concessions located in the Guadalupe y
Calvo Mining District, State of Chihuahua, Mexico from Carlos Teodoro Ortiz
Rodriquez, Abelardo Garza Hernanadez and Minera San Miguel de los Tarros, S.A.
de C.V., as optionors, by making staged cash payments totalling US$965,000.

As of December 31, 2005 we had paid US$125,000 in accordance
with the above.

Subsequent to December 31, 2005, we decided not to actively
commit to further exploration of the San Taco property, and as a result the
value of the property as at December 31, 2005, was determined to be nil. As
such, the acquisition costs associated with the property (US$403,634) was
expensed as part of the write down of property cost and the expense was
recognized in the year ended December 31, 2005.

During 2006, the Company elected to discontinue exploration of
the San Taco property and abandoned the project.

Virimoa Project

On June 13, 2005, we entered into an option agreement to
purchase 100% of the ownership rights in and to two mining claims designated as
the Virimoa Property, located in the Topia Mining District, State of Durango,
Mexico from Minera Acero del Fuego, S.A. de C.V., as optionor. Under the terms
of the option agreement, we were to compensate the optionor of the Virimoa
Property by making four cash payments totalling US$300,000 (US$50,000 paid) over
a period of three years. In a concurrent agreement, we were required to issue a
total of 300,000 common shares (150,000 issued) to the optionor. If we exercised
this option, the optionor would retain a 2% NSR, half of which could be
purchased by us for US$1 million.

On May 30, 2007, the Company provided notice that it was
terminating the option agreement on the Virimoa property in Durango State.

B.          
Business Overview

We are an active mining and exploration company listed on the
Toronto Stock Exchange (TSX), trading under the symbol GPR. Our current
activities are focused on the mining of precious and base metals from our two
wholly owned mines in Mexico. In addition, we are also involved in the
acquisition, exploration and development of other properties in Mexico that have
a potential for success, based upon the recommendation of our technical director
and professional advisors, and the assessment of our board of directors.

We have two primary mining properties: (1) Topia Mine and (2)
Guanajuato Mine. We have two primary exploration properties: (1) Mapimi and (2)
San Antonio.

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 owned 100% 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.

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

---

- 20 -

concentrates from operations. Production was ramped up steadily
until reaching approximately 3,000 tonnes per month in late 2007. Custom milling
for local miners helps to utilize the plants capacity which operates at
approximately 170 tonnes per day.

In the fourth quarter of 2008, we worked with the mine
contractors to re-evaluate the mining plan and optimize production capability
and profitability. While 10 individual mines were closed during this period of
re-evaluation, 8 of these were re-opened subsequent to year-end. Underground
development and exploitation is now continuing on 12 mineralized vein
structures.

In 2009, operating cash flow will be supplemented by revenues
from increased custom milling for other small mines in the Topia District.
Exploration is expected to be restricted mainly to underground development on
the higher grade veins. Little surface drilling is required at present as the
Company has delineated sufficient resources for at least seven years of
operation at current production levels, with potential to increase this with
more detailed drilling in the future.

Production

For the year ended December 31, 2008, cumulative ore throughput
increased 5% from 33,605 tonnes in 2007 to 35,318 tonnes in 2008. Metal
production increased 10% from 625,726 Ag eq oz in 2007 to 687,238 Ag eq oz in
2008 exceeding the 650,000 Ag eq oz production target for the year.

A summary of production at Topia for 2008 is as follows:

FY08-Q1
    FY08-Q2
    FY08-Q3
    FY08-Q4
    TOTALTonnes milled
    9,457
    8,649
    9,701
    7,511
    35,318Silver ounces
    86,476
    85,320
    105,235
    89,168
    366,199Gold ounces
    220
    192
    271
    129
    812Lead tonnes
    217
    225
    246
    188
    876Zinc tonnes
    237
    218
    370
    249
    1,074Silver equivalent ounces (Ag eq oz)1
    164,507
    160,557
    208,589
    153,585
    687,238


|1 | For 2008, silver equivalent ounces for each metal were
      established using commodity prices of: US$800 per oz, US$16 per oz,
      US$1.15 per lb, and US$1.00 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 87.1% for Ag, 84.9% for Au, 91.1% for Pb, and 85.6% for Zn were
      realized which resulted in the production of 366,199 oz Ag, 812 oz Au,
      1,930,251 lbs Pb, and 2,368,268 lbs Zn for a silver equivalent production
      of 687,238 ounces.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Production continued to improve as the focus shifted to
production stoping with exploratory development of higher grade mining areas of
Argentina and Don Benito veins. New higher grade veins were accessed and
explored including the east extension of the Cantarranas vein, and the
Recompensa, San Gregorio and Rosario veins.

The average ore grade for 2008 was 0.84 g/t gold, 370 g/t
silver, 2.72% lead, and 3.41% zinc compared to 0.71 g/t gold, 300 g/t silver,
2.44% lead and 3.04% zinc in 2007. Plant performance was also improved with
metal recoveries at 84.9%, 87.1%, 91.1% and 85.6% for gold, silver, lead and
zinc respectively, up from 84.3%, 86.1%, 89.6% and 82.9% in 2007. Concentrate
quality was also improved with the silver content of the lead concentrate at
6,793 g/t, up from 5,831 g/t in 2007.

As a result of the temporary closure of 10 of the smaller
mines, the overall tonnage from the Topia operation decreased by 23% in the
fourth quarter, compared to the third quarter. Overall, head grades from the
remaining mines increased, resulting in less metal output but doing so at an
operating profit. The contracts for all mining contractors were terminated for
the fourth quarter. Due to the rugged terrain

---

- 21 -

at Topia, access to the mines is provided via tunnels into the
sides of the mountains and there are no water issues, so closing individual
mines is simply a matter of removing any mobile equipment and they can be
reopened at any time.

In addition to the material processed for the Companys
account, an additional 11,729 tonnes were processed for various local miners.
Custom milling utilizes excess capacity and provides additional income.

Cash cost of sales was $6,113,947 for 2008. This includes costs
the Company incurred in the direct purchase of minerals from various independent
miners.

(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 13,000 tonnes per month but has a capacity to more than
double that.

From the fourth quarter of 2005 to the end of 2008, 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. In addition, 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.

Underground drilling at Guanajuato during the same time frame
has mostly been conducted in the Cata Mine area and was designed to demonstrate
the continuity of the Cata Clavo ore body to depth below the existing mine
workings. The program has been extremely successful and will be continued in
2009.

In 2008, in addition to the Rayas and Cata Mines, mining was
conducted in the San Vicente North, Promontorio and Guanajuatito areas, which
are accessible by ramps. San Vicente North is adjacent to the southeast side of
the old Animas Mine, where surface drilling by Great Panther in 2006 intersected
zones of previously unknown high grade silver-gold mineralization. Mining at
Guanajuatito is pursuing a zone of high grade mineralization intersected by the
Companys surface drilling in late 2005 and 2006. At Promontorio, development is
progressing to access an area from where encouraging drill intersections were
reported during 2007. At year-end 2008, mining at San Vicente and the
development at Promontorio were temporarily on hold to preserve capital. Mining
at the Cata Mine is focused on an area below the previously worked Cata Clavo
where recent drilling results indicate that the high grade mineralization
extends to a depth of at least 600 metres.

In 2008, mining at Rayas focused on development and production
from the recovery of higher grade remnants and pillars. The latter included the
development of the flatter lying vein which splits off from the main Veta Madre
in the formerly mined San Pio area of Rayas. Diamond drilling to explore for
extensions of, and better define, the Cata Clavo and other higher grade areas
will continue from stations located adjacent to current and planned underground
workings.

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- 22 -

In fourth quarter of 2008, plant performance was excellent and
metal recoveries were the highest to date. The quality of concentrates also
improved in this quarter.

In 2009, the Company expects continued improved production and
reduction in unit costs. Mine site exploration was temporarily suspended in the
fourth quarter of 2008, but will be resumed as soon as practical, with the focus
on the delineation of deep mineralization in the Rayas area. Deep drilling in
the Cata Clavo in 2008 was very successful in extending high grade silver-gold
mineralization to a depth of 600 metres and much of the mines current
production comes from this area.

Principal Capital Expenditures

On August 18, 2008, two underground loaders, known as
scooptrams were purchased as part of the mine improvement plan. The units will
assist the mine in achieving an expected 40% increase in production within the
next 12 months. Capital lease obligations are $436,498 for 2009 and $456,788 for
2010 totaling $893,286.

Production

After a period of preliminary plant and mine rehabilitation,
Great Panther commenced production in June of 2006 on easily accessible low
grade stockwork zones. The development of high grade zones did not proceed as
quickly as originally anticipated. However, in 2007 these did reach the point
where they were contributing to production. As such, the average head grades at
Guanajuato remained low for 2006 and only slowly improved through most of 2007.
With increasing production from the higher grade areas of the mines and the
vigilant implementation of grade control procedures, the average grade for the
mine improved significantly such that in December 2007, grades were more than
twice what they were at the start of the year.

The plant at Guanajuato contains three ball mills. The Company
initiated production with one ball mill, brought a second on stream in November
2006, and commissioned the third ball mill in 2007. A metallurgical testwork
program, directed by a senior Canadian metallurgist, was initiated in the fourth
quarter of 2007 to assess the plant upgrades necessary to improve plant recovery
and concentrate quality. Improvements were experienced in 2008 as a result of
this program.

For the year ended December 31, 2008, cumulative throughput
decreased 24% from 203,968 tonnes in 2007 to 155,079 tonnes in 2008. However,
metal production increased 58% to 1,122,482 Ag eq oz from 710,903 Ag eq oz in
2007 and exceeded the 2008 target of 1,100,000 Ag eq oz. The mining strategy,
which had been changed towards the end of 2007, focused on production from the
higher grade, cut and fill stoping in the Guanajuatito North Zone and the Cata
Clavo which were supplemented by mining of ore remnants and pillars in the
Rayas, San Vicente and Promontorio areas. Strict grade control procedures were
implemented throughout which had the impact of limiting ore supply to the mill,
but at much improved grades.

The average ore grade for 2008 was 1.40 g/t gold and 203 g/t
silver compared to 0.86 g/t gold and 113 g/t silver in 2007. Plant performance
was also much improved with metal recoveries at 78.6% and 83.7% for gold and
silver respectively, up from 71.0% and 72.8% in 2007, and concentrate gold and
silver contents at 61 g/t and 9,476 g/t respectively, up from 31 g/t and 4,315
g/t in 2007.

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- 23 -

A summary of production at Guanajuato for 2008 is as follows:

FY08-Q1
    FY08-Q2
    FY08-Q3
    FY08-Q4
    TOTALTonnes milled
    40,393
    38,951
    37,237
    38,498
    155,079Silver ounces
    198,663
    201,815
    177,810
    269,795
    848,083Gold ounces
    1,369
    1,474
    1,166
    1,479
    5,488Silver equivalent
      ounces (Ag eq oz)1
    267,132
    275,515
    236,097
    343,738
    1,122,482


|1 | For 2008, silver equivalent ounces for each metal were
      established using commodity prices of: US$800 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 83.7% for Ag and 78.6% for Au were realized which resulted
      in the production of 848,083 oz Ag and 5,488 oz Au for a silver equivalent
      production of 1,122,482 ounces.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As metal prices declined in the latter half of 2008, ore
cut-off values increased, forcing several changes to the Guanajuato operations.
A number of cost reductions were implemented and the cut-off grade was raised to
225 and 250 g/t Ag equivalent depending on the cost structure of individual
mines. Production from the lower grade San Vicente Mine was terminated and
production from the Promontorio Mine was also deferred as this area still
requires some underground development and was not yet generating an operating
profit. Contractors and their equipment were moved from these areas into the
higher grade and profitable Rayas Mine. Both San Vicente and Promontorio are
close to surface and accessible by ramp, such that no care and maintenance is
required and they can be re-opened at any time in the future. In response to the
increase in electricity rates, the Guanajuato plant is now operating at a higher
daily throughput but only 4 days per week.

Two new 3.5 yard scoop trams were deployed in the higher grade
areas of Cata and Guanajuatito at the end of the third quarter of 2008 and, as
anticipated, have enhanced development and production efficiency from these
areas such that the fourth quarter resulted in higher metal production.

Mining at Guanajuatito focused on the North Zone and, at Rayas,
on development and production from the recovery of higher grade remnants and
pillars. The latter included the development of a flatter lying vein which
splits off from the main Veta Madre in the formerly mined San Pio area at Rayas.
Diamond drilling to explore for extensions of, and better define, the Cata Clavo
and other higher grade areas will continue from stations located adjacent to
current and planned underground workings.

At Guanajuato, total production costs for the fiscal period
ended December 31, 2008 totalled $12,030,276. The Company anticipates 2009
production costs, on a per silver ounce basis, at Guanajuato to be lower through
mine site efficiencies as well as with the achievement of higher grades.

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

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- 24 -

surface core drilling program intersected economically
significant results leading to re-commencement of underground exploitation in
2007. Exploitation in the San Vicente and Animas areas is on-going.

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. The geology department
at the Guanajuato Mine continues exploration activities with daily sampling,
geological mapping and development underground core drilling.

Promontorio: The 2005 review of historic data revealed
that underground sampling with economically significant results had not been
exploited. Surface geological map and rock sampling was 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 two underground levels accessed from the San Vicente area.

Cata: The 2005 review of historic data revealed that
underground sampling and underground core drilling with economically significant
results had not been exploited. A deep underground drilling program, below the
1,700 metre elevation (previous lower level of exploitation), to in-fill and
expand the previous operators drilling at Cata commenced in 2007 and is
expected to be completed in October 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. Several other areas of
economic significance were underground-geologically mapped and re-sampled in
2006. As there has been no exploitation in these areas, the mine geological
staff is presently conducting an 11-hole drill program to outline economically
significant mineralization. Exploitation in the deepest parts of Cata, and below
the previous operators work, re-commenced in 2007 and is ongoing with a program
a ramping, sub-level development and cut-and-fill exploitation.

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 are 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.
Underground core drilling, below the 1,700 metre level, is expected to commence
in March 2009.

Tepeyac: 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 was
seen as an excellent opportunity to potentially drill off a shallow section of
economically significant mineralization. A core drilling program consisting of
eight (8) holes was completed during 2007 with no significant results.

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 (6) core holes were completed in 2007 with two
(2) containing significant silver-gold mineralization in the Veta Madre. A
follow up surface core drilling program of four (4) core-holes will be completed
in early 2009.

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- 25 -

Rayas: The 2005 review of historic data revealed that
underground sampling and underground core drilling with economically significant
results had not been exploited. Exploitation is on-going with back filling of
old stopes and mining of old pillars. Renewed exploration of the deep potential
at Rayas, below the 1,650 level of previous exploitation, was delayed due to the
need to de-water the deep portions of the Rayas area, and constraints due to
equipment priorities. Presently an exploration cross cut is being driven so that
deep underground drilling can commence below the area of exploitation. The cross
cut will take another six (6) months to fully complete but drilling is expected
to commence in October 2008 when the first drill station is completed.

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 qualified
person as defined under NI43-101 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 complex 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.

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.

---

- 26 -

The Guanajuato assay laboratory was constructed in 2006-07 in
an old 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) is 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 has
been to define a bulk tonnage deposit amenable to open pit mining, thereby
significantly enhancing Great Panther's growing portfolio of silver projects.
The property consists of 17 concessions in northeast Durango State and is
bisected by a paved highway approximately 100 kilometres from Peñoles' smelter
at Torreon, so infrastructure is considered excellent.

Exploration on the Mapimi property since 2006 has 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 high
grade Ag-Pb-Zn mineralization in an area named the North Zone.

(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. Great Panther previously had an option to acquire a 100% interest
in the Santo Niño concession and has exercised that right and transferred the
title. The

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- 27 -

Company now owns a 100% undivided interest in the entire San
Antonio package. (In 2007, the Company elected to discontinue exploration of the
San Taco property, which previously formed part of the project). As the project
is considered to be a non-core asset to the Company, it has been optioned to
Altair Ventures Incorporated.

Revenues

The Company recognizes revenue from the sale of concentrates
based on the market metal prices and mineral content when title to the
concentrates transfers to the customer, which generally occurs on the date of
delivery. Revenue is recorded net of treatment and refining costs paid to
counter parties under terms of the off take arrangements. Revenue from the sale
of the concentrates are subject to adjustment upon final settlement based upon
metal prices, weights and assays. Adjustments to revenue for metal prices are
recorded monthly and any other adjustments are recorded on final settlement.

For the year ended December 31, 2008, we earned $22,445,438 in
revenue from our Topia and Guanajuato mining operations. Revenues for 2007 were
$15,523,094.

Market Prices of Gold

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
and do not experience any material price volatility, 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. Mexican law
grants concessions under the denominations of exploration or exploitation. The
construction of processing plants requires further governmental approval.

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- 28 -

The holder of an exploration concession is granted the
exclusive right to explore a designated area. Exploration concessions are
granted for a period of six years from the date of their recording in the Public
Registry of Mining. Exploration concessions are not renewable after the end of
the initial term. The holder of an exploration concession must file an
application for an exploitation concession before the end of the six year term.
If the concessionaire does not comply with this requirement, the concession will
be cancelled. Exploitation concessions are granted for 50 years from the date of
their registration with the Public Registry of Mining to the exploration
concession holder as a matter of law if all regulations have been complied with.
During the final five years of exploitation, 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
an exploration or exploitation 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 for both exploration and exploitation 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.

There are no limitations on the total amount of surface covered
by exploration or exploitation 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 five 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.            
|   |                                                                                                                                                                                                                                                         
|4. | Exploraciones Mineras el Rosario, S.A. de C.V., a company
      incorporated in the United States of Mexico on February 20, 2007 is
      responsible for the exploration and further development of the Companys
      mineral properties.            
|   |                                                                                                                                                                                                                                                         
|5. | New Age Investments Inc., a company incorporated in the
      Province of Alberta. This company is presently
inactive.                                                                                                                                  

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- 29 -

*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 $11,200 per month.

Our Mexican subsidiary, Minera Mexicana el Rosario, S.A. de
C.V. (MMR), rents office space at Camino del Amanecer 409, Los Remedios,
Durango, DGO, Mexico, for the sum of $7,280 Mexican Pesos (approximately $660)
per month.

Our Mexican subsidiary Minera de Villa Seca, S.A. de C.V.,
maintains office space at Hacienda de Bustos, Mineral de Cata, Guanajuato, GTO
C.P. 36010. No rent is paid as 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, Dgo. 34541. No rent
is paid as the premises are owned by MMR.

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, DGO,
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.

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- 30 -

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.

d. Mineral Resource and Mineral Reserve Estimates

There are no known reserves on the property and the proposed
program is exploratory in nature.

During 2008, Wardrop Engineering (Wardrop) of Vancouver
provided an update to the ongoing mineral resource development at Topia. The
2008 resource estimate has increased over that of 2006, even after considering
the last two years of production. Contained silver is up 11%, gold 25%, and lead
by 6% while zinc stayed the same. At the current production rate of
approximately 36,000 tonnes per year, management expects the resources to
support a mine life of at least seven more years. 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.

The new estimate provides an update for the Argentina vein
only, while the estimate delivered by Wardrop in 2006 for the other veins on the
property remains unchanged. The breakdown for the Argentina Vein and Other Veins
on the property is given in the Table below. Wardrop capped the grades and used
metal prices and recoveries as indicated in the table in order to categorize the
resources.

2008 Resource Update:

VEIN
    CATEGORY
    Tonnes
    Ag g/t
    Au g/t
    Pb %
    Zn %ARGENTINA
    MEASURED
    32,050
    585
    0.60
    6.61
    4.96INDICATED
    65,450
    594
    0.58
    6.03
    4.49INFERRED
    75,700
    534
    0.85
    3.67
    2.35OTHER
    M & I
    55,859
    345
    1.57
    3.91
    5.21INFERRED
    22,373
    243
    1.39
    3.31
    4.97TOTAL
    M & I
    153,373
    501
    0.95
    5.38
    4.85INFERRED
    98,083
    468
    0.97
    3.59
    2.95


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- 31 -

Metal Prices (2008)
      Recoveries
      Capping GradesAu
      US$888/oz
      76.4%
      Au (g/t)
      6.0Ag
      US$17/oz
      76.6%
      Ag (g/t)
      2,000.0Pb
      US$1.01/lb
      83.1%
      Pb (%)
      20.0Zn
      US$0.99/lb
      68.3%
      Zn (%)
      20.0


The mineral resources are reported at a US$60 RMV cut-off which
is based on a US$40/t cost for mining and milling, US$15/t for general and
administrative costs, and US$5/t concentrate handling cost.

The resources estimated in 2006 for the other veins on the
property came largely from the verification of Peñoles' resources, and are still
intact, as mining to date has come from new mine development on these veins.
(Resources for the "other veins" were estimated by Wardrop using metal prices as
reported in the 2006 report.) When combined with the 2008 Argentina resource,
the new total contained metal for each of these categories is shown in the Table
below.

Contained metal (all veins):

Category
    Tonnes
    Ag ozs
    Au ozs
    Pb lbs
    Zn lbsM & I Resources
    153,375
    2,472,700
    4,661
    18,191,165
    16,402,718Inferred Resources
    98,075
    1,474,927
    3,057
    7,765,300
    6,371,766


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. As such,
much of the surface drilling is used to determine additional Exploration
Potential for the veins. This has been estimated in-house for the Don Benito and
Argentina veins to demonstrate the potential mineral resources in these areas
prior to mine development. According to NI 43-101, Exploration Potential must be
reported as ranges and these are presented in the following table. The
Exploration Potential is conceptual in nature and based on wide spaced
exploration drilling at Argentina, and exploration drilling and two development
levels at Don Benito. There has been insufficient exploration to define a
mineral resource and it is uncertain if further exploration will result in the
Exploration Potential being delineated as a mineral resource.

Exploration Potential:

Vein
    Tonnes
    Ag
    Au
    Pb
    ZnArgentina
    80,000-100,000
    300-500g/t
    1-2g/t
    4-6%
    2-4%Don Benito
    60,000-80,000
    300-600g/t
    1-4g/t
    4-8%
    3-6%


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- 32 -

These tonnages include some of the drilling and development
completed during the spring of 2008 (see Great Panthers news releases dated
February 19, June 2 and June 23, 2008) and could represent another 4-5 years of
mine life with further definition. The Argentina vein remains open to expansion
at depth and to the east for approximately 500 metres below old mine workings.

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. Great Panther has
now drilled a total of 15,206 metres in 62 surface holes and 2,732 metres in 48
underground holes.

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

As at December 31, 2008, total costs incurred on mineral
properties, plant and equipment were $8,975,000. Total costs incurred on
exploration were $8,201,000.

Planned costs for 2009 are approximately $0.8 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 Complex 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

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- 33 -

2327500N, 265500E). The Guanajuato Mine Complex 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.

b. History

The Guanajuato Mining District was founded in 1548, with the
first discovery of silver in the area. Estimates of historical production
ranging 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 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.

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- 34 -

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 1:70 to 1:200. 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.

d.Mineral Resource and Mineral Reserve
Estimates

There are currently no reserve or resource estimates conforming
to NI 43-101 Standards of Disclosure for Mineral Projects adopted by the
securities regulators in Canada. A noncompliant, resource estimate was made in
2000 by Sociedad Cooperativa Minero-Metalurgica Santa Fe de Guanajuato with most
of the resource located in the lower levels of the mine. Since purchasing the
mine, Great Panther has been compiling information from its own drilling and
sampling and has estimated mineral inventories in areas of the mine where it is
working or plans to work. While these mineral inventories are used for mine
planning, it is often not cost-effective to define these in the detail required
to make them NI43-101 compliant. The Company is, however, working on a new
compliant resource estimate for the Cata Mine area, expected in March-April of
2009.

e.Exploration History

Since acquiring the Guanajuato Mine in 2005, Great Panther has
completed 88 surface drill holes totaling 15,222.0 metres and 37 underground
holes totalling 7,791.00 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.

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 430 oz/t or a gold equivalent grade of 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 6 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.

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- 35 -

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 NI43-101 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 along 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.

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 development on the 430 and 460 metre
levels of the Cata Clavo is continuing and the ramp will be extended to lower
levels of the Cata Mine area. The program was suspended temporarily in order to
conserve cash and will resume in the Rayas area in 2009.

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

As at December 31, 2008 total costs incurred on mineral
properties, plant and equipment at the Guanajuato mines were $15,191,000. Total
exploration costs were $6,291,000.

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- 36 -

Planned costs for 2009 are approximately $2.1 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 unit
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.

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

Refer to Exhibit 8.5  Map of Mapimi Property.

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.

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 & 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.

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- 37 -

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 are no known reserves on the property and the proposed
program is exploratory in nature. The Company does have a resource estimate as
described below.

During 2006, the Company commissioned Wardrop Engineering
(Wardrop) of Vancouver, B.C. 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.

The resource estimate was based upon a comprehensive
exploration program completed on the property by Coeur d'Alene Mines during 1997
and 1998, wherein they drilled 81 reverse circulation holes (7,515 metres and
3,614 samples) and 22 diamond drill holes (2,983 metres and 900 samples). The
geological database also includes 422 surface channel samples. Coeur d'Alene
dropped the property in 1998. The resource includes 2,643,600 tonnes of oxide
material at a grade of 51 g/t Ag, 0.11 g/t Au, 0.73% Pb and 0.98% Zn for a
silver equivalent grade of 113 g/t and 2,326,200 tonnes of sulphide
mineralization at a grade of 68 g/t Ag, 0.16 g/t Au, 0.90% Pb and 1.69% Zn for a
silver equivalent grade of 169 g/t. As the grade of sulphide mineralization is
50% higher than the 40-60 metre-thick oxide zone, the Company expects the
overall grade of the resource to increase over time as the deposit is extended
to depth.

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.

The new estimate includes the twenty-nine core holes,
representing 6,298 metres, completed during Great Panthers Phase I drilling
program in the first half of 2007 (see below in Exploration). This program
consisted mostly of fill-in holes focused on the La Gloria Zone and adjacent Las
Palmitas Zone in an effort to confirm, expand, and better delineate the previous
Inferred Mineral Resource.

The 2007 Phase I drilling at Mapimi has increased the
confidence level of the 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.

In the new resource estimate, Wardrop has used different
parameters than in 2006, such that the new estimate is considered to be more
robust. In keeping with the previously reported resource estimate,

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- 38 -

Wardrop has 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 5m X 5m X 5m 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 current
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 represents an
increase in tonnage of approximately 73% while the average grade of the
Indicated and Inferred Resources is 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 have increased by
approximately 28%.

The work to date on La Gloria and Las Palmitas has resulted in
a well-defined resource that can now be modeled for extraction by open pit
mining methods. An in-house scoping study has been initiated that will examine
basic issues such as permitting, metallurgy, transportation, mining, milling and
construction costs, etc. While this will lay the groundwork for later
feasibility studies, it is still the Companys objective to increase the size of
the overall project resource by drilling targets outside of La Gloria/Las
Palmitas. The recently discovered North Zone and the Bulls-Eye molybdenum
mineralization may add to the viability of the project. 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.

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 has
been drilled by the Company at Mapimi. As of the date of this document,
exploration at Mapimi has been suspended in order to conserve cash.

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- 39 -

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

As at December 31, 2008, total exploration costs incurred were
$5,206,000. The Company has not planned any exploration work in 2009.

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 three contiguous
mining concessions covering in the aggregate 11,946 hectares. These concessions
were staked and are owned 100% by MMR.

Concession
    Size (hectares)
    Expiry DateSanto Niño
    80
    21/04/2036San Antonio
    9,447
    15/04/2051Iran
    2,184
    09/05/2055La Chiripa
    235
    03/05/2056


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 the Robert Archer, the
President 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.

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- 40 -

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

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 the proposed program is 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.

Three drill holes within the Gossan Breccia zone, noted as a
potential high sulphidation gold system from geochemistry and PIMA alteration
studies, returned no significant assay results and detected no deeper epithermal
feeder structures. As such, it may be a remnant, thin (<50 metres thick)
rhyolitic volcanic unit with incipient alteration.

The five other drill holes demonstrated that there is excellent
continuity of the high level structures and mineralization along strike and to
depth, especially at San Cayetano, La Gringa, and La Gringa Norte. On

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- 41 -

surface these three vein / structures are continuous for
approximately 400 metres each and they have been followed to depths of 100 - 140
metres. Due to the extreme topography in this part of the project, however,
these intercepts appear to be still too high within the mineralizing system to
determine if the lead-zinc-silver-gold veins progress into a copper-gold zone at
depth. Deeper drilling to test this concept may be considered.

Field work on the project is 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.

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, 2008, 2007 and 2006 and 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 October 1, 2008, the life of the Topia mine was
extended from 2 years to 7 years. Effective December 31, 2008, the life of the
Guanajato mine was extended from 2 years to 3 years. These estimates may change
in circumstances where the assets useful life changes based upon new
information.

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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- 42 -

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*

Restatement

The comparative figures in the consolidated financial
statements have been restated to reduce revenue to reflect the proceeds from the
sale of concentrates, net of treatment and refining fees charged by counter
parties, as the Company assumes no risk or obligation for treatment and refining
services under its sales arrangements. The Company previously recorded treatment
and refining fees as a cost of sales.

The effect of the restatement is a decrease in cost of sales
(excluding amortization and depletion) and revenue for the year ended December
31, 2007 by $1,963,976 (2006 - $736,408). This restatement has no impact on the
reported loss and loss per share for each of the years in the three years ended
December 31, 2007.

2007
      2006As originally reported
      As restated
      As originally reported
      As restatedMineral sales
      $17,487,070
      $15,523,094
      $7,069,442
      $6,333,034Cost of sales (excluding 
        amortization and depletion)
      $16,116,633
      $14,152,657
      $7,119,047
      $6,382,639


---

- 43 -

Operating Results

For the year ended December 31, 2008, the Companys sales were
$22,445,438 million compared to $15,523,094 million in 2007 and $6,333,034 million in 2006, an
increase of 45% and 145%, respectively. The Company generates its revenue from
the sale of metal concentrates derived from the mining and subsequent processing
of mineralization from its Topia and Guanajuato operations. Revenue has grown
over the last three years as production levels have steadily increased at both
operations. Combined output at Topia and Guanajuato was 1,809,720 Ag eq oz in
2008, compared with 1,336,629 Ag eq oz in 2007 and 638,860 Ag eq oz in 2006.
Increases in revenue from the increase in output and improved silver and gold
prices were partially offset by increases in smelting and refining costs in
2008. For the year ended December 31, 2008, silver and gold prices increased by
12% and 25%, respectively, while the price of zinc and lead decreased by 19% and
42%, respectively, as compared to December 31, 2007.

Overall cost of sales for the 2008 fiscal year was $18,144,223
compared with $14,152,657 in 2007 and $6,382,639 in 2006. Cost of sales
increased due to the focus on higher grade, higher cost areas, as well as higher
power and fuel costs to support the increased production. Earnings from mining
operations grew to $4,301,215 in 2008 from $1,370,437 in 2007 and from a loss of
$49,605 in 2006. Overall, the cash cost per silver ounce decreased slightly from
2007 levels. Improvement in Guanajuatos cost per ounce was offset by an
increase in Topias cost per ounce. Unit costs improved significantly during the
fourth quarter at the Guanajuato operations as production records were achieved
and operational efficiencies were implemented at the mine sites. The favourable
exchange rate effectively lowered site costs still further.

Amortization and depletion of mineral properties, plant and
equipment increased by $681,361 in 2008 to $4,285,029 compared with $3,603,668
in 2007 and by $2,863,260 compared with $1,421,769 in 2006. The increase is
largely due to capital purchases made in 2007 and 2008.

Accretion on asset retirement obligations was $281,677 for the
year ended December 31, 2008 compared to $22,704 in 2007. This increase is due
to a full year of accretion on the change in the asset retirement obligations
that was recognized at the end of 2007.

Mineral property exploration costs in 2008 were $6,327,926
compared to $6,803,104 in 2007 and $3,968,083 in 2006. The decrease in 2008 over
2007 is mainly due to the cost cutting program implemented in the fourth
quarter. Mine development not related to immediate production was deferred and
exploration was stopped on all projects in response to declining metal prices.
The Company had anticipated spending $8.6 million on mineral property
expenditures in 2008 but spent $2.3 million less than planned due to work
stoppage. The Companys ability to raise the necessary equity capital required
to fund the expenditures was impacted by the deteriorating world economic
conditions. The Company plans to spend $1 million in mineral property
expenditures in 2009 from cash flow generated by operations.

General and administrative expenses (G&A) were $5,965,595
for 2008 compared to $4,672,362 and $4,408,631 in 2007 and 2006, respectively.
Of the $1.3 million increase in 2008, approximately $0.5 million is due to the
growth of the Company since the latter part of 2007, which included adding three
new senior management positions and significantly increasing the depth of the
accounting and financial reporting department in Vancouver and Mexico. During
the year, the Company incurred $0.3 million for financial statement and internal
control audit fees related to 2007 as well as higher fees for the 2008 audit. As
a result of the cost reduction program implemented in the fourth quarter, the
Company incurred $0.1 million in termination costs. The remaining amount of the
$1.3 million increase is attributable to $0.2 million incurred in the second
quarter for the event celebrating the reopening of the Guanajuato mines, tax
planning initiatives, and Value-Added Tax (VAT) recovery fees. In addition,
during the first

---

- 44 -

quarter of 2008, the Company took a provision of $0.2 million
of potentially uncollectible VAT receivable.

The Company had anticipated spending $5.2 million on G&A
during 2008. Unplanned expenditures of $0.8 million included additional audit
fees, severance costs, VAT write-offs and recovery fees as well as the
Guanajuato celebration. The Company plans to spend $5.3 million in general and
administrative expenses in 2009.

The Company also incurred non-cash stock-based compensation
expense of $1,608,271 in 2008 compared with $1,129,500 and $4,672,774 in 2007
and 2006, respectively. Of the $0.5 million increase in 2008, $0.4 million is
due to re-pricing of incentive stock options from $2.65 and $2.00 to $1.42
during the second quarter. The balance of the increase is due to a net increase
in options granted in 2008. The Company grew exponentially in 2006 which
resulted in the larger than usual expense in that year.

Interest expense was $1,155,197 in 2008, compared to $1,035,577
in 2007 and $830,236 in 2006. Interest increased over the three years due to the
$4.05 million convertible notes issued in the third quarter of 2007 for which
the impact was reflected in the last two quarters of 2007 and fully reflected in
2008.

The Company realized a foreign exchange gain of $113,042 in
2008, compared to a loss of $1,440,802 in 2007 and a gain of $10,358 in 2006.
The gain in 2008 is a result of the appreciation of the Canadian dollar against
the US dollar and Mexican peso for most of the year.

For the year ended December 31, 2008, income taxes recoverable
were $651,489 compared to an expense of $2,571,473 in 2007 and $110,016 in 2006.
A new tax in Mexico, referred to as a Flat Tax, was enacted in 2007 and came
into effect on January 1, 2008. Flat tax works as an alternative minimum tax.
Taxpayers are required to pay the higher of the amount due under either income
tax or flat tax. Under flat tax, the tax basis of fixed assets is significantly
reduced and tax losses originating from prior years are not deductible. This
resulted in the $2.5 million increase to the future income tax liability in
2007. Extending the remaining mine life of Topia and Guanajuato in 2008
increased the tax basis of fixed assets that were excluded in the 2007
calculation resulting in a future income tax recovery.

Overall, the loss for the twelve months ended December 31, 2008
was $14,285,852 compared to $19,700,861 and $15,084,437 for the twelve month
periods ending December 31, 2007 and December 31, 2006, respectively, for the
above-noted reasons.

*B.*         
*Liquidity and Capital Resources*

The audited consolidated financial statements of the Company
for the year ended December 31, 2008 were prepared in accordance with GAAP on a
going concern basis, which assumes the realization of assets and liquidation of
liabilities in the normal course of business. During the years ended December
31, 2008 and 2007, the Company recorded losses of $14,285,852 and $19,700,861,
respectively, and used cash in operations of $3,254,623 and $12,483,969,
respectively. As at December 31, 2008, the Company had an accumulated deficit of
$58,913,891 and a working capital balance of $1,320,087. These conditions raise
substantial doubt about the Companys ability to continue as a going concern.

In response to worsening economic and market conditions in the
last quarter of 2008, management has undertaken a plan to significantly reduce
costs through a series of actions including, but not limited to, reducing
exploration activities, reducing capital expenditures, obtaining more favourable
terms with a new smelter and reducing its staff levels.

In response to worsening economic and market conditions in the
last quarter of 2008, management has undertaken a plan to significantly reduce
costs through a series of actions including, but not limited to, reducing
exploration activities, reducing capital expenditures, obtaining more favourable
terms with a

---

- 45 -

new smelter, reducing its staff levels, and considering other
financing alternatives for its operations. Subsequent to year end, the Company
raised additional equity.

For 2009, Great Panther plans to produce 2.07 million Ag eq oz
and invest $3.1 million in capital and exploration expenditures. Considering the
decline in metal prices in the latter part of 2008 combined with the current
volatile and uncertain business environment, there is no assurance that working
capital together with net revenues from increasing production, will be adequate
to fund the Companys activities and to cover corporate overhead for the next
twelve months. If metal prices remain at or above current levels, management
anticipates that cash flow generated from mining activities along with working
capital, including the proceeds received from the January 2009 private placement
(see Financing Activities), will be sufficient to fund the Companys
operations without raising any additional capital during 2009. Should the
Company chose to undertake significant capital expenditures for equipment, plant
upgrades or an enhanced exploration program during 2009, additional financing
will be required.

Great Panther does not have access to any lines of credit nor
does the Company have any off-balance sheet financing arrangements. At this
time, Great Panther does not use hedges or other financial derivatives.

Operating Activities

Cash flow used in operating activities, after working capital
adjustments, was $3,254,623 in 2008 compared to $12,483,969 in 2007 and
$11,433,341 in 2006. The decrease in 2008 over 2007 of $9,229,346 was primarily
due to positive cash flow generated by the mines during the year as well as a
significant favourable change in non-cash operating working capital.

Investing Activities

For the twelve months ended December 31, 2008, the Company had
a net cash outflow from investing activities, primarily for the purchase of
mineral properties and capital assets, of $1,837,187 compared with $3,362,263 in
2007 and $5,736,570 in 2006. The Company acquired, through capital leases, two
underground loaders for the Guanajuato mine with a cost of $785,047.

The Company plans to invest $2.1 million in capital
expenditures in 2009.

Financing Activities

During the second quarter of 2008, the Company entered into a
capital lease agreement to purchase two underground loaders. The principal
amount of the lease obligation at December 31, 2008 is US$733,540 and is
repayable quarterly over two years at an interest rate of 9.3% per annum. Total
minimum lease payments amount to US$807,154

Subsequent to December 31, 2009, the Company 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 $1,025,000. Each Unit comprises one
common share and one-half of one non-transferable share purchase warrant. The
securities issued in the private placement are subject to a hold period expiring
May 24, 2009. Each whole warrant entitles the holder, upon exercise, to acquire
one common share of the Company at a price of $0.35 until January 22, 2010. The
Company has paid finders' fees totaling $50,400 cash and has issued 169,050
finder's warrants, which are also exercisable at $0.35 until January 22, 2010.

The financing proceeds will be used primarily for additional
working capital at the Company's 100% owned Guanajuato and Topia Mines in
Mexico.

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- 46 -

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 balances sheets and statements of operations and
cash flows is summarized as follows:

|                                |   | December
      31, 2008 |   |   | December 31, 2007 |  
|------------------------------- | - | ----------------------- | - | - | ----------------- | -
|                                |   | Canadian                |   |   | US                |  
|                                |   | GAAP                    |   |   | GAAP              |  
|Convertible note payable        |   |                         |   |   |                   |  
|(note (a)(iv))                  | $ | 4,651,690               |   | $ | 6,070,000         |  
|Share capital                   |   | 57,865,462              |   |   | 64,076,667        |  
|Contributed surplus             |   | 7,724,900               |   |   | 7,739,900         |  
|Equity component of convertible |   |                         |   |   |                   |  
|note (note (a)(iv))             |   | 2,569,000               |   |   | -                 |  
|Deficit                         |   | (58,913,891             | ) |   | (63,989,406       | )

Share capital and contributed surplus:

|                                                        |   | 2008       |  |   | 2007       | 
|------------------------------------------------------- | - | ---------- |  | - | ---------- | 
|Share capital and contributed surplus,
      under      |   |            |  |   |            | 
|Canadian GAAP                                           | $ | 65,590,362 |  | $ | 63,249,563 | 
|Adjustment for stock-based compensation for             |   |            |  |   |            | 
|employees (note (a)(ii))                                |   | 15,000     |  |   | 15,000     | 
|Reversal of recapitalization of deficit (note (a)(iii)) |   | 6,211,205  |  |   | 6,211,205  | 
|Share capital and contributed surplus, under            |   |            |  |   |            | 
|US GAAP                                                 | $ | 71,816,567 |  | $ | 69,475,768 | 

Deficit:

|                                                          |   | 2008        |   |   | 2007        |  
|--------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|Deficit, under Canadian GAAP                              | $ | (58,913,891 | ) | $ | (44,628,039 | )
|Adjustment for stock-based compensation for               |   |             |   |   |             |  
|employees (note (a)(ii))                                  |   | (15,000     | ) |   | (15,000     | )
|Reversal of recapitalization of deficit (note (a)(iii))   |   | (6,211,205  | ) |   | (6,211,205  | )
|Interest accreted on convertible loan note (note (a)(iv)) |   | 1,150,690   |   |   | 527,611     |  
|Deficit, under US
      GAAP                              | $ | (63,989,406 | ) | $ | (50,326,633 | )

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- 47 -

Loss and loss per share:

|                                        |   | 2008        |   |   | 2007        |   |   | 2006        |  
|--------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|Loss for the year, under Canadian GAAP  | $ | (14,285,852 | ) | $ | (19,700,861 | ) | $ | (15,084,437 | )
|Interest accreted on convertible        |   |             |   |   |             |   |   |             |  
|loan note (note (a)(iv))                |   | 623,079     |   |   | 377,812     |   |   | 149,799     |  
|Loss for the year,
      under US GAAP  | $ | (13,662,773 | ) | $ | (19,323,049 | ) | $ | (14,934,638 | )
|                                        |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per share, under |   |             |   |   |             |   |   |             |  
|US GAAP                                 | $ | (0.17       | ) | $ | (0.27       | ) | $ | (0.25       | )
|Weighted average number of common       |   |             |   |   |             |   |   |             |  
|shares, basic and diluted               |   | 81,321,733  |   |   | 72,227,455  |   |   | 59,720,424  |  

|(a) | These 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)                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                               

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- 48 -

| |       | expense of $15,000 being recognized for employees in the
      year ended December 31, 2001 under US GAAP and no similar expense was
      required under Canadian GAAP. Effective January 1, 2003, the Company
      adopted the fair value recognition provisions of SFAS 123 whereby the fair
      value of the stock options granted to employees was expensed. Under the
      modified prospective method of adoption selected by the Company under the
      provisions of Statement of Financial Accounting Standards Board No. 148
      Accounting for Stock-Based Compensation-Transition and Disclosure(SFAS 148), employee compensation cost recognized in 2003 is the same
      as that which would have been recognized had the provisions of SFAS 123
      been applied from its original effective date. Results of prior years have
      not been restated.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       | Effective January 1, 2006, the Company adopted Statement
      of Financial Accounting Standard (SFAS 123R) Share Based Paymentusing the modified prospective method for all employee awards granted,
      modified or settled after the effective date using the fair value
      measurement method of this standard. For unvested employee equity awards
      as of the effective date, compensation is to be recognized based upon the
      grant date fair value determined under SFAS 123, adjusted to reflect the
      estimated impact of forfeitures. Upon adoption of SFAS 123R, there was no
      cumulative effect adjustment required. Non-employee awards are accounted
      for under the fair value method under both Canadian and US GAAP.                                                                                                                
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       | There were no significant differences in accounting for
      stock-based compensation between Canadian GAAP and US GAAP during the
      three years ended December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (iii) | Elimination of deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       | During the year ended December 31, 1999, the Company
      reduced its paid-up capital by $6,211,205 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 note payable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       | Under Canadian GAAP, the proceeds of the financing
      allocated to the estimated fair value of the conversion feature of the
      debt is recorded as an equity component of the debt. 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,
      2008 would be recorded as a liability at face value of $6,070,000 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 $623,079 (2007 - $377,812, 2006 - $149,799)
      for the year ended December 31, 2008 would not have been recorded,
      reducing interest expense by an equivalent amount.                                                                                                                                                                                                                                                                                                                                                         
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (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 7 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. This
      measurement difference is not material for all reporting
  periods.                                                                                                                                                                                                                                                                                                                                                                                                                        

---

- 49 -

|(b) | Recently adopted United States accounting
      pronouncements:
|--- | ---------------------------------------------------------------
|    |                                                                
|    | (i)                                                            
|    |                                                                
|    | (ii)                                                           
|    |                                                                
|    | (iii)                                                          
|    |                                                                
|(c) | Recently issued United States accounting
      pronouncements: 
|    |                                                                
|    | (i)                                                            
|    |                                                                
|    |                                                                
|    |                                                                
|    | (ii)                                                           
|    |                                                                
|    |                                                                
|    |                                                                
|    |                                                                
|    |                                                                
|    |                                                                
|    |                                                                
|    |                                                                

---

- 50 -

| |  | goodwill, if any, arising on a business combination
      reflects the excess of the fair value of the acquiree, as a whole, over
      the net amount of the recognized identifiable assets acquired and
      liabilities assumed. Goodwill is allocated to the acquirer and the non-
      controlling interest.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |       | The statement is effective for periods beginning on or
      after December 15, 2008. The Company does not expect the adoption of this
      Interpretation to have a significant effect on the Companys results of
      operations or financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (iii) | In March 2008, the FASB issued FASB Statement No. 161,
      Disclosures about Derivative Instruments and Hedging Activities.
      This new statement enhances disclosures regarding an entitys derivative
      and hedging activities. This statement is effective for the Company
      beginning January 1, 2009. The Company is currently assessing the impact
      of this new standard.                                                                                                                                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (iv)  | In May 2008, the FASB issued Staff Position No. APB 14-1,
      Accounting for Convertible Debt Instruments that may be Cash Settled
      Upon Conversion,which clarifies the accounting for convertible debt
      instruments that may be settled in cash upon conversion. The guidance
      specifies that issuers of such instruments should separately account for
      the liability and equity components of those instruments by allocating the
      proceeds from issuance between the liability component and the embedded
      conversion option. The guidance is effective for the Company beginning
      January 1, 2009. The Company is currently assessing the impact on the
      Companys financial statements.

|(d) | International Financial Reporting Standards
    (IFRS):
|--- | ---------------------------------------------------------

In 2006, the Canadian Accounting
Standards Board ("AcSB") published a new strategic plan that will significantly
affect financial reporting requirements for Canadian companies. The AcSB
strategic plan outlines the convergence of Canadian GAAP with IFRS over an
expected five year transitional period. 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.

The Company is developing an IFRS
conversion plan and has completed a preliminary assessment which prioritizes how
each IFRS standard will impact the financial statements. The Company anticipates
there will be changes in accounting policies and these changes may materially
impact our financial statements but the impact cannot be reasonably estimated at
this time. The Company does anticipate a significant increase in disclosure
resulting from the adoption of IFRS and is continuing to assess the level of
disclosure required as well as systems changes that may be necessary to gather
and process the required information.

We have begun planning our 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 largely completed. The identified areas of
accounting differences of highest potential impact to the Company, based on
existing IFRS 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 First-Time
Adoption of IFRS (IFRS1).

Phase Two: Detailed Assessment,
Conversion Planning and Development involves detailed diagnostics and evaluation
of the financial impacts of various options and alternative

---

- 51 -

methodologies available under IFRS;
identification and design of operational and financial business processes;
initial staff training; analysis of IFRS1 optional exemptions and mandatory
exceptions to the general requirement for full retrospective application upon
transition to IFRS; summarization of 2011 IFRS disclosure requirements; and
development of required solutions to address identified issues. It is not known
whether the adoption of IFRS will have a significant impact on information
systems requirements. The Company is assessing the need for system upgrades or
modifications to ensure an efficient conversion to IFRS. As part of Phase Two,
information systems plans will be prepared for implementation in Phase Three if
necessary. The extent of the impact on the Companys information systems is not
reasonably determinable at this time.

Phase Three: Implementation, Parallel
Reporting and Review, expected to commence in the latter part of 2009, will
involve 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 financial statements
and reconciliations; embedding of IFRS in business processes; and, audit
committee approval of IFRS-compliant financial statements.

*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 $250,000 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.

*F.*         
*Tabular Disclosure of Contractual Obligations*

The following table outlines the contractual obligations of the
Company at December 31, 2008:

Less
      than
    
    
    1 
      3
    
    
    4 
      5
    
    
    AfterTotal
    
    
    1
      year
    
    
    Years
    
    
    Years
    
    
    5
      yearsLong-term
      debt1
    $
    6,070,000
    
    $
    -
    
    $
    6,070,000
    
    $
    -
    
    $
    -Purchase and lease obligations2
    
    3,308,050
    
    
    1,541,050
    
    
    1,752,000
    
    
    15,000
    
    
    -Total obligations
    $
    9,378,050
    
    $
    1,541,050
    
    $
    7,822,000
    
    $
    15,000
    
    $
    -


|1 | These payments relate to the Convertible Notes which may
      be converted into common shares of the Company at the holders option at
      any time. 
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                         
|2 | Purchase and lease obligations include commitments for
      laboratory and drilling services and lease payments for operating and
      capital leases.

---

- 52 -

*G.*         
*Safe Harbor*

Not applicable.

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 Mexican el
      Rosario
    Present Position Alberta
      Subsidiary
    Present Position Metalicos
      de Durango
    Present Position Minera de
      Villa Seca
    Present Position Exploraciones
      Mineras el RosairoKaare G. Foy
    Executive Chairman, Director
    President, Director
    Director
    President, Director
    President, Director
    President, DirectorRobert A. Archer
    President, CEO, Director
    Secretary, Director
    n/a
    Secretary, Director
    Secretary, Director
    Secretary, DirectorMalcolm A. Burne
    Director
    n/a
    Director
    n/a
    n/a
    n/aJohn T. Kopcheff
    Director
    n/a
    n/a
    n/a
    n/a
    n/aMartin Carsky
    Director
    n/a
    n/a
    n/a
    n/a
    n/aWendy M. Ratcliffe
    Corporate Secretary
    n/a
    n/a
    n/a
    n/a
    n/aFrancisco Ramos Sanchez
    Vice President - Business Development
    Director
    n/a
    Director
    Director
    DirectorRobert Brown
    Vice President - Exploration
    n/a
    n/a
    n/a
    n/a
    DirectorCharles Brown
    Chief Operating Officer
    n/a
    n/a
    n/a
    n/a
    n/aRaakel Iskanius
    Chief Financial Officer
    Chief Financial Officer
    Chief Financial Officer
    Chief Financial Officer
    Chief Financial Officer
    Chief Financial Officer


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.

---

- 53 -

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, an AIM-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 its affairs and business in Mexico.

Mr. Archer has more than 27 years experience working for mining
companies throughout North America, namely 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 also 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, and formerly
Executive Chairman of the Australian Bullion Company Pty. Ltd., Malcolm Burne is
a director of public companies Samson Exploration NL, Jubilee Platinum PLC, Mano
River Resources Inc., Great Panther Resources Limited, Cangold Limited and
Golden Prospect Precious Metals Limited, a publicly listed mineral investments
and gold fund company.

Mr. Burne is an independent director.

John T. Kopcheff

Mr. Kopcheff has been a director of our Company since August
2001. As a non-executive director, Mr. Kopcheff is responsible for the corporate
governance of our Company, 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.

He is Managing Director of Victoria Petroleum NL, an oil and
gas company publicly listed on the main board of the Australian Stock Exchange.

Mr. Kopcheff is an independent director.

Martin 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.

He is an experienced financial executive with extensive
experience in capital markets, mergers and acquisition, restructuring, and
corporate governance. He is the CEO of Anthem Ventures Capital Corp. and until
recently he acted as the Executive Chairman of Metrobridge Networks
International Inc., a

---

- 54 -

wireless broadband service provider, and as the Executive Vice
President of Anthem Capital Corp., the private investment arm of the Anthem
Group of companies.

He is currently the director and the Chairman of the Audit
Committee of Pacific Safey Products Inc. and Con-Space Communications Ltd. and
is a director of Cangold Limited and Anthem Ventures Capital Corp. Mr. Carsky
holds a Bachelor of Science degree from the University of British Columbia in
Vancouver, British Columbia and holds the designation of Chartered Accountant.

Wendy Ratcliffe

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

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 and initiating planning and permitting
issues for the advancement of the Mapimi Project in Durango. 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.

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 28 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 13 years, he held senior
management positions in the junior sector, working on projects throughout the
Americas, Eastern Europe and Indonesia, primarily in gold and silver
exploration.

Charles Brown

Mr. Brown has been our Chief Operating Officer since August
2007. He is a seasoned professional with more than 30 years experience
successfully operating and developing mines both in Canada and internationally,
from operating 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.

Most recently 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.

---

- 55 -

Raakel 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 18 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.

Family Relationships

There are no family relationships between any of the persons
named above.

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.

*B.*          *Compensation*

Other than as set forth in the table below, none of our
executive officers was paid or earned compensation for performing his duties
during the fiscal year ended December 31, 2008. 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 | April 27, 2004     | Present          
|                        | Director                              | April 27, 2004     | Present          
|Malcolm A. Burne        | Director                              | June 3, 1987       | Present          
|Kaare G. Foy            | Executive Chairman                    | April 27, 2004     | Present          
|                        | Director                              | June 23, 1994      |                  
|John T. Kopcheff        | Director                              | August 16, 2001    | Present          
|A. Michael Turko        | Director                              | July 7, 2006       | February 9, 2009 
|Francisco Ramos Sánchez | Vice President, Business Development  | November 13, 2007  | Present          
|                        | Vice President, Operations            | April 30, 2004     | November 13, 2007
|Robert F. Brown         | Vice President, Exploration           | April 30, 2004     | Present          
|Charles Brown           | Chief Operating Officer               | August 15, 2007    | Present          
|Raakel
      Iskanius   | Chief Financial Officer               | May 22,
      2007 | Present          

---

- 56 -

Summary Compensation Table

Annual Compensation
      Long
        Term CompensationAwards
      PayoutsName
      Year
      Salary ($)
      Bonus ($)
      Other Annual Compen- sation
        ($)
      Securities Under Options Granted (#)
      Restricted Shares or Restricted
        Share Units ($)
      LTIP Payouts ($)
      All Other Compen- sation ($)Robert A. Archer
      2008
      30,000(1)
      nil
      nil
      nil
      nil
      n/a
      301,324(2)Malcolm Burne
      2008
      30,000(1)
      nil
      nil
      nil
      nil
      n/a
      nilKaare G. Foy
      2008
      30,000(1)
      nil
      nil
      nil
      nil
      n/a
      330,637(3)John T. Kopcheff
      2008
      30,000(1)
      nil
      nil
      nil
      nil
      n/a
      nilA. Michael Turko
      2008
      30,000(1)
      nil
      nil
      nil
      nil
      n/a
      nilFrancisco Ramos Sánchez
      2008
      nil
      nil
      nil
      nil
      nil
      n/a
      266,230(4)Robert F. Brown
      2008
      149,400
      nil
      nil
      nil
      nil
      n/a
      nilCharles Brown
      2008
      192,000
      nil
      nil
      nil
      nil
      n/a
      nilRaakel Iskanius
      2008
      150,000
      nil
      nil
      nil
      nil
      n/a
      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, $294,499 was paid for consulting and
      other benefits and $36,138 was paid for rent and other services to Oceanic
      Management Limited, a company controlled by Kaare G. Foy.
|    |                                                                                                                                                                                                      
|(4) | Consulting fees paid to Francisco Ramos
  Sánchez.                                                                                                                                                   

Compensation of Directors

During the financial year ended December 31, 2008, the
remuneration paid or accrued to directors in their capacity as directors of our
Company was as follows:

Kaare G. Foy
    $30,000Robert A. Archer
    $30,000Malcolm A. Burne
    $30,000John T. Kopcheff
    $30,000A. Michael Turko
    $30,000


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, 2008.

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

---

- 57 -

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 27,
2008.

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 John T. Kopcheff,
Malcolm A. Burne and A. Michael Turko up until February 9, 2009, at which time
A. Michael Turko resigned as director and Martin Carsky was appointed. 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 A. Michael Turko, Malcolm A. Burne and John T. Kopcheff up
until February 9, 2009, at which time A. Michael Turko resigned as director and
Martin Carsky was appointed. 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 Malcolm A.
Burne, John T. Kopcheff and A. Michael Turko up until February 9, 2009, at which
time A. Michael Turko resigned as a director and Martin Carsky was appointed.
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, 2008, December 31,
2007 and December 31, 2006, we had direct employees as outlined below. Prior to
2007, the majority of the Companys workforce was independent contractors
rendering services to the different subsidiaries.

| | Company                                  | 2008 | 2007 | 2006
| | ---------------------------------------- | ---- | ---- | ----
| | Great Panther Resources Limited.         | 10   | 15   | Nil 
| | Minera Mexicana el Rosario, S.A. de C.V. | Nil  | Nil  | Nil 
| | Metalicos de Durango, S.A. de C.V.       | 46   | 46   | 35  

---

- 58 -

| | Minera de Villa Seca, S.A. de C.V.                   | 54  | 56  | 28 
| | ---------------------------------------------------- | --- | --- | ---
| | Exploraciones
      Mineras el Rosario, S.A. de C.V. | 4   | 17  | N/A
| | TOTAL                                                | 114 | 134 | 63 

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

*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 18, 2009, the number
  of securities beneficially owned by our directors and officers, 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           | 2,000,100            | 2.07%        
|Charles P. Brown           | 697,500              | 0.72%        
|Robert F. Brown            | 365,000              | 0.38%        
|Malcolm A. Burne           | 843,033              | 0.87%        
|Martin B. Carsky
      (2) | 150,000              | 0.16%        
|Kaare G. Foy               | 843,600              | 0.87%        
|Raakel Iskanius            | 197,500              | 0.20%        
|John T. Kopcheff           | 587,000              | 0.61%        
|Francisco Ramos Sanchez    | 1,521,000            | 1.57%        
|Wendy M. Ratcliffe         | 342,500              | 0.35%        
|Sergio Rios Martinez       | 100,000              | 0.10%        

|(1) | Based on the following securities issued and outstanding
      as at March 18, 2009:
|--- | ------------------------------------------------------------------------------------
|    |                                                                                     
|    | -                                                                                   
|    |                                                                                     
|    | -                                                                                   
|    |                                                                                     
|    | -                                                                                   
|    |                                                                                     
|(2) | Appointed a director on February 9,
  2009.                                         

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

As at March 18, 2009, our directors and officers held, as a
group, directly or indirectly, an aggregate of 3,808,733 common shares,
3,556,000 options exercisable within 60 days and 282,500 warrants exercisable
within 60 days.

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- 59 -

The total number of options outstanding as at March 18, 2009,
all exercisable within 60 days, granted to our directors and officers are set
out below:

|                           | Number of Options |                |                  
|-------------------------- | ----------------- | -------------- | -----------------
|Name                       | Outstanding       | Exercise Price | Expiry Date      
|                           |                   |                |                  
|Robert A. Archer           | 100,000           | $0.45          | July 26, 2010    
|                           | 125,000           | $0.90          | January 5, 2011  
|                           | 250,000           | $0.45          | February 8, 2014 
|Charles P. Brown           | 150,000           | $0.45          | February 8, 2014 
|Robert F. Brown            | 40,000            | $0.45          | May 25, 2009     
|                           | 100,000           | $0.90          | January 5, 2011  
|                           | 150,000           | $0.45          | February 8, 2014 
|Malcolm A. Burne           | 25,000            | $0.45          | February 27, 2010
|                           | 100,000           | $0.45          | July 26, 2010    
|                           | 125,000           | $0.90          | January 5, 2011  
|                           | 253,000           | $0.45          | February 8, 2014 
|Martin B. Carsky (2)       | 150,000           | $0.45          | February 8, 2014 
|Kaare G. Foy               | 25,000            | $0.45          | February 27, 2010
|                           | 205,000           | $0.90          | January 5, 2011  
|                           | 250,000           | $0.45          | February 8, 2014 
|Raakel Iskanius            | 150,000           | $0.45          | February 8, 2014 
|John T. Kopcheff           | 25,000            | $0.45          | February 27, 2010
|                           | 100,000           | $0.45          | July 26, 2010    
|                           | 125,000           | $0.90          | January 5, 2011  
|                           | 257,000           | $0.45          | February 8, 2014 
|Francisco Ramos Sanchez    | 25,000            | $0.45          | February 27, 2010
|                           | 75,000            | $0.45          | July 26, 2010    
|                           | 125,000           | $0.90          | January 5, 2011  
|                           | 221,000           | $0.45          | February 8, 2014 
|Wendy M. Ratcliffe         | 30,000            | $0.52          | April 5, 2009    
|                           | 25,000            | $0.45          | February 27, 2010
|                           | 25,000            | $0.45          | July 26, 2010    
|                           | 25,000            | $0.90          | January 5, 2011  
|                           | 200,000           | $0.45          | February 8, 2014 
|Sergio Rios
      Martinez | 100,000           | $0.45          | February 8, 2014 

The total number of warrants outstanding as at March 18, 2009,
all exercisable within 60 days, issued to our directors and officers are set out
below:

|                 | Number of Warrants |                |                 
|---------------- | ------------------ | -------------- | ----------------
|Name             | Outstanding        | Exercise Price | Expiry Date     
|Robert A. Archer | 25,000             | $0.35          | January 22, 2010
|Charles P. Brown | 182,500            | $0.35          | January 22, 2010
|Robert F. Brown  | 25,000             | $0.35          | January 22, 2010
|Kaare G. Foy     | 25,000             | $0.35          | January 22, 2010
|Raakel Iskanius  | 12,500             | $0.35          | January 22, 2010
|Wendy Ratcliffe  | 12,500             | $0.35          | January 22, 2010

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- 60 -

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.

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 18, 2009,
granted to our directors and executive officers as a group, to our non-executive
officers as a group, to our employees as a group and to our consultants as a
group, are set out below:

|                        | Number of Options |                |                  
|----------------------- | ----------------- | -------------- | -----------------
|Name                    | Outstanding       | Exercise Price | Expiry Date      
|                        |                   |                |                  
|Directors and Executive | 40,000            | $0.45          | May 25, 2009     
|Officers                | 100,000           | $0.45          | February 27, 2010
|                        | 375,000           | $0.45          | July 26, 2010    
|                        | 805,000           | $0.90          | January 5, 2011  
|                        | 1,831,000         | $0.45          | February 8, 2014 
|                        |                   |                |                  
|Non-executive Officers  | 30,000            | $0.52          | April 5, 2009    
|                        | 25,000            | $0.45          | February 27, 2010
|                        | 25,000            | $0.45          | July 26, 2010    

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- 61 -

|            | Number of Options |                |                  
|----------- | ----------------- | -------------- | -----------------
|Name        | Outstanding       | Exercise Price | Expiry Date      
|            | 25,000            | $0.90          | January 5, 2011  
|            | 300,000           | $0.45          | February 8, 2014 
|            |                   |                |                  
|Employees   | 2,971,700         | $0.45          | February 8, 2014 
|            |                   |                |                  
|Consultants | 650,000           | $0.45          | February 8, 2014 
|            | 160,000           | $0.45          | February 29, 2012

ITEM
7             
Major Shareholders and Related Party Transactions

*A.*         
*Major Shareholders*

As of February 28, 2009, Computershare Trust Company of Canada,
our registrar and transfer agent, reported that we had 86,779,521 common shares
issued and outstanding. Of those common shares, 80,479,838 common shares were
registered to Canadian residents (50 shareholders); 4,876,919 common shares were
registered to residents of the United States (100 shareholders); and 1,422,764
common shares were registered to residents of other foreign countries (19
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 2008 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.

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- 62 -

During the year ended December 31, 2008, we entered into the
following transactions with related parties:

|                                                                                                          |   | 2008    |  |   | 2007    |  |   | 2006    | 
|--------------------------------------------------------------------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- | 
|                                                                                                          |   |         |  |   |         |  |   |         | 
|Consulting fees paid or accrued to 
      companies controlled by directors of the Company                | $ | 595,823 |  | $ | 539,000 |  | $ | 388,250 | 
|                                                                                                          |   |         |  |   |         |  |   |         | 
|Consulting fees paid or accrued to 
      companies controlled by officers of the Company                 |   | 266,230 |  |   | 395,943 |  |   | 272,578 | 
|                                                                                                          |   |         |  |   |         |  |   |         | 
|Cost recoveries received or accrued
      from a company with a common director of the Company            |   | 82,397  |  |   | 631,117 |  |   | -       | 
|                                                                                                          |   |         |  |   |         |  |   |         | 
|Office and administration fees paid or
      accrued to a company controlled by a director of the Company |   | 36,138  |  |   | 39,879  |  |   | 101,060 | 
|                                                                                                          |   |         |  |   |         |  |   |         | 

As at December 31, 2008, $314,435 (2007 - $74,401; 2006 - nil)
was due to companies controlled by officers and directors of the Company.
Amounts due from a company with a common director were $61,720 (2007 - $400,742,
2006 - nil).

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 11, 2009.                                                               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                   
|- | Consolidated balance sheets for
      the fiscal years ended December 31, 2008, and 2007.                                                         
|  |                                                                                                                                                   
|- | Consolidated statements of
      operations and comprehensive loss and deficit for the fiscal years ended
      December 31, 2008, 2007, and 2006.
|  |                                                                                                                                                   
|- | Consolidated statements of cash
      flows for the fiscal years ended December 31, 2008, 2007, and 2006.                                         
|  |                                                                                                                                                   
|- | 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.

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- 63 -

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, 2008.

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.

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
    LowDecember 31, 2004
    $0.77
    $0.33December 31, 2005
    $1.17
    $0.36December 31, 2006
    $2.79
    $0.80December 31, 2007
    $2.53
    $1.07December 31, 2008
    $1.72
    $0.18


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
    LowMarch 31, 2007
    $2.53
    $1.77June 30, 2007
    $2.20
    $1.60September 30, 2007
    $2.15
    $1.07December 31, 2007
    $1.75
    $1.09


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- 64 -

Quarter Ended
    High
    LowMarch 31, 2008
    $1.72
    $0.85June 30, 2008
    $1.48
    $1.05September 30, 2008
    $1.24
    $0.52December 31, 2008
    $0.70
    $0.18


The high and low market prices for our common shares for each
of the most recent six months, from September, 2008 through February, 2009 were
as follows:

Month Ended
    High
    LowSeptember 30, 2008
    $0.85
    $0.52October 31, 2008
    $0.70
    $0.18November 30, 2008
    $0.44
    $0.21December 31, 2008
    $0.31
    $0.22January 31, 2009
    $0.45
    $0.23February 28, 2009
    $0.53
    $0.31


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

*B.*         
*Plan of Distribution*

Not applicable.

*C.*         
*Markets*

Our common shares trade on the Toronto Stock Exchange (TSX)
under the symbol "GPR" effective November 14, 2006. Our CUSIP number is 39115T
106.

*D.*         
*Selling Shareholders*

Not applicable.

*E.*          *Dilution*

Not applicable

*F.*         
*Expenses of the Issue*

Not applicable.

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- 65 -

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 $1,025,000. Each Unit comprises of one common share and
one-half of one share purchase warrant. Each whole warrant entitles 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.

*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

---

- 66 -

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.

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,

---

- 67 -

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
bad 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.

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

---

- 68 -

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.

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

---

- 69 -

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.

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 Registrantour
company. 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

---

- 70 -

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.

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 believes 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 our company 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 we 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 an
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 we are 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, we 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

---

- 71 -

which a Pedigreed QEF election is made, if we 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.

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 we are, 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 our 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

---

- 72 -

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.

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.

---

- 73 -

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.

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.

---

- 74 -

*I.*         
*Subsidiary Information*

As at the date of this annual report, we have five wholly-owned
subsidiaries: (i) Minera Mexicana el Rosario, S.A. de C.V.; (ii) New Age
Investments Inc.; (iii) Metalicos de Durango, S.A. de C.V.; (iv) Minera de Villa
Seca, S.A. de C.V.; and (v) Exploraciones Mineras el Rosario, 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, 2008 are
as follows:

|                              |  | December
      31, |  |  | December
      31, | 
|----------------------------- |  | ------------------ |  |  | ------------------ | 
|                              |  | 2008               |  |  | 2007               | 
|                              |  |                    |  |  |                    | 
|MXN Peso to CDN Dollar        |  | 0.089              |  |  | 0.091              | 
|US Dollar to CDN
      Dollar |  | 1.218              |  |  | 0.991              | 

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 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, 2008, the Company did not hold any guaranteed investment
certificates.

For financial liabilities, the convertible loan notes and
capital leases carry fixed interest rates of 8.0% and 9.6% per annum,
respectively, and as such are not subject to fluctuations of interest rates.

---

- 75 -

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, 2008, market prices were US$10.79/oz for silver, US$870/oz
for gold, US$949/tonne for lead, and US$1,121/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.

The Company has not entered into any hedging or other commodity
based risk instruments.

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, 2008.
- Proportional foreign exchange movement of -10% (depreciation of CAD) and
  +10% (appreciation of CAD) against the USD, from the December 31, 2008 CAD to
  USD exchange rate of 0.821.
- Proportional foreign exchange movement of -10% (depreciation of CAD) and
  +10% (appreciation of CAD) against the Mexican peso, from the December 31,
  2008 CAD to Mexican peso exchange rate of 11.296.
- A parallel shift of +10%/-10% from the prevailing commodity prices of
  US$10.79/oz for silver, US$870/oz for gold, US$949/tonne for lead, and
  US$1,121/tonne for zinc as of December 31, 2008.

---

- 76 -

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
      
      
      Currency
        Rate
      
      
      Commodity
        PriceRisk
      
      
      Risk
      
      
      Risk-1%
      
      
      +1%
      
      
      -10%
      
      
      +10%
      
      
      -10%
      
      
      +10%CarryingAmount
      
      
      Income
      
      
      Income
      
      
      Income
      
      
      Income
      
      
      Income
      
      
      Income($'000)
      
      
      ($'000)
      
      
      ($'000)
      
      
      ($'000)
      
      
      ($'000)
      
      
      ($'000)
      
      
      ($'000)Financial assetsCash and cash equivalentsCAD
      
      115
      
      
      (1
      )
      
      1
      
      
      -
      
      
      -
      
      
      -
      
      
      -USD
      
      114
      
      
      (1
      )
      
      1
      
      
      13
      
      
      (10
      )
      
      -
      
      
      -Pesos
      
      377
      
      
      (4
      )
      
      4
      
      
      42
      
      
      (34
      )
      
      -
      
      
      -Amounts receivableUSD
      
      337
      
      
      -
      
      
      -
      
      
      37
      
      
      (31
      )
      
      (34
      )
      
      34Pesos
      
      2,433
      
      
      -
      
      
      -
      
      
      270
      
      
      (221
      )
      
      -
      
      
      -Financial liabilitiesAccounts payable and accruedliabilitiesUSD
      
      1,000
      
      
      -
      
      
      -
      
      
      (111
      )
      
      91
      
      
      -
      
      
      -Pesos
      
      1,443
      
      
      -
      
      
      -
      
      
      (160
      )
      
      131
      
      
      -
      
      
      -Capital lease obligationUSD
      
      893
      
      
      -
      
      
      -
      
      
      (99
      )
      
      81
      
      
      -
      
      
      -Total Increase(Decrease)
      
      
      
      
      (6
      )
      
      6
      
      
      (8
      )
      
      7
      
      
      (34
      )
      
      34


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.

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- 77 -

PART II

ITEM
13           Defaults,
Dividend Arrearages and Delinquencies

Not applicable.

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, 2008. 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, 2008.

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, 2008, 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, 2008.

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, 2008. 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, 2008, 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.

---

- 78 -

ITEM
16           Reserved

ITEM 16A        Audit
Committee Financial Expert

Our board of directors had determined that the past Chairman of
the Company's Audit Committee, Mr. John T. Kopcheff BSc (Hons), SPE, AAPG,
qualified as an "audit committee financial expert" as that term is defined in
Item 16A(b) of Form 20-F.

On February 12, 2009, Mr. Martin Carsky was appointed as the
new Chairman of the Audit Committee and Mr. Kopcheff stepped down. Mr. Carsky
also qualifies as an audit committee financial expert and he holds a Bachelor
of Science degree from the University of British Columbia in Vancouver, British
Columbia and holds the designation of Chartered Accountant.

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

Mr. Kopcheff and Mr. Carsky both qualify 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 Business Conduct and Ethics (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.

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, 2008. The aggregate fees billed by KPMG LLP,
Chartered Accountants, for professional services rendered for the audit of our
2008 annual financial statements included in this annual report for the year
ended December 31, 2008 were $270,000 compared to $391,555 for the year ended
December 31, 2007. The aggregate fees billed by KPMG Mexico for professional
services rendered for the Mexican statutory audits of our subsidiaries 2008
annual financial statements included in this annual report for the year ended
December 31, 2008 were US$33,000 compared to US$38,000 for the year ended
December 31, 2007.

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 $nil for each of the years ended December
31, 2008 and December 31, 2007.

---

- 79 -

Tax Fees

The aggregate fees billed for tax compliance, tax advice and
tax planning by KPMG LLP, Chartered Accountants, were $3,500 for the year ended
December 31, 2008, compared to $3,300 for the year ended December 31, 2007. The
aggregate fees billed for certification of the Companys Value Added Tax
receivable by KPMG Mexico was US$25,000.

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 $31,451 for the year ended December 31, 2008 compared to $4,600 for
the year ended December 31, 2007.

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:

|- | Approved by our audit committee;
      or                                                                                                                                                                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                     
|- | 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.

---

- 80 -

PART III

ITEM
17           Financial
Statements

Financial Statements Filed as Part of the Annual Report:

|- | Report of Independent Registered
      Public Accounting Firm dated March 11, 2009.                                                               
|- | --------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                   
|- | Consolidated balance sheets for
      the fiscal years ended December 31, 2008 and 2007.                                                          
|  |                                                                                                                                                   
|- | Consolidated statements of operations
      and comprehensive loss and deficit for the fiscal years ended December 31,
      2008, 2007, and 2006.
|  |                                                                                                                                                   
|- | Consolidated statements of cash
      flows for the fiscal years ended December 31, 2008, 2007, and 2006.                                         
|  |                                                                                                                                                   
|- | Notes to consolidated financial
      statements                                                                                                  

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).                                                                                                            
|    |                                                                                                                                                                                                                             
|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).

---

- 81 -

|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).                                                                                                                                               
|      |                                                                                                                                                                                                                                                                                                                                                                             
|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.                                                                                                                                                                                                                                          
|      |                                                                                                                                                                                                                                                                                                                                                                             
|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   | New Age Investments
        Inc. (incorporated by reference from our Registration Statement on Form
        20-F, filed on August 10, 2004).                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                             
|4.3   | Metalicos de
        Durango, S.A. de C.V.                                                                                                                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                             
|4.4   | Minera de Villa
        Seca, S.A. de C.V.                                                                                                                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                             
|4.5   | Exploraciones
        Mineras el Rosario, 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 and September 2008).                                                                                                                                                                                                    

---

- 82 -

|6.    | 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.                                                                                                     
|      |                                                                                                                                                                                                
|7.    | 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.                                                                                                     
|      |                                                                                                                                                                                                
|8.    | Additional
        Exhibits                                                                                                                                                                    
|      |                                                                                                                                                                                                
|8.1   | 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).
|      |                                                                                                                                                                                                
|8.2   | 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).                
|      |                                                                                                                                                                                                
|8.3   | Map of Topia
        Property                                                                                                                                                                  
|      |                                                                                                                                                                                                
|8.4   | Map of Guanajuato
        Property                                                                                                                                                             
|      |                                                                                                                                                                                                
|8.5   | Map of Mapimi
        Property                                                                                                                                                                 
|      |                                                                                                                                                                                                
|*     | 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

iiiOctober 12, 2006 press release.

---

- 83 -

**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 Resources 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 19, 2009



---



GREAT PANTHER RESOURCES LIMITED

CONSOLIDATED FINANCIAL STATEMENTS 
  FOR THE YEARS ENDEDDECEMBER 31, 2008 and 2007Expressed in Canadian Dollars

---

GREAT PANTHER RESOURCES LIMITED

MANAGEMENTS STATEMENT OF RESPONSIBILITY FOR FINANCIAL
  REPORTING

The management of Great Panther Resources Limited is
  responsible for the presentation and preparation of the accompanying
  consolidated financial statements of Great Panther Resources 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, 2008, 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, 2008.

KPMG LLP, an independent registered public accounting firm, has
  audited the effectiveness of our internal control over financial reporting as of
  December 31, 2008, as stated in their report which appears herein.

|Robert A. Archer      | Raakel S. Iskanius   
|----------------------- | -----------------------
|Chief Executive Officer | Chief Financial Officer
|                        |                        
|March 11, 2009          | March 11, 2009         

---





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

REPORT OF INDEPENDENT REGISTERED PUBLIC 
  ACCOUNTING FIRM

To the Shareholders and Board of Directors of Great Panther
  Resources Limited

We have audited Great Panther Resources Limiteds (the
  Company") internal control over financial reporting as of December 31, 2008,
  based on the criteria established in Internal ControlIntegrated Frameworkissued 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, included in the
  accompanying Managements Report on Internal Control over Financial
  Reporting.Our responsibility is to express an opinion on 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.

---



In our opinion, the Company maintained, in all material
  respects, effective internal control over financial reporting as of December 31,
  2008, 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, 2008 and 2007 and the related
  consolidated statements of operations and comprehensive loss, deficit and cash
  flows for each of the years in the three-year period ended December 31,
  2008 and our report dated March 11, 2009 expressed an unqualified opinion on
  those consolidated financial statements.

*/s/ KPMG LLP*

Chartered Accountants

Vancouver, Canada

March 11, 2009

KPMG LLP, a Canadian limited liability partnership is the
  Canadian 
  member firm of KPMG International, a Swiss cooperative.

---





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

REPORT OF INDEPENDENT REGISTERED PUBLIC 
  ACCOUNTING FIRM

To the Board of Directors of Great Panther Resources Limited

We have audited the accompanying consolidated balance sheets
  of Great Panther Resources Limited (the “Company") as of December
  31, 2008 and 2007 and the related consolidated statements of operations and
  comprehensive loss, deficit and cash flows for each of the years in the three-year
  period ended December 31, 2008. These consolidated financial statements are
  the responsibility of the Company's management. Our responsibility is to express
  an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally
  accepted auditing standards. We also conducted our audits 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 the financial statements are free of material misstatement.
  An audit includes examining, on a test basis, evidence supporting the amounts
  and disclosures in the financial statements. An audit also includes assessing
  the accounting principles used and significant estimates made by management,
  as well as evaluating the overall financial statement presentation. We believe
  that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  the Company as of December 31, 2008 and 2007 and the results of its operations
  and its cash flows for each of the years in the three-year period ended December
  31, 2008 in conformity with Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles vary in certain significant
  respects from US generally accepted accounting principles. Information relating
  to the nature and effect of such differences is presented in Note 20 to the
  consolidated financial statements.

As discussed in Note 2(a), the consolidated statements of operations
  for the years ended December 31, 2007 and 2006 have been restated.

We also have audited, in accordance with the standards of the
  Public Company Accounting Oversight Board (United States), the Company's internal
  control over financial reporting as of December 31, 2008, 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 11, 2009 expressed an unqualified opinion on the effectiveness of
  the Company’s internal control over financial reporting.

*/s/ KPMG LLP*

Chartered Accountants

Vancouver, Canada

March 11, 2009

KPMG LLP, a Canadian limited liability partnership is the
  Canadian 
  member firm of KPMG International, a Swiss cooperative.

---

|GREAT PANTHER RESOURCES LIMITED
|-------------------------------
|CONSOLIDATED BALANCE SHEETS    
|(Expressed in Canadian Dollars)
|                               
|December 31, 2008 and 2007     

|                                                               |   | 2008        |   |   | 2007        |  
|-------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                               |   |             |   |   |             |  
|Assets                                                         |   |             |   |   |             |  
|                                                               |   |             |   |   |             |  
|Current assets:                                                |   |             |   |   |             |  
|Cash and
      cash equivalents                                | $ | 606,244     |   | $ | 5,357,977   |  
|Marketable securities                                          |   | 6,435       |   |   | 39,795      |  
|Amounts
      receivable (note 5)                              |   | 2,806,432   |   |   | 5,879,243   |  
|Income taxes recoverable                                       |   | 431,523     |   |   | 363,220     |  
|Inventories (note 6)                                           |   | 945,506     |   |   | 748,473     |  
|Prepaid expenses, deposits and advances                        |   | 495,287     |   |   | 576,589     |  
|                                                               |   | 5,291,427   |   |   | 12,965,297  |  
|                                                               |   |             |   |   |             |  
|Mineral properties, plant and equipment (note 7)               |   | 16,087,761  |   |   | 18,087,813  |  
|                                                               |   |             |   |   |             |  
|                                                               | $ | 21,379,188  |   | $ | 31,053,110  |  
|                                                               |   |             |   |   |             |  
|                                                               |   |             |   |   |             |  
|Liabilities and Shareholders Equity                           |   |             |   |   |             |  
|                                                               |   |             |   |   |             |  
|Current liabilities:                                           |   |             |   |   |             |  
|Accounts
      payable and accrued liabilities                 | $ | 3,534,842   |   | $ | 2,216,730   |  
|Current portion of
      capital lease obligation (note 18(e)) |   | 436,498     |   |   | -           |  
|Current portion of
      long-term debt (note 9(a))            |   | -           |   |   | 88,625      |  
|                                                               |   | 3,971,340   |   |   | 2,305,355   |  
|Long-term liabilities:                                         |   |             |   |   |             |  
|Capital lease obligation
      (note 18(e))                    |   | 456,788     |   |   | -           |  
|Convertible loan notes (note 9(b))                             |   | 4,651,690   |   |   | 4,028,611   |  
|Asset retirement
      obligations (note 10)                   |   | 1,104,877   |   |   | 1,101,171   |  
|Future income tax
      liability (note 16)                    |   | 1,901,614   |   |   | 2,421,504   |  
|                                                               |   | 12,086,309  |   |   | 9,856,641   |  
|                                                               |   |             |   |   |             |  
|Shareholders equity:                                          |   |             |   |   |             |  
|Capital
      stock (note 11(b))                               |   | 57,865,462  |   |   | 56,988,447  |  
|Contributed surplus (note
      11(c))                         |   | 7,724,900   |   |   | 6,261,116   |  
|Equity
      component of convertible note (note 9(b))         |   | 2,569,000   |   |   | 2,569,000   |  
|Advances on share
      subscriptions (note 11(f))             |   | 85,000      |   |   | -           |  
|Accumulated other comprehensive income (loss) (note 12)        |   | (37,592     | ) |   | 5,945       |  
|Deficit                                                        |   | (58,913,891 | ) |   | (44,628,039 | )
|                                                               |   | 9,292,879   |   |   | 21,196,469  |  
|                                                               |   |             |   |   |             |  
|Nature of operations and going concern
      (note 1)          |   |             |   |   |             |  
|Commitments and contingencies (notes 9, 10, and 18)            |   |             |   |   |             |  
|Subsequent events (note 19)                                    |   |             |   |   |             |  
|                                                               |   |             |   |   |             |  
|                                                               | $ | 21,379,188  |   | $ | 31,053,110  |  

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

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

---

GREAT PANTHER RESOURCES LIMITEDCONSOLIDATED
  STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 
  (Expressed in Canadian
  Dollars)

Years ended December 31, 2008, 2007 and 2006

|                                                         |   | 2008        |   |   | 2007            |   |   | 2006            |  
|-------------------------------------------------------- | - | ----------- | - | - | --------------- | - | - | --------------- | -
|                                                         |   |             |   |   | Restated        |   |   | Restated        |  
|                                                         |   |             |   |   | Note
      2(a) |   |   | Note
      2(a) |  
|Revenues:                                                |   |             |   |   |                 |   |   |                 |  
|Mineral sales                                            | $ | 22,445,438  |   | $ | 15,523,094      |   | $ | 6,333,034       |  
|Cost of sales (excluding amortization                    |   |             |   |   |                 |   |   |                 |  
|and depletion)                                           |   | 18,144,223  |   |   | 14,152,657      |   |   | 6,382,639       |  
|                                                         |   | 4,301,215   |   |   | 1,370,437       |   |   | (49,605         | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Expenses:                                                |   |             |   |   |                 |   |   |                 |  
|Amortization and depletion of
      mineral              |   |             |   |   |                 |   |   |                 |  
|properties,
      plant and equipment                    |   | 4,285,029   |   |   | 3,603,668       |   |   | 1,421,769       |  
|Accretion on asset retirement
      obligation           |   | 281,677     |   |   | 22,704          |   |   | -               |  
|Mineral property exploration expenditures
      (note 8) |   | 6,327,926   |   |   | 6,803,104       |   |   | 3,968,083       |  
|General and administrative                               |   | 5,965,595   |   |   | 4,672,362       |   |   | 4,408,631       |  
|Stock-based compensation (note 11(d))                    |   | 1,608,271   |   |   | 1,129,500       |   |   | 4,672,774       |  
|                                                         |   | 18,468,498  |   |   | 16,231,338      |   |   | 14,471,257      |  
|                                                         |   | (14,167,283 | ) |   | (14,860,901     | ) |   | (14,520,862     | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Other income (expenses):                                 |   |             |   |   |                 |   |   |                 |  
|Interest income                                          |   | 240,929     |   |   | 207,892         |   |   | 366,319         |  
|Interest expense                                         |   | (1,155,197  | ) |   | (1,035,577      | ) |   | (830,236        | )
|Foreign exchange gain (loss)                             |   | 113,042     |   |   | (1,440,802      | ) |   | 10,358          |  
|Gain
      on disposal of fixed assets                   |   | 31,168      |   |   | -               |   |   | -               |  
|                                                         |   | (770,058    | ) |   | (2,268,487      | ) |   | (453,559        | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Loss before provision for income taxes                   |   | (14,937,341 | ) |   | (17,129,388     | ) |   | (14,974,421     | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Provision for income taxes (note 16)                     |   | 651,489     |   |   | (2,571,473      | ) |   | (110,016        | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Loss for the year                                        |   | (14,285,852 | ) |   | (19,700,861     | ) |   | (15,084,437     | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Other comprehensive income (loss), net of
      tax:     |   |             |   |   |                 |   |   |                 |  
|Unrealized gain (loss) on marketable
      securities    |   | (43,537     | ) |   | 5,945           |   |   | -               |  
|                                                         |   |             |   |   |                 |   |   |                 |  
|Comprehensive loss
      for the year                    | $ | (14,329,389 | ) | $ | (19,694,916     | ) | $ | (15,084,437     | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Diluted and basic loss per share (note 2(o))             | $ | (0.18       | ) | $ | (0.27           | ) | $ | (0.25           | )
|                                                         |   |             |   |   |                 |   |   |                 |  
|Weighted average number of common                        |   |             |   |   |                 |   |   |                 |  
|shares outstanding                                       |   | 81,321,733  |   |   | 72,227,455      |   |   | 59,720,424      |  

See accompanying notes to consolidated financial statements.

2

---

GREAT PANTHER RESOURCES LIMITEDCONSOLIDATED
  STATEMENTS OF DEFICIT 
  (Expressed in Canadian Dollars)

Years ended December 31, 2008, 2007 and 2006

|                           |   | 2008        |   |   | 2007        |   |   | 2006        |  
|-------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|Deficit, beginning of year | $ | (44,628,039 | ) | $ | (24,927,178 | ) | $ | (9,842,741  | )
|Loss for the year          |   | (14,285,852 | ) |   | (19,700,861 | ) |   | (15,084,437 | )
|Deficit, end of year       | $ | (58,913,891 | ) | $ | (44,628,039 | ) | $ | (24,927,178 | )

See accompanying notes to consolidated financial statements.

3

---

GREAT PANTHER RESOURCES LIMITEDCONSOLIDATED
  STATEMENTS OF CASH FLOWS
  (Expressed in Canadian Dollars)

Years ended December 31, 2008, 2007 and 2006

|                                                      | 2008            | 2007              | 2006             
|----------------------------------------------------- | --------------- | ----------------- | -----------------
|                                                      |                 |                   |                  
|Cash flows used in operating activities:              |                 |                   |                  
|Loss for
      the year                               | $ (14,285,852)  | $ (19,700,861)    | $ (15,084,437)   
|Items not involving cash:                             |                 |                   |                  
|Amortization and depletion of mineral                 |                 |                   |                  
|properties,
      plant and equipment                 | 4,285,029       | 3,603,668         | 1,421,769        
|Foreign exchange loss (gain) on debt                  | 5,119           | (778)             | (12,395)         
|Foreign exchange loss (gain) on capital               |                 |                   |                  
|lease
      obligation                                | 128,493         | -                 | -                
|Stock-based compensation                              | 1,608,271       | 1,129,500         | 4,672,774        
|Shares issued for mineral exploration                 |                 |                   |                  
|expenditures                                          | 191,568         | 246,000           | 613,000          
|Future income tax                                     | (519,890)       | 2,421,504         | (17,459)         
|Interest accretion on debt discount                   | 11,154          | 259,355           | 378,363          
|Interest accretion on convertible note payable        | 623,079         | 377,812           | 149,799          
|Interest on capital lease obligation                  | 24,438          | -                 | -                
|Accretion on asset retirement obligations             | 281,677         | 22,704            | -                
|Write-down of inventory                               | 240,810         | -                 | -                
|Gain on disposal of capital assets                    | (31,168)        | -                 | -                
|Changes in non-cash
      operating working capital:  |                 |                   |                  
|Amounts receivable                                    | 3,209,104       | (1,758,659)       | (3,119,463)      
|Inventories                                           | (357,566)       | (143,346)         | (605,127)        
|Prepaid expenses and deposits                         | 371,085         | 245,025           | (637,702)        
|Accounts payable and accrued liabilities              | 1,028,329       | 1,304,802         | 680,062          
|Income taxes                                          | (68,303)        | (490,695)         | 127,475          
|Net cash used in
      operating activities           | (3,254,623)     | (12,483,969)      | (11,433,341)     
|                                                      |                 |                   |                  
|Cash flows used in investing activities:              |                 |                   |                  
|Marketable securities                                 | (10,177)        | (33,850)          | -                
|Mineral properties and
      capital expenditures     | (1,927,624)     | (3,328,413)       | (5,736,570)      
|Proceeds from disposal
      of capital assets        | 100,614         | -                 | -                
|Net cash used in
      investing activities           | (1,837,187)     | (3,362,263)       | (5,736,570)      
|                                                      |                 |                   |                  
|Cash flows from financing activities:                 |                 |                   |                  
|Repayment
      of long-term debt                     | (104,898)       | (1,456,893)       | (4,897,504)      
|Repayment of capital
      lease obligation           | (180,985)       | -                 | -                
|Proceeds
      from advances on share subscriptions   | 85,000          | -                 | -                
|Proceeds from exercise of
      warrants              | 142,710         | 8,725,054         | 9,224,170        
|Proceeds
      from exercise of options               | 398,250         | 678,000           | 869,257          
|Proceeds from issuance of
      convertible notes     | -               | 4,050,000         | 2,020,000        
|Issuance of shares for
      cash, net of issue costs | -               | -                 | 13,866,639       
|Net cash from financing activities                    | 340,077         | 11,996,161        | 21,082,562       
|                                                      |                 |                   |                  
|Increase (decrease) in cash and cash equivalents      | (4,751,733)     | (3,850,071)       | 3,912,651        
|                                                      |                 |                   |                  
|Cash and cash
      equivalents, beginning of year    | 5,357,977       | 9,208,048         | 5,295,397        
|                                                      |                 |                   |                  
|Cash and cash
      equivalents, end of year          | $
      606,244 | $
      5,357,977 | $
      9,208,048

See accompanying notes to consolidated financial statements.

4

---

GREAT PANTHER RESOURCES LIMITEDCONSOLIDATED
  STATEMENTS OF CASH FLOWS 
  (Expressed in Canadian Dollars)

Years ended December 31, 2008, 2007 and 2006

|                                                      |   | 2008     |   |   | 2007    |  |   | 2006    | 
|----------------------------------------------------- | - | -------- | - | - | ------- |  | - | ------- | 
|                                                      |   |          |   |   |         |  |   |         | 
|Supplementary cash flow information:                  |   |          |   |   |         |  |   |         | 
|Income
      taxes received                           | $ | 63,296   |   | $ | -       |  | $ | -       | 
|Income taxes paid                                     |   | -        |   |   | 640,664 |  |   | -       | 
|Interest
      expense paid                           |   | 496,526  |   |   | 330,517 |  |   | 121,200 | 
|Interest income received                              |   | 250,317  |   |   | 198,504 |  |   | 302,074 | 
|                                                      |   |          |   |   |         |  |   |         | 
|Non-cash financing and investing transactions:        |   |          |   |   |         |  |   |         | 
|Mineral
      property adjustment from changes in     |   |          |   |   |         |  |   |         | 
|asset
      retirement obligation                     |   | (277,971 | ) |   | 986,182 |  |   | 92,285  | 
|Assumption of capital lease obligation                |   |          |   |   |         |  |   |         | 
|on purchase
      of equipment                        |   | 785,047  |   |   | -       |  |   | -       | 
|Value
      added tax on capital lease obligation     |   | 136,293  |   |   | -       |  |   | -       | 
|Warrants and options
      issued for financing fee   |   | -        |   |   | -       |  |   | 251,500 | 
|Assumption of debt on purchase of mining              |   | -        |   |   | -       |  |   | 231,260 | 
|concession                                            |   |          |   |   |         |  |   |         | 
|Shares
      issued and funds received in prior years |   | -        |   |   | -       |  |   | 49,910  | 
|Issuance of shares
      pursuant to mineral property |   | 191,568  |   |   | 246,000 |  |   | 613,000 | 
|option
      agreements                               |   |          |   |   |         |  |   |         | 

See accompanying notes to consolidated financial statements.

5

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

|1. | Nature of operations and going concern:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Great Panther Resources 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.                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company is in the business of acquisition,
      development and exploration, and operation of mineral properties and mines
      in Mexico. Of the properties in which the Company has an interest, the
      Topia and Guanajuato mines were in production at the balance sheet dates.
      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 on a going
      concern basis, which assumes the realization of assets and liquidation of
      liabilities in the normal course of business. During the years ended
      December 31, 2008 and 2007, the Company recorded losses of approximately
      $14,286,000 and $19,701,000 respectively, and used cash in operations of
      approximately $3,255,000 and $12,484,000, respectively. As at December 31,
      2008, the Company had an accumulated deficit of approximately $58,914,000
      and a working capital balance of $1,320,000. These conditions raise
      substantial doubt about the Companys ability to continue as a going
      concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In response to these conditions, management has
      undertaken a plan to significantly reduce costs through a series of
      actions including, but not limited to, reducing exploration activities,
      reducing capital expenditures, obtaining more favourable smelter terms
      with a new customer, reducing its staff levels, and considering other
      financing alternatives for its operations. Subsequent to year end, the
      Company raised additional equity (note 19(a)).                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Companys ability to continue on as a going concern
      is dependent on the achievement of profitable operations, the existence of
      economically recoverable mineral reserves and the ability to raise
      adequate financing from lenders, shareholders and other investors to
      support its business activities. Given the current economic environment,
      there can be no assurance that such financing will be available to the
      Company on acceptable terms, or at all. Failure to continue as a going
      concern would require the Companys assets and liabilities to be presented
      on a liquidation basis, which would differ materially from the going
      concern basis.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2. | Significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

6

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

The effect of the restatement is a
    decrease in cost of sales (excluding amortization and depletion) and a decrease
    in revenues for the year ended December 31, 2007 by $1,963,976 (2006 -
    $736,408). This restatement has no impact on the reported loss and loss per
    share for each of the years.

| |                                       | 2007          | 2006             
| | ------------------------------------- | ------------- | -----------------
| |                                       | As originally |                  
| |                                       | reported      | As
      restated
| |                                       |               |                  
| | Mineral sales                         | $17,487,070   | $15,523,094      
| | Cost of sales (excluding amortization |               |                  
| | and depletion)                        | $16,116,633   | $14,152,657      

| | (b) | Basis of presentation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | These consolidated financial statements include the
      accounts of the Company and its wholly-owned subsidiaries, New Age
      Investments Inc., Minera Mexicana el Rosario, S.A. de C.V., Metalicos de
      Durango, S.A. de C.V., Minera de Villa Seca, S.A. de C.V., and
      Exploraciones Mineras el Rosario, S.A. de C.V. Significant inter-company
      balances and transactions are eliminated on consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | These consolidated financial statements have been
      prepared by management in accordance with Canadian generally accepted
      accounting principles. The significant measurement differences between
      those principles and requirements promulgated by the Financial Accounting
      Standards Board and the Securities and Exchange Commission (collectively
      US GAAP), as they affect the Company, are disclosed in note 20.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (c) | Use of estimates:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | The preparation of the consolidated financial statements
      requires management to make estimates and assumptions which affect the
      reported amounts of assets and liabilities, the disclosure of contingent
      assets and liabilities at the date of the consolidated financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Significant areas requiring the use of management
      estimates relate to the assessment for impairment and useful life of
      mineral properties, plant and equipment, site restoration costs, valuation
      of amounts receivable and future income tax assets, assumptions used in
      determining the fair value of non-cash stock-based compensation, the fair
      value of the equity component of convertible loan notes and the fair
      values assigned to the net assets acquired and liabilities assumed on
      acquisition. Due to the inherent uncertainty involved with making such
      estimates, actual results reported in future years could differ from these
      estimates.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (d) | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Cash and cash equivalents consist of highly liquid
      investments that are readily convertible to known amounts of cash. Short
      term investments have maturity dates of three months or less from the date
      of purchase, or they are redeemable prior to maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (e) | Marketable securities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Marketable securities are recorded at fair value based on
      quoted market prices.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (f) | Inventories:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Inventories consist of ore stockpiles and concentrate
      inventories which are valued at the lower of weighted average cost and net
      realizable value. Costs include all direct production costs and fixed
      overhead.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

7

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| |     | Materials and supplies inventory, which includes the cost
      of consumables used in operations such as fuel, grinding media, chemicals
      and spare parts, are stated at the lower of average cost and replacement
      cost. Major spare parts and standby equipment are included in property,
      plant, and equipment when they are expected to be used during more than
      one period or if they can only be used in connection with an item of
      property, plant, and equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (g) | Mineral properties, plant and equipment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | The Companys policy is to expense, as incurred,
      exploration expenditures, periodic option payments related to mineral
      properties and administrative and land use costs incurred prior to
      commercial feasibility of mining operations being established. Mineral
      property acquisition costs are capitalized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Mineral property acquisition costs include cash
      consideration and the fair value of common shares issued for mineral
      property interests, pursuant to the terms of the relevant agreement. Costs
      related to the acquisition of property and mineral rights, equipment,
      construction of production facilities and the development and betterment
      of mine infrastructure and equipment are capitalized. Costs of permitting,
      evaluation and feasibility are capitalized upon completion of an analysis
      which demonstrates the economic viability of the mineral deposit. Mineral
      property sales proceeds or option payments received for exploration rights
      are treated as cost recoveries.                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Once commercial production has commenced, production
      facilities and equipment are depreciated using the units-of-production
      method, if sufficient reserve information is available or the
      straight-line method over their estimated useful lives, not to exceed the
      life of the mine to which the assets relate. As at December 31, 2008, the
      Company did not have a reliable estimate of reserves and therefore did not
      use the units-of-production method. Effective October 1, 2008, the
      remaining life of the Topia mine was extended from 2 years to 7 years.
      Effective December 31, 2008, the remaining life of the Guanajuato mine was
      extended from 2 years to 3 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.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Maintenance and repairs are charged to operations as
      incurred. When assets are retired or sold, the costs and related
      accumulated depreciation are eliminated from the accounts and any
      resulting gain or loss is reflected in operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Capital assets held at the parent company are recorded at
      cost less accumulated depreciation, calculated using the following
      basis:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | Computer equipment     | 30% declining balance                   
| | ---------------------- | ----------------------------------------
| | Furniture and fixtures | 20% declining balance                   
| | Office equipment       | 20% declining balance                   
| | Leasehold improvements | straight-line over the term of the lease

| | (h) | 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

8

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| |     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (i) | Stock-based compensation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company accounts for stock-based payments granted to
      non-employees after January 1, 2002 and employees after January 1, 2003
      using the fair value-based method. Under the fair value-based method,
      compensation cost is measured at the fair value as the awards are earned
      and services performed and charged to operations over the service period
      which normally is the period during which the options vest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (j) | Revenue recognition:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company recognizes revenue from the sale of
      concentrates based on market metal prices and mineral content when title
      to the concentrates transfers to the customer, which generally occurs on
      the date the shipment is received. 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.
      Variations between the sales price recorded at the shipment date and the
      actual final sales price at the settlement date caused by changes in
      market metal prices results in an embedded derivative in the related
      accounts receivable balance. The embedded derivative is recorded at fair
      value each period until final settlement occurs with changes in fair value
      classified as a component of revenue.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (k) | Asset retirement obligations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company's mining and exploration activities are
      subject to various laws and regulations governing the protection of the
      environment. The Company recognizes the fair value of future reclamation
      and remediation as a liability in the period in which it incurs a legal
      obligation associated with the retirement of tangible long-lived assets
      that results from the acquisition, construction, development, and/or
      normal use of the asset, if a reasonable estimate of fair value can be
      made. The liability is measured initially at fair value and the resulting
      cost capitalized to the carrying value of the related assets. In
      subsequent periods, the liability is adjusted for accretion of the
      discount and any change in the amount or timing of the underlying cash
      flows. The asset retirement cost is depreciated over the remaining life of
      the assets.                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | 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 asset retirement obligations as evidence becomes
      available indicating that its remediation and reclamation liabilities may
      have changed. Any such changes in costs could materially impact the future
      amounts charged to operations for reclamation and remediation
      obligations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

9

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| | (l) | Financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Companys financial instruments consist of cash and
      cash equivalents, marketable securities, amounts receivable, income taxes
      recoverable, accounts payable and accrued liabilities, long-term debt and
      convertible loan notes. These financial instruments are classified as
      either held-for-trading, available- for-sale, held-to-maturity, loans and
      receivables or other financial liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Held-for-trading financial instruments include cash and
      cash equivalents and are initially and subsequently recorded at fair
      value. Unrealized gains and losses related to revaluations are recorded in
      net income for the period. A financial asset is classified in this
      category if acquired principally for the purpose of selling in the short
      term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Transaction costs are expensed as incurred for financial
      instruments designated as held-for-trading. The effective interest rate
      method of amortization is used for any transaction costs for financial
      instruments measured at amortized cost, which includes loans and
      receivables and other financial liabilities. Available-for-sale financial
      assets include marketable securities and are initially and subsequently
      recorded at fair value. Unrealized gains and losses resulting from
      revaluation are included in other comprehensive income. When the assets
      are sold or an impairment write down is required, the accumulated fair
      value adjustments recognized in equity are included in the income
      statement. Financial assets that are non-derivatives and not classified in
      any of the other categories are classified as available- for-sale.
      Categories of regular way purchases and sales of financial assets are
      accounted for at the settlement date.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Loans and receivables include amounts receivable and
      income taxes recoverable, and are initially measured at fair value and
      subsequently measured at amortized cost. Gains and losses resulting from
      revaluations, impairment write-downs and foreign exchange translation
      adjustments are recognized in net earnings for the period. Financial
      assets with fixed or determinable payments that are not quoted in an
      active market are classified in this category.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Other financial liabilities include accounts payable,
      accrued liabilities, long-term debt and convertible loan notes. Other
      financial liabilities are initially measured at fair value and subsequent
      periodical revaluations are recorded at amortized cost using the effective
      interest rate method. Gains and losses resulting from revaluation and
      foreign exchange translation adjustments are recognized in net earnings
      for the period. The conversion feature of the convertible loan notes are
      recorded at fair value using a Black-Scholes valuation model upon issue of
      the note. The fair value of the conversion feature is recorded as an
      equity component of the note financing, reducing the amount assigned to
      the debt component. The debt component is accreted to its fair value until
      extinguished on conversion or maturity.                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company assesses at each balance sheet date whether
      there is objective evidence that a financial asset or a group of financial
      assets is impaired using the following criteria:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

10

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

terms of the receivables. Significant
  financial difficulties of the debtor or delinquency in payments are considered
  indicators that a trade receivable is impaired. The amount of the provision is
  the difference between the assets carrying amount and the present value of
  estimated future cash flows, discounted at the original effective interest rate.
  The carrying amount of the asset is reduced through the use of an allowance
  account and the amount of the loss is recognized in the income statement within
  general and administrative expenses. When a trade receivable is uncollectible,
  it is written off against the allowance account for trade receivables.
  Subsequent recoveries of amounts previously written off are credited against
  general and administrative expenses in the income statement.

| | (m) | Foreign currency translation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | The functional currency of the Company and its
      subsidiaries is the Canadian dollar.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | Monetary items denominated in a foreign currency are
      translated to Canadian dollars at exchange rates in effect at the balance
      sheet date and non-monetary items are translated at rates of exchange in
      effect when the assets were acquired or obligations incurred. Revenues and
      expenses are translated at rates in effect at the time of the
      transactions. Foreign exchange gains and losses are included in
      income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (n) | Income taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | The Company uses the asset and liability method of
      accounting for income taxes. Under this method, future income tax assets
      and liabilities are determined based on differences between the financial
      statement carrying values of existing assets and liabilities and their
      respective income tax bases (temporary differences), and tax loss carry
      forwards. Future income tax assets and liabilities are measured using
      enacted or substantively enacted tax rates expected to be in effect when
      the temporary differences are likely to be recovered or settled. The
      effect on future income tax assets and liabilities of a change in tax
      rates is included in operations in the period in which the change is
      substantively enacted. The amount of future income tax assets recognized
      is limited to the amount that is, in managements estimation, more likely
      than not to be realized.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (o) | Loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | Basic loss per share is computed by dividing net loss by
      the weighted average number of common shares outstanding during the
      reporting period. Diluted loss per share is computed similar to basic loss
      per share except that the weighted average shares outstanding are
      increased to include additional shares from the assumed exercise of stock
      options and warrants, if dilutive. The number of additional shares is
      calculated by assuming that outstanding stock options or warrants were
      exercised and that the proceeds from such exercises were used to acquire
      shares of common stock at the average market price during the reporting
      period. Diluted loss per share is the same as basic loss per share because
      the effect on the basic loss per share of outstanding options and warrants
      is anti-dilutive.                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (p) | Comparative figures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | Certain comparative figures have been reclassified to
      conform with current year presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

11

---

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|(Expressed in Canadian Dollars)               
|Years ended December 31, 2008, 2007 and 2006  

|3. | Adoption of new accounting standards:                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                          
|   | Effective January 1, 2008, the Company adopted the following new accounting standards issued by the Canadian Institute of Chartered Accountants (CICA):
|   |                                                                                                                                                          
|   | (a)                                                                                                                                                      
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   | (b)                                                                                                                                                      
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   | (c)                                                                                                                                                      
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|4. | Recent accounting pronouncements:                                                                                                                        
|   |                                                                                                                                                          
|   | (a)                                                                                                                                                      
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   |                                                                                                                                                          
|   | (b)                                                                                                                                                      
|   |                                                                                                                                                          
|   |                                                                                                                                                          

12

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

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

| |                                |   | 2008      |   |   | 2007      |  
| | ------------------------------ | - | --------- | - | - | --------- | -
| |                                |   |           |   |   |           |  
| | Trade accounts receivable      | $ | 1,693,512 |   | $ | 2,515,477 |  
| | Value added tax recoverable    |   | 1,292,264 |   |   | 3,037,482 |  
| | Other                          |   | 123,782   |   |   | 436,284   |  
| |                                |   | 3,109,558 |   |   | 5,989,243 |  
| | Allowance for doubtful amounts |   | (303,126  | ) |   | (110,000  | )
| |                                |   |           |   |   |           |  
| |                                | $ | 2,806,432 |   | $ | 5,879,243 |  

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

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

| |                                                              |   | 2008      |   |   | 2007    | 
| | ------------------------------------------------------------ | - | --------- | - | - | ------- | 
| |                                                              |   |           |   |   |         | 
| | Finished product                                             | $ | 506,383   |   | $ | 311,357 | 
| | Ore stockpile                                                |   | 7,026     |   |   | 29,319  | 
| | Materials and supplies                                       |   | 672,907   |   |   | 407,797 | 
| |                                                              |   | 1,186,316 |   |   | 748,473 | 
| |                                                              |   |           |   |   |         | 
| | Write-down of
      finished product to net realizable value |   | (240,810  | ) |   | -       | 
| |                                                              |   |           |   |   |         | 
| |                                                              | $ | 945,506   |   | $ | 748,473 | 

The amount of inventory recognized as
  an expense for the years ended December 31, 2008, 2007 and 2006 is represented
  by the amount of cost of sales.

13

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

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

| |                                                          |   | December
      31, |   |   | December
      31, |  
| | -------------------------------------------------------- | - | ------------------ | - | - | ------------------ | -
| |                                                          |   | 2008               |   |   | 2007               |  
| |                                                          |   |                    |   |   |                    |  
| | Topia Mine :                                             |   |                    |   |   |                    |  
| | Mineral
      properties                                 | $ | 2,731,978          |   | $ | 2,167,106          |  
| | Plant and equipment                                      |   | 5,847,432          |   |   | 5,660,608          |  
| | Buildings
      and mobile equipment                     |   | 395,716            |   |   | 393,346            |  
| | Asset retirement obligations (note 10)                   |   | 231,439            |   |   | 546,254            |  
| |                                                          |   | 9,206,565          |   |   | 8,767,314          |  
| | Accumulated depreciation and depletion                   |   | (3,838,616         | ) |   | (2,177,831         | )
| |                                                          |   | 5,367,949          |   |   | 6,589,483          |  
| |                                                          |   |                    |   |   |                    |  
| | Guanajuato Mines:                                        |   |                    |   |   |                    |  
| | Mineral properties                                       |   | 4,130,020          |   |   | 3,978,063          |  
| | Plant and
      equipment                                |   | 6,504,682          |   |   | 4,828,025          |  
| | Buildings and mobile
      equipment                     |   | 1,711,403          |   |   | 1,752,370          |  
| | Land                                                     |   | 2,844,889          |   |   | 2,844,889          |  
| | Asset retirement obligations (note 10)                   |   | 569,057            |   |   | 532,213            |  
| |                                                          |   | 15,760,051         |   |   | 13,935,560         |  
| | Accumulated depreciation and depletion                   |   | (5,333,231         | ) |   | (2,753,990         | )
| |                                                          |   | 10,426,820         |   |   | 11,181,570         |  
| |                                                          |   |                    |   |   |                    |  
| | Santo Nino                                               |   | 68,542             |   |   | 68,542             |  
| |                                                          |   |                    |   |   |                    |  
| | Leasehold improvements and other equipment,
      net of |   |                    |   |   |                    |  
| | accumulated depreciation
      of $208,299 (2007 -       |   |                    |   |   |                    |  
| | $123,957)                                                |   | 224,450            |   |   | 248,218            |  
| |                                                          |   |                    |   |   |                    |  
| |                                                          | $ | 16,087,761         |   | $ | 18,087,813         |  

| | (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 pursuant to the Topia Purchase Agreement located
      in the Municipality of Topia, 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 2 main properties, a plant, workshops
      and administration facilities, mining infrastructure, equipment, and
      certain surface rights (real estate).                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (c) | Arcoiris Concession:                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | On March 8, 2006, the Company purchased a 100% interest
      in the Arcoiris concession. 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 Topia Mine Property.

14

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| | (d) | Fundiciones Property:                                                                                                                                                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                       
| |     | On May 15, 2006, the Company purchased a 100% interest in
      the Fundiciones property. The additional 3.88 hectares of real estate is
      adjacent to the existing plant at Guanajuato and the purchase will
      facilitate any future expansion of the plant
      facilities.

The carrying values of the mineral
  properties, plant and equipment related to the Topia mine and the Guanajuato
  mine were $5,367,949 and $10,426,820, respectively, at December 31, 2008. The
  Company has determined that no impairment write-down was required at December
  31, 2008 for the Topia and Guanajuato mining properties. This conclusion is
  based on estimates of undiscounted future cash flows for these mines which
  include assumptions about long-term silver, gold, lead and zinc prices, future
  production levels, and future operating, capital and reclamation costs. Future
  changes in the assumptions used for impairment testing may result in material
  changes in asset carrying values.

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

| |                |        | San             | Santo           | San             | Topia           | Topia               |                 |                 |            |            
| | -------------- | ------ | --------------- | --------------- | --------------- | --------------- | ------------------- | --------------- | --------------- | ---------- | -----------
| |                |        | Antonio         | Nino            | Taco            | Main Block      | II to IV Guanajuato | Virimoa         | Mapimi          |           
| |                |        | (a)             | (a)             | (b)             | note
      7(a) | note
      7(a)     | note
      7(b) | (c)             | (d)        | 2008       
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Option         |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | payments:      | Cash   | $ -             | $ -             | $ -             | $ -             | $ -                 | $ -             | $ -             | $ 375,280  | $ 375,280  
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| |                | Shares | -               | -               | -               | -               | -                   | -               | -               | 191,568    | 191,568    
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Analysis       |        | -               | -               | -               | 44,624          | -                   | 210,420         | -               | 117,761    | 372,805    
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Drilling       |        | -               | -               | -               | 302,427         | -                   | 890,951         | -               | 643,106    | 1,836,484  
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Field costs    |        | 1,176           | -               | -               | 35,697          | -                   | 15,060          | -               | 54,774     | 106,707    
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Geology        |        | 5,180           | -               | -               | 267,517         | -                   | 694,985         | -               | 557,585    | 1,525,267  
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Project        |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | administration |        | 32,558          | -               | -               | 16,083          | -                   | 222,159         | -               | 182,021    | 452,821    
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Mine           |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | exploration    |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | costs          |        | -               | -               | -               | 1,549,391       | -                   | -               | -               | -          | 1,549,391  
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| |                |        | 38,914          | -               | -               | 2,215,739       | -                   | 2,033,575       | -               | 2,122,095  | 6,410,323  
| | Cost           |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Recoveries     |        | (82,397)        | -               | -               | -               | -                   | -               | -               | -          | (82,397)   
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| |                |        | (43,483)        | -               | -               | 2,215,739       | -                   | 2,033,575       | -               | 2,122,095  | 6,327,926  
| | Cumulative     |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | expenses,      |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | beginning of   |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | year           |        | 210,074         | 489,654         | 425,465         | 5,817,298       | 168,144             | 4,257,919       | 369,788         | 3,083,486  | 14,821,828 
| |                |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | Cumulative     |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | expenses,      |        |                 |                 |                 |                 |                     |                 |                 |            |            
| | end of year    |        | $
      166,591 | $
      489,654 | $
      425,465 | $8,033,037      | $
      168,144     | $6,291,494      | $
      369,788 | $5,205,581 | $21,149,754

15

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

The continuity of expenditures on
  mineral properties for the year ended December 31, 2007 is as follows:

| |                |        | San       | Santo    | San      | Topia           | Topia           |            |          |            |            
| | -------------- | ------ | --------- | -------- | -------- | --------------- | --------------- | ---------- | -------- | ---------- | -----------
| |                |        | Antonio   | Nino     | Taco     | Main Block      | II to IV        | Guanajuato | Virimoa  | Mapimi     |            
| |                |        | (a)       | (a)      | (b)      | note
      7(a) | note
      7(a) | note 7(b)  | (c)      | (d)        | 2007       
| |                |        |           |          |          |                 |                 |            |          |            |            
| | Option         |        |           |          |          |                 |                 |            |          |            |            
| | payments:      | Cash   | $ 49,119  | $102,721 | $ -      | $ -             | $ -             | $ -        | $ -      | $ 216,623  | $ 368,463  
| |                | Shares | -         | -        | -        | -               | -               | -          | -        | 246,000    | 246,000    
| | Analysis       |        | 19,588    | -        | -        | 51,098          | -               | 293,759    | -        | 160,448    | 524,893    
| | Drilling       |        | 161,212   | -        | -        | 766,273         | -               | 816,417    | -        | 928,912    | 2,672,814  
| | Field costs    |        | 315,688   | -        | -        | 111,448         | -               | 3,007      | -        | 171,758    | 601,901    
| | Geology        |        | 31,582    | -        | -        | 323,649         | -               | 750,145    | -        | 459,351    | 1,564,727  
| | Project        |        |           |          |          |                 |                 |            |          |            |            
| | administration |        | 30,132    | -        | -        | 16,490          | -               | 52,024     | -        | 133,577    | 232,223    
| | Mine           |        |           |          |          |                 |                 |            |          |            |            
| | exploration    |        |           |          |          |                 |                 |            |          |            |            
| | costs          |        | -         | -        | -        | 1,223,200       | -               | -          | -        | -          | 1,223,200  
| |                |        |           |          |          |                 |                 |            |          |            |            
| |                |        | 607,321   | 102,721  | -        | 2,492,158       | -               | 1,915,352  | -        | 2,316,669  | 7,434,221  
| | Cost           |        |           |          |          |                 |                 |            |          |            |            
| | Recoveries     |        | (631,117) | -        | -        | -               | -               |            | -        | -          | (631,117)  
| |                |        | (23,796)  | 102,721  | -        | 2,492,158       | -               | 1,915,352  | -        | 2,316,669  | 6,803,104  
| | Cumulative     |        |           |          |          |                 |                 |            |          |            |            
| | expenses,      |        |           |          |          |                 |                 |            |          |            |            
| | beginning of   |        |           |          |          |                 |                 |            |          |            |            
| | year           |        | 233,870   | 386,933  | 425,465  | 3,325,140       | 168,144         | 2,342,567  | 369,788  | 766,817    | 8,018,724  
| |                |        |           |          |          |                 |                 |            |          |            |            
| | Cumulative     |        |           |          |          |                 |                 |            |          |            |            
| | expenses,      |        |           |          |          |                 |                 |            |          |            |            
| | end of year    |        | $210,074  | $489,654 | $425,465 | $5,817,298      | $168,144        | $4,257,919 | $369,788 | $3,083,486 | $14,821,828

16

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

The continuity of expenditures on
  mineral properties for the year ended December 31, 2006 is as follows:

| |                |        | San             | Santo           | San             | Topia             | Topia           |                   |                 |                 |                  
| | -------------- | ------ | --------------- | --------------- | --------------- | ----------------- | --------------- | ----------------- | --------------- | --------------- | -----------------
| |                |        | Antonio         | Nino            | Taco            | Main Block        | II to IV        | Guanajuato        | Virimoa         | Mapimi          |                  
| |                |        | (a)             | (a)             | (b)             | note
      7(a)   | note
      7(a) | note
      7(b)   | (c)             | (d)             | 2006             
| |                |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | Option         |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | payments:      | Cash   | $ -             | $ 11,495        | $ -             | $ -               | $ -             | $ -               | $ 111,337       | $ 93,639        | $ 216,471        
| |                | Shares | -               | -               | -               | -                 | -               | -                 | 81,000          | 532,000         | 613,000          
| | Analysis       |        | 1,288           | -               | -               | 64,493            | -               | 286,744           | -               | -               | 352,525          
| | Drilling       |        | -               | -               | -               | 206,977           | -               | 620,092           | -               | 24,951          | 852,020          
| | Field costs    |        | 768             | -               | -               | 228,253           | -               | 43,061            | -               | -               | 272,082          
| | Geology        |        | 16,782          | 11,307          | -               | 352,364           | 44,188          | 848,183           | -               | 107,207         | 1,380,031        
| | Project        |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | administration |        | 16,006          | -               | -               | 127,244           | -               | 129,684           | -               | 9,020           | 281,954          
| |                |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| |                |        | 34,844          | 22,802          | -               | 979,331           | 44,188          | 1,927,764         | 192,337         | 766,817         | 3,968,083        
| | Cumulative     |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | expenses,      |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | beginning of   |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | year           |        | 199,026         | 364,131         | 425,465         | 2,345,809         | 123,956         | 414,803           | 177,451         | -               | 4,050,641        
| |                |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | Cumulative     |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | expenses,      |        |                 |                 |                 |                   |                 |                   |                 |                 |                  
| | end of year    |        | $
      233,870 | $
      386,933 | $
      425,465 | $
      3,325,140 | $
      168,144 | $
      2,342,567 | $
      369,788 | $
      766,817 | $
      8,018,724

| | (a) | Santo Nino Project:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | On March 13, 2007, the Company satisfied all conditions
      of the option agreement by paying the seventh and final installment
      payment. By making cumulative payments of US$165,000 over a three year
      period, the Company is granted ownership to the Santo Nino Mining
      Concession located in the Guadalupe y Calvo Mining District, State of
      Chihuahua, Mexico.                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | On February 2, 2007, the Company entered into an option
      agreement with Altair Ventures Incorporated (Altair). Terms of the
      agreement allow 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$200,000, 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, 2008, US$60,000 and 150,000
      shares of Altair have been received in accordance with the
      agreement.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | There is no underlying Net Smelter Return royalty or
      other royalties and Great Panther owns 100% of all four concessions as at
      December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (b) | San Taco Project:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | On February 28, 2004, the Company entered into an option
      agreement (the San Taco Option Agreement) which granted the Company the
      right and option, for a period of three years plus 30 days, to purchase
      100% of the ownership rights in and to the San Taco Mining Concessions
      located in the Guadalupe y Calvo Mining District, State of Chihuahua,
      Mexico.                                                                                                                                                                                                                               

17

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| |     | The Company did not make the required US$100,000 payment
      on February 28, 2006 and as a result forfeited all rights and options to
      the property.                                                                                                                                                                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (c) | Virimoa Project:                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | On June 13, 2005, the Company signed an Option Agreement
      to earn a 100% interest of the ownership rights in two mining claims
      designated as the Virimoa Property located in the Topia Mining District,
      State of Durango, Mexico.                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | In May 2007, the Company chose to forfeit all rights and
      options to the property. Of the total consideration of US$300,000 and
      300,000 common shares of the Company payable over three years, US$50,000
      was paid and 150,000 shares issued. No payments were made in
      2007.                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (d) | Mapimi Project:                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | On September 11, 2006, the Company signed an Option
      Agreement 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. In consideration for the
      right and purchase, the Company must make payments totalling US$3,000,000
      and issue 500,000 common shares as follows:
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | (vi)                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | If the option is exercised, the vendors will retain a 3%
      Net Smelter Return, each 0.5% (to a maximum of 2%) of which can be
      purchased for US$500,000.                                                                                                                                                                                                                                                              

18

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

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

| |                                                                     |   | December
      31, |  |   | December
      31, |  
| | ------------------------------------------------------------------- | - | ------------------ |  | - | ------------------ | -
| |                                                                     |   | 2008               |  |   | 2007               |  
| |                                                                     |   |                    |  |   |                    |  
| | Arcoiris concession acquisition, carrying value of
      US$100,000 |   |                    |  |   |                    |  
| | (note 7(c)), without interest and discounted
      at an effective  |   |                    |  |   |                    |  
| | interest rate of 26.8% per annum, payable in
      four staged      |   |                    |  |   |                    |  
| | payments over three years                                           | $ | -                  |  | $ | 99,130             |  
| |                                                                     |   |                    |  |   |                    |  
| |                                                                     |   |                    |  |   | 99,130             |  
| | Less: unamortized
      discount                                    |   | -                  |  |   | (10,505            | )
| |                                                                     |   | -                  |  |   | 88,625             |  
| | Current portion                                                     |   | -                  |  |   | (88,625            | )
| |                                                                     |   |                    |  |   |                    |  
| |                                                                     | $ | -                  |  | $ | -                  |  

Interest accreted on long-term debt
  totaled $11,154 in 2008 (2007  $259,355).

| | (b) Convertible loan notes:
| | ---------------------------

| |                                                                       |   | December
      31, |  |   | December
      31, | 
| | --------------------------------------------------------------------- | - | ------------------ |  | - | ------------------ | 
| |                                                                       |   | 2008               |  |   | 2007               | 
| |                                                                       |   |                    |  |   |                    | 
| | $2,020,000 note due March 9, 2010, interest rate of 8% per            |   |                    |  |   |                    | 
| | annum payable quarterly. Discounted at an
      effective interest    |   |                    |  |   |                    | 
| | rate of 26.8%.                                                        | $ | 1,680,550          |  | $ | 1,398,507          | 
| |                                                                       |   |                    |  |   |                    | 
| | $4,050,000 million notes due July 14, 2011,
      interest rate of 8% |   |                    |  |   |                    | 
| | per annum payable quarterly. Discounted at an
      effective         |   |                    |  |   |                    | 
| | interest rate of 25.1%.                                               |   | 2,971,140          |  |   | 2,630,104          | 
| |                                                                       |   |                    |  |   |                    | 
| |                                                                       |   |                    |  |   |                    | 
| |                                                                       | $ | 4,651,690          |  | $ | 4,028,611          | 

| | (i)  | On March 8, 2006, the Company completed a financing
      agreement for cash proceeds of $2,020,000. The financing consisted of an
      8% per annum unsecured convertible note maturing March 9, 2010,
      convertible into common shares of the Company at a price of $1.32 per
      share at the holders option at any time. On issuance, the conversion
      feature of the note had a fair value of $1,006,000 determined using the
      Black-Scholes valuation model. The assumptions used in the valuation model
      were a risk- free interest rate of 4.1%, volatility of 63.4%, dividends
      paid of 0.0%, and an expected life of the option of 4 years. Interest
      accreted on the note payable during 2008 was $282,043 (2007 -
      $234,708).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (ii) | On July 13, 2007, the Company completed financing
      agreements for cash proceeds of $4,050,000. 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 $1,563,000 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 2008 was $341,036 (2007 -
      $143,104).          

19

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

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.

|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:

| |                                |   | 2008      |   |   | 2007      | 
| | ------------------------------ | - | --------- | - | - | --------- | 
| | Balance, beginning of year     | $ | 1,101,171 |   | $ | 92,285    | 
| | Changes in cash flow estimates |   | (277,971  | ) |   | 986,182   | 
| | Accretion expense              |   | 281,677   |   |   | 22,704    | 
| | Balance, end of
      year     | $ | 1,104,877 |   | $ | 1,101,171 | 

The provision for asset retirement
  obligations is based on the following assumptions:

| | The total undiscounted estimated cash flows required to settle the
        Companys estimated obligations is US$2,893,000 (2007 - US$2,289,000).The expected timing of payments is estimated as follows: US$914,000 in
        2012, US$161,000 in 2013, US$172,000 in 2014, US$1,218,000 in 2017, US$207,000
        in 2018, and US$221,000 in 2019. This timing matches the estimated remaining
        life of the mines, which is 3 years for Guanajuato and 7 years for Topia in
        the absence of a reliable estimate of reserves.A credit-adjusted risk-free rate of 25.1% (2007  25.1%) has been used to
        discount cash flows.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

|11. | Capital stock:
|--- | --------------
|    |               
|    | (a)           
|    |               
|    |               
|    |               
|    |               
|    | (b)           

| |  |                                                                         |  | Number
      of |       |   | Stated     |  
| |  | ----------------------------------------------------------------------- |  | --------------- | ----- | - | ---------- | -
| |  | common
      shares                                                     |  |                 | value |  
| |  |                                                                         |  |                 |       |   |            |  
| |  | Balance carried forward, December 31, 2005                              |  | 47,349,431      |       | $ | 21,536,440 |  
| |  |                                                                         |  |                 |       |   |            |  
| |  | Exercise of "F" warrants at $0.62 per share                             |  | 2,179,472       |       |   | 1,351,273  |  
| |  | Exercise of "G" warrants at $0.62 per share                             |  | 4,034,000       |       |   | 2,501,080  |  
| |  | Exercise of H warrants at $0.62 per share                             |  | 2,147,500       |       |   | 1,331,450  |  
| |  | Exercise of I warrants at $0.90 per share                             |  | 197,000         |       |   | 177,300    |  
| |  | Exercise of J warrants at $0.90 per share                             |  | 3,062,500       |       |   | 2,756,250  |  
| |  | Exercise of K warrants at $2.65 per share                             |  | 127,999         |       |   | 339,197    |  
| |  | Exercise of agent warrants                                              |  | 1,149,886       |       |   | 817,530    |  
| |  | Exercise of options                                                     |  | 1,799,560       |       |   | 869,257    |  
| |  | Private placement at $2.00 per unit, net of
      costs (i)             |  | 7,500,000       |       |   | 13,866,639 |  
| |  | Issue of warrants for financing services                                |  |                 |       |   | (251,500   | )
| |  | Issue of shares pursuant to mineral
      property option agreements    |  |                 |       |   |            |  
| |  | - Virimoa and Mapimi                                                    |  | 250,000         |       |   | 613,000    |  
| |  | Reclass from contributed surplus on exercise of options                 |  | -               |       |   | 485,229    |  
| |  |                                                                         |  |                 |       |   |            |  
| |  | Balance, December 31, 2006                                              |  | 69,797,348      |       |   | 46,393,145 |  
| |  |                                                                         |  |                 |       |   |            |  
| |  | Exercise of I warrants at $0.90 per share                             |  | 3,906,200       |       |   | 3,515,580  |  
| |  | Exercise of agents warrants                                             |  | 200,920         |       |   | 180,828    |  
| |  | Exercise of J warrants at $0.90 per share                             |  | 5,034,300       |       |   | 4,530,870  |  
| |  | Exercise of agent warrants                                              |  | 553,084         |       |   | 497,776    |  
| |  | Exercise of options                                                     |  | 1,017,500       |       |   | 678,000    |  
| |  | Issue of shares pursuant to mineral property agreement                  |  | 200,000         |       |   | 246,000    |  
| |  | Reclassification from contributed surplus
      on exercise of options  |  | -               |       |   | 819,356    |  
| |  | Reclassification
      to common shares on cashless exercise of options |  | 35,000          |       |   | 126,892    |  
| |  |                                                                         |  |                 |       |   |            |  
| |  | Balance, December 31, 2007                                              |  | 80,744,352      |       |   | 56,988,447 |  
| |  |                                                                         |  |                 |       |   |            |  
| |  | Exercise of options                                                     |  | 465,000         |       |   | 398,250    |  
| |  | Exercise of warrants                                                    |  | 100,500         |       |   | 142,710    |  
| |  | Issue of shares pursuant to mineral property agreement                  |  | 344,669         |       |   | 191,568    |  
| |  | Reclassification from contributed surplus
      on exercise of options  |  | -               |       |   | 157,896    |  
| |  | Repricing of
      broker warrants                                      |  | -               |       |   | (13,409    | )
| |  |                                                                         |  |                 |       |   |            |  
| |  | Balance, December
      31, 2008                                        |  | 81,654,521      |       | $ | 57,865,462 |  

No preferred shares have been issued.

| |  | (i) | On June 1, 2006, the Company issued 7,500,000 units by
      private placement at a price of $2.00 per unit (Unit) for gross proceeds
      of $15,000,000 and paid cash issuance costs of $1,133,361. Each Unit
      comprises one common share and one-half of one transferable share purchase
      warrant. Each whole warrant entitles the holder, upon exercise, to acquire
      one common share of the Company at a price of $2.65 until June 1, 2008.
      After the expiration of the hold period the Company has the right to
      accelerate the expiry date of the warrants if the closing price of the
      Company's common shares on the TSX Exchange exceeds $3.35 for a period of
      20 consecutive trading days. The warrants expired
| |  | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

on June 1, 2008. The Company also
  issued 479,375 broker warrants entitling the holder to acquire one common share
  of the Company at $2.00 for a period of twenty-four months. The fair value of
  broker warrants of $251,500 is recorded as a cost of financing and is included
  in contributed surplus. The broker warrants expired on June 1, 2008.

During the year ended December 31,
  2008, nil (2007  nil; 2006  1,012,500) shares were released pursuant to
  time-based provisions of the escrow agreement.

| | (c) | Contributed surplus:
| | --- | --------------------

| |  |                                                                         |   | Stated value |  
| |  | ----------------------------------------------------------------------- | - | ------------ | -
| |  |                                                                         |   |              |  
| |  | Balance, December 31, 2005                                              | $ | 1,638,819    |  
| |  |                                                                         |   |              |  
| |  | Issue of warrants for financing activities                              |   | 251,500      |  
| |  | Reclassification to common shares on exercise of options                |   | (485,229     | )
| |  | Stock-based compensation                                                |   | 4,672,774    |  
| |  |                                                                         |   |              |  
| |  | Balance, December 31, 2006                                              |   | 6,077,864    |  
| |  |                                                                         |   |              |  
| |  | Reclassification to common shares on
      exercise of options          |   | (819,356     | )
| |  | Reclassification to common shares on cashless exercise of
      options |   | (126,892     | )
| |  | Stock-based compensation                                                |   | 1,129,500    |  
| |  |                                                                         |   |              |  
| |  | Balance, December 31, 2007                                              |   | 6,261,116    |  
| |  |                                                                         |   |              |  
| |  | Reclassification to common shares on
      exercise of options          |   | (157,896     | )
| |  | Stock-based compensation                                                |   | 1,165,121    |  
| |  | Repricing of broker warrants                                            |   | 13,409       |  
| |  | Repricing of stock
      options                                        |   | 443,150      |  
| |  |                                                                         |   |              |  
| |  | Balance, December
      31, 2008                                        | $ | 7,724,900    |  

| | (d) | Stock options and warrants:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | 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. The Exchange policies permit the Companys directors to grant
      options for the purchase of shares of the Company to qualified persons as
      incentive for their services. Pursuant to the Companys 2003 Incentive
      Stock Option Plan (the Plan), options must be non-transferable and may
      not exceed 10% of the issued and outstanding common shares of the Company
      at the time of granting and may not exceed 5% of the outstanding to any
      individual (maximum of 2% to any consultant) in any 12-month period. The
      exercise price of options is determined by the board of directors by
      reference to the market value of the shares at the date of grant. Options
      have expiry dates of no longer than five years from the date of grant and
      terminate 30 days following the termination of the participants
      employment. Vesting of options is generally at the time of
      grant.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | On December 3, 2007, the Company amended the Plan to
      allow 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

22

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

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, 2008, nil (2007  35,000; 2006  nil)
  common shares were issued upon cashless exercises.

The continuity of common stock options
  for 2008 is as follows:

| |  |                                       |                    | Balance      |           |             |           | Balance     
| |  | ------------------------------------- | ------------------ | ------------ | --------- | ----------- | --------- | ------------
| |  | Exercise                              |                    | December 31, |           | Cancelled/  |           | December 31,
| |  | price                                 | Expiry date        | 2007         | Granted   | expired     | Exercised | 2008        
| |  | 0.45                                  | February 8, 2009   | 490,000      | -         | -           | -         | 490,000     
| |  | 0.52                                  | April 5, 2009      | 30,000       | -         | -           | -         | 30,000      
| |  | 0.45                                  | May 25, 2009       | 60,000       | -         | -           | (20,000)  | 40,000      
| |  | 0.45                                  | February 27, 2010  | 150,000      | -         | -           | (25,000)  | 125,000     
| |  | 0.45                                  | July 26, 2010      | 400,000      | -         | -           | -         | 400,000     
| |  | 0.90                                  | January 5, 2011    | 1,201,700    | -         | -           | (20,000)  | 1,181,700   
| |  | 0.90                                  | January 14, 2008   | 400,000      | -         | -           | (400,000) | -           
| |  | 2.65                                  | January 14, 2008   | 400,000      | -         | (400,000)   | -         | -           
| |  | 1.42                                  | December 06, 2011  | 2,105,000    | -         | (420,000)   | -         | 1,685,000   
| |  | 1.42                                  | March 11, 2012     | 115,000      | -         | (15,000)    | -         | 100,000     
| |  | 1.42                                  | June 05, 2012      | 375,000      | -         | (125,000)   | -         | 250,000     
| |  | 1.42                                  | September 10, 2012 | 550,000      | -         | (25,000)    | -         | 525,000     
| |  | 1.42                                  | April 30, 2010     | -            | 350,000   | -           | -         | 350,000     
| |  | 1.42                                  | May 14, 2013       | -            | 1,485,000 | (265,000)   | -         | 1,220,000   
| |  | 1.42                                  | July 31, 2013      | -            | 125,000   | -           | -         | 125,000     
| |  |                                       |                    |              |           |             |           |             
| |  |                                       |                    |              |           |             |           |             
| |  |                                       |                    | 6,276,700    | 1,960,000 | (1,250,000) | (465,000) | 6,521,700   
| |  |                                       |                    |              |           |             |           |             
| |  | Weighted
      average exercise price | $1.22              | $1.42        | $1.97     | $0.86       | $1.16    

As at December 31, 2008, all share
  options are fully vested. The weighted average remaining contractual life of the
  options is 2.7 years.

On April 9, 2008, the Board of
  Directors approved amending the exercise price of 2,070,000 outstanding
  incentive stock options previously exercisable at $2.65 to $1.42 and 925,000
  outstanding incentive stock options previously exercisable at $2.00 to $1.42.
  The reduction in the exercise price became effective on April 23, 2008. An
  expense of $443,150 related to the re-pricing of the options has been included
  in stock-based compensation expense.

23

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

The continuity of common stock options
  for 2007 is as follows:

| |                                 |                    |        | Balance      |           |            |           |             | Balance     
| | ------------------------------- | ------------------ | ------ | ------------ | --------- | ---------- | --------- | ----------- | ------------
| | Exercise                        |                    |        | December 31, |           | Cancelled/ | Cashless  |             | December 31,
| | price                           | Expiry date        |        | 2006         | Granted   | expired    | Exercise  | Exercised   | 2007        
| |                                 |                    |        |              |           |            |           |             |             
| |                                 |                    |        |              |           |            |           |             |             
| | 0.45                            | February 8, 2009   |        | 490,000      | -         | -          | -         | -           | 490,000     
| | 0.52                            | April 5, 2009      |        | 30,000       | -         | -          | -         | -           | 30,000      
| | 0.45                            | May 25, 2009       |        | 100,000      | -         | -          | -         | (40,000)    | 60,000      
| | 0.45                            | February 27, 2010  |        | 200,000      | -         | -          | -         | (50,000)    | 150,000     
| | 0.45                            | July 11, 2010      |        | 100,000      | -         | -          | -         | (100,000)   | -           
| | 0.45                            | August 30, 2010    |        | 75,000       | -         | -          | -         | (75,000)    | -           
| | 0.45                            | July 26, 2010      |        | 580,000      | -         | -          | -         | (180,000)   | 400,000     
| | 0.60                            | September 29, 2007 |        | 125,000      | -         | -          | -         | (125,000)   | -           
| | 0.90                            | January 5, 2011    |        | 1,551,700    | -         | -          | -         | (350,000)   | 1,201,700   
| | 0.90                            | December 31, 2007  |        | 237,500      | -         | -          | (140,000) | (97,500)    | -           
| | 0.90                            | January 14, 2008   |        | 400,000      | -         | -          | -         | -           | 400,000     
| | 2.65                            | January 14, 2008   |        | 400,000      | -         | -          | -         | -           | 400,000     
| | 2.65                            | December 06, 2011  |        | 2,295,000    | -         | (190,000)  | -         | -           | 2,105,000   
| | 2.65                            | March 11, 2012     |        | -            | 165,000   | (50,000)   | -         | -           | 115,000     
| | 2.00                            | June 05, 2012      |        | -            | 525,000   | (150,000)  | -         | -           | 375,000     
| | 2.00                            | September 10, 2012 |        | -            | 550,000   | -          | -         | -           | 550,000     
| |                                 |                    |        |              |           |            |           |             |             
| |                                 |                    |        |              |           |            |           |             |             
| |                                 |                    |        | 6,584,200    | 1,240,000 | (390,000)  | (140,000) | (1,017,500) | 6,276,700   
| |                                 |                    |        |              |           |            |           |             |             
| | Weighted average exercise price | $ 1.50             | $ 2.09 | $ 2.40       | $ 0.90    | $ 0.67     | $ 1.71   

The continuity of common stock options
  for 2006 is as follows:

| |                                 |                    | Balance      |           |            |             | Balance     
| | ------------------------------- | ------------------ | ------------ | --------- | ---------- | ----------- | ------------
| | Exercise                        |                    | December 31, |           | Cancelled/ |             | December 31,
| | price                           | Expiry date        | 2005         | Granted   | expired    | Exercised   | 2006        
| |                                 |                    |              |           |            |             |             
| | 0.45                            | February 8, 2009   | 710,000      | -         | -          | (220,000)   | 490,000     
| | 0.52                            | April 5, 2009      | 60,000       | -         | -          | (30,000)    | 30,000      
| | 0.45                            | May 25, 2009       | 100,000      | -         | -          | -           | 100,000     
| | 0.45                            | February 27, 2010  | 250,000      | -         | -          | (50,000)    | 200,000     
| | 0.45                            | May 2, 2006        | 100,000      | -         | -          | (100,000)   | -           
| | 0.45                            | July 11, 2010      | 100,000      | -         | -          | -           | 100,000     
| | 0.45                            | August 30, 2010    | 125,000      | -         | (50,000)   | -           | 75,000      
| | 0.45                            | July 26, 2010      | 700,000      | -         | -          | (120,000)   | 580,000     
| | 0.60                            | September 13, 2006 | 747,260      | -         | -          | (747,260)   | -           
| | 0.60                            | September 29, 2007 | 125,000      | -         | -          | -           | 125,000     
| | 0.45                            | October 4, 2006    | 416,500      | -         | -          | (416,500)   | -           
| | 0.90                            | January 5, 2011    | -            | 1,605,000 | (50,000)   | (3,300)     | 1,551,700   
| | 0.90                            | December 31, 2007  | -            | 350,000   | -          | (112,500)   | 237,500     
| | 0.90                            | January 14, 2008   | -            | 400,000   | -          | -           | 400,000     
| | 2.65                            | January 14, 2008   | -            | 400,000   | -          | -           | 400,000     
| | 2.65                            | December 6, 2011   | -            | 2,295,000 | -          | -           | 2,295,000   
| |                                 |                    |              |           |            |             |             
| |                                 |                    |              |           |            |             |             
| |                                 |                    | 3,433,760    | 5,050,000 | (100,000)  | (1,799,560) | 6,584,200   
| |                                 |                    |              |           |            |             |             
| | Weighted average exercise price | $ 0.46             | $ 1.83       | $ 0.68    | $ 0.48     | $ 1.50     

The Company applies the fair
  value-based method of accounting for employee stock options granted after
  January 1, 2003. During the year ended December 31, 2008, the Company recorded
  compensation expense for the fair value of stock options of $1,608,271 (2007 -
  $1,129,500, 2006 - $4,672,774) for stock options that were granted or repriced
  during the year. The weighted average fair value of options granted

24

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

or repriced during 2008 was $0.32 (2007
  - $0.91, 2006 - $0.93) . The fair value per option was determined using the
  following weighted average assumptions:

| |  |                         | 2008      | 2007      | 2006     
| |  | ----------------------- | --------- | --------- | ---------
| |  |                         |           |           |          
| |  | Risk-free interest rate | 3.0%      | 4.4%      | 3.8%     
| |  | Dividend paid           | 0.0%      | 0.0%      | 0.0%     
| |  | Expected life           | 4.1 years | 5.0 years | 4.2 years
| |  | Volatility              | 66.6%     | 64.0%     | 65.2%    

| | (e) | Warrants:                                               
| | --- | --------------------------------------------------------
| |     |                                                         
| |     | The continuity of warrants for 2008 is as
      follows:

| |  |                     |          |                    | Balance      |        |           |             | Balance     
| |  | ------------------- | -------- | ------------------ | ------------ | ------ | --------- | ----------- | ------------
| |  |                     | Exercise |                    | December 31, |        |           |             | December 31,
| |  | Series              | price    | Expiry date        | 2007         | Issued | Exercised | Expired     | 2008        
| |  |                     |          |                    |              |        |           |             |             
| |  | Series 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) | -           

On April 9, 2008, the Board of
  Directors amended the terms of the 3,621,999 outstanding K warrants and the
  479,375 outstanding broker warrants by reducing the exercise price from $2.65
  and $2.00, respectively, to $1.42. There was no change to the expiry date.

The continuity of warrants for 2007 is
  as follows:

| |  |                     |       |                    | Balance    |        |             |              | Balance  
| |  | ------------------- | ----- | ------------------ | ---------- | ------ | ----------- | ------------ | ---------
| |  | Exercise            |       | December 31,       |            |        |             | December 31,
| |  | Series              | price | Expiry date        | 2006       | Issued | Exercised   | Expired      | 2007     
| |  |                     |       |                    |            |        |             |              |          
| |  |                     |       |                    |            |        |             |              |          
| |  | Series "I" Warrants | 0.90  | Nov. 30, 2007      | 3,906,200  | -      | (3,906,200) | -            | -        
| |  | Agents' Warrants    | 0.90  | Nov. 30, 2007      | 200,920    | -      | (200,920)   | -            | -        
| |  | Series "J" Warrants | 0.90  | Dec. 20, 2007      | 5,034,300  | -      | (5,034,300) | -            | -        
| |  | Agents Warrants    | 0.90  | Dec. 20, 2007      | 553,084    | -      | (553,084)   | -            | -        
| |  | Series K Warrants | 2.65  | June 1, 2008       | 3,621,999  | -      | -           | -            | 3,621,999
| |  | Broker Warrants     | 2.00  | June
      1, 2008 | 479,375    | -      | -           | -            | 479,375  
| |  |                     |       |                    |            |        |             |              |          
| |  |                     |       |                    | 13,795,878 | -      | (9,694,504) | -            | 4,101,374

25

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

The continuity of warrants for 2006 is
  as follows:

| |                      |       |                    | Balance    |           |              |              | Balance   
| | -------------------- | ----- | ------------------ | ---------- | --------- | ------------ | ------------ | ----------
| | Exercise             |       | December 31,       |            |           |              | December 31,
| | Series               | price | Expiry date        | 2005       | Issued    | Exercised    | Expired      | 2006      
| |                      |       |                    |            |           |              |              |           
| | Series "F" Warrants  | 0.62  | June 28, 2006      | 1,039,861  | -         | (1,039,861)  | -            | -         
| | Agents' Warrants     | 0.62  | June 28, 2006      | 127,500    | -         | (127,500)    | -            | -         
| | Series "F" Warrants  | 0.62  | July 18, 2006      | 1,139,611  | -         | (1,139,611)  | -            | -         
| | Finders' Warrants    | 0.62  | July 18, 2006      | 48,200     | -         | (48,200)     | -            | -         
| | Series "G" Warrants  | 0.62  | Sept. 13, 2006     | 4,034,000  | -         | (4,034,000)  | -            | -         
| | Series "H" Warrants  | 0.62  | Oct. 4, 2006       | 2,147,500  | -         | (2,147,500)  | -            | -         
| | Series "I" Warrants  | 0.90  | Nov. 30, 2007      | 4,103,200  | -         | (197,000)    | -            | 3,906,200 
| | Agents' Warrants     | 0.90  | Nov. 30, 2007      | 410,320    | -         | (209,400)    | -            | 200,920   
| | Series "J" Warrants  | 0.90  | Dec. 20, 2007      | 8,096,800  | -         | (3,062,500)  | -            | 5,034,300 
| | Agents Warrants     | 0.90  | Dec. 20, 2007      | 735,990    | -         | (182,906)    | -            | 553,084   
| | Series "K" Warrants  | 2.65  | June 1, 2008       | -          | 3,749,998 | (127,999)    | -            | 3,621,999 
| | Broker Warrants      | 2.00  | June 1, 2008       | -          | 479,375   | -            | -            | 479,375   
| | Agent Warrants       | 0.62  | Sept. 13, 2006     | -          | 373,630   | (373,630)    | -            | -         
| | Agent
      Warrants | 0.62  | Oct.
      4, 2006 | -          | 208,250   | (208,250)    | -            | -         
| |                      |       |                    |            |           |              |              |           
| |                      |       |                    |            |           |              |              |           
| |                      |       |                    | 21,882,982 | 4,811,253 | (12,898,357) | -            | 13,795,878

| | (f) | Advances on share subscriptions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | As at December 31, 2008, the Company received a total of
      $85,000 (2007  nil; 2006  nil) in advances on share subscriptions to be
      applied to future private placements (note 19(a)). The cash was restricted
      as of December 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (g) | Revision to 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | 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. The Plan
      was ratified on June 27, 2008 and will continue until the annual general
      meeting of shareholders in 2012.

26

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

|12. | Accumulated other comprehensive
      income:
|--- | ---------------------------------------------

| |                                                       |   | December
      31, |   |   | December
      31, | 
| | ----------------------------------------------------- | - | ------------------ | - | - | ------------------ | 
| |                                                       |   | 2008               |   |   | 2007               | 
| | Balance, beginning of period                          | $ | 5,945              |   | $ | -                  | 
| | Unrealized gain
      (loss) on marketable securities |   | (43,537            | ) |   | 5,945              | 
| | Balance, end of period                                | $ | (37,592            | ) | $ | 5,945              | 

|13. | Capital management:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Companys objectives when managing capital are
      to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | The Topia and Guanajuato mines are producing properties,
      but exploration activities are also performed at these properties in order
      to identify further resources. Funds realized from the sale of
      concentrates are largely used to finance the operations of the producing
      properties. Additionally, the Company carries out exploration activities
      on the Mapimi property which does not generate any operating income or
      cash flow. The Company is largely dependent on external financing to fund
      exploration activities. To undertake planned exploration, the Company will
      raise additional funds as needed. Funds are primarily secured through
      convertible debt and equity capital raised by way of private
      placements.                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | 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. In order to maintain or adjust the
      capital structure, the Company may issue new debt or capital through
      private placements. For the year ended December 31, 2008, there were some
      changes in quantitative and qualitative data about the Companys
      objectives, policies and processes for managing capital as compared to the
      prior period. In response to the global economic downturn in the latter
      part of 2008, the Company increased its focus on internally generated cash
      flow to reduce its reliance on equity and debt
      financing.

27

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

As at December 31, 2008, total managed
  capital was $14,231,611, comprised of:

| |                                      |   | December
      31, |  |   | December
      31, |  
| | ------------------------------------ | - | ------------------ |  | - | ------------------ | -
| |                                      |   | 2008               |  |   | 2007               |  
| | Total debt (1)                       | $ | 5,544,976          |  | $ | 4,117,236          |  
| | Less: Cash                           |   | 606,244            |  |   | 5,357,977          |  
| | Net debt (cash)                      |   | 4,938,732          |  |   | (1,240,741         | )
| | Shareholders
      equity           |   | 9,292,879          |  |   | 21,196,469         |  
| | Adjusted capital                     | $ | 14,231,611         |  | $ | 19,955,728         |  
| | Debt to adjusted
      capital ratio |   | 0.35               |  |   | (0.06              | )

(1) Includes current and
  long term portion of capital lease obligation and convertible loan notes

The Companys capital structure is
  dependent on expected business growth and changes in the business
  environment.

The Company is subject to externally
  imposed capital requirements under its lease financing contract. 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, 2008, the Company met all
  externally imposed capital and debt repayment requirements.

|14. | 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 value of
      marketable securities is based on current bid prices at December 31, 2008.
      The fair value of the capital lease obligation to a third party
      approximates the amortized cost as the interest rate reflects the
      estimated market rate at  December 31, 2008. The fair value of the
      convertible notes at December 31, 2008 is $6,014,000 as determined using
      the Black-Scholes valuation model. The weighted average assumptions used
      in the valuation model were a risk-free interest rate of 1.1%, volatility
      of 85.6%, dividends paid of 0.0%, and an expected life of the options of
      1.9 years. The carrying value of the convertible notes at December 31,
      2008 was $4,651,690.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | 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 different 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | For the year ended December 31, 2008, a mark-to-market
      loss of $43,537 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 current interim
      period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

28

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

|15. | 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 participate in the use of
      financial instruments to mitigate these risks and has no designated
      hedging transactions. The Company has no collateral on its debt. 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 RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| |     | For the year ended December 31, 2008, receipt of trade
      and VAT receivables and draws on cash and cash equivalents were used to
      fund the operating costs associated with the producing properties as well
      as mineral property exploration expenditures and head office costs. The
      Companys cash and cash equivalents are invested in guaranteed investment
      certificates which are available on demand to fund the Companys operating
      costs and other financial demands.                                 
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | The maturities of the Companys convertible loan notes
      and capital lease obligation are disclosed in Notes 9 and 18(e). The
      Company manages the long-term liquidity risks associated with the
      convertible loan notes by including a holders conversion feature in the
      agreements, which it anticipates will be exercised. In the event that the
      conversion feature is not exercised, the expectation is that the Company
      will have sufficient cash flow from operations to repay the
      debt.        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (d) | Market risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | The significant market risks to which the Company is
      exposed are currency, interest rate and commodity price risk.                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | (i) 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,
      2008 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                               | December
      31, | December
      31,
| | ----------------------------- | ------------------ | ------------------
| |                               | 2008               | 2007              
| |                               |                    |                   
| | MXN Peso to CDN Dollar        | 0.089              | 0.091             
| | US Dollar to CDN
      Dollar | 1.218              | 0.991             

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.

(ii) Interest rate risk

The Companys policy is to invest cash
  in 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

30

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

comparison to prevailing market rates.
  As at December 31, 2008, the Company did not hold any guaranteed investment
  certificates.

For financial liabilities, the
  convertible loan notes and capital leases carry fixed interest rates of 8.0% and
  9.6% per annum, respectively, and as such are not subject to fluctuations of
  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. As at December 31, 2008, market prices were
  US$10.79/oz for silver, US$870/oz for gold, US$949/tonne for lead, and
  US$1,121/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.

The Company has not entered into any
  hedging or other commodity based risk instruments.

(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, 2008.Proportional foreign exchange movement of -10% (depreciation of CAD) and
        +10% (appreciation of CAD) against the USD, from the December 31, 2008 CAD to
        USD exchange rate of 0.821.
        Proportional foreign exchange movement of -10%
        (depreciation of CAD) and +10% (appreciation of CAD) against the Mexican peso,
        from the December 31, 2008 CAD to Mexican peso exchange rate of 11.296.A parallel shift of +10%/-10% from the prevailing commodity prices of
        US$10.79/oz for silver, US$870/oz for gold, US$949/tonne for lead, and
        US$1,121/tonne for zinc as of December 31, 2008.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     



31

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| |                           |          | Interest Rate | Currency Rate | Commodity Price
| | ------------------------- | -------- | ------------- | ------------- | ---------------
| |                           |          | Risk          | Risk          | Risk           
| |                           |          | -1%           | +1%           | -10%           
| |                           | Carrying |               |               |                
| |                           | Amount   | Income        | **Income**    | **Income**     
| |                           | ($'000)  | ($'000)       | ($'000)       | ($'000)        
| | Financial assets          |          |               |               |                
| |                           |          |               |               |                
| | Cash and cash equivalents |          |               |               |                
| | CAD                       | 115      | (1)           | 1             | -              
| | USD                       | 114      | (1)           | 1             | 13             
| | Pesos                     | 377      | (4)           | 4             | 42             
| | Amounts receivable        |          |               |               |                
| | USD                       | 337      | -             | -             | 37             
| | Pesos                     | 2,433    | -             | -             | 270            
| |                           |          |               |               |                
| | Financial liabilities     |          |               |               |                
| | Accounts payable and      |          |               |               |                
| | accrued liabilities       |          |               |               |                
| | USD                       | 1,000    | -             | -             | (111)          
| | Pesos                     | 1,443    | -             | -             | (160)          
| | Capital lease obligation  |          |               |               |                
| | USD                       | 893      | -             | -             | (99)           
| | Total Increase(Decrease)  |          | (6)           | 6             | (8)            

|16. | Income taxes:              
|--- | ---------------------------
|    |                            
|    | Provision for income taxes:

| |                                                                                                            |   |             |   |   |             |   |   |             |  
| | ---------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
| |                                                                                                            |   | 2008        |   |   | 2007        |   |   | 2006        |  
| |                                                                                                            |   |             |   |   |             |   |   |             |  
| | Current income taxes                                                                                       | $ | (131,599    | ) | $ | 149,969     |   | $ | 127,475     |  
| | Future income
      taxes                                                                                  |   | (519,890    | ) |   | 2,421,504   |   |   | (17,459     | )
| |                                                                                                            |   |             |   |   |             |   |   |             |  
| |                                                                                                            | $ | (651,489    | ) | $ | 2,571,473   |   | $ | 110,016     |  
| |                                                                                                            |   |             |   |   |             |   |   |             |  
| | Income tax expense (recovery) differs from the
      amount which would result from applying the statutory |  
| | Canadian tax rates for the following reasons:                                                              |   |             |   |   |             |   |   |             |  
| |                                                                                                            |   |             |   |   |             |   |   |             |  
| |                                                                                                            |   | 2008        |   |   | 2007        |   |   | 2006        |  
| |                                                                                                            |   |             |   |   |             |   |   |             |  
| | Net income (loss) before tax                                                                               | $ | (14,937,341 | ) | $ | (17,129,388 | ) | $ | (14,974,421 | )
| | Canadian income tax rate                                                                                   |   | 31.00%      |   |   | 34.12%      |   |   | 34.12%      |  
| | Income tax recovery expected                                                                               |   | (4,630,576  | ) |   | (5,844,547  | ) |   | (5,109,272  | )
| | Permanent differences                                                                                      |   | 786,549     |   |   | (81,800     | ) |   | 1,766,992   |  
| | Difference in tax rates                                                                                    |   | 1,575,899   |   |   | 561,686     |   |   | 809,932     |  
| | Benefit of tax attributes not recognized and                                                               |   |             |   |   |             |   |   |             |  
| | other items                                                                                                |   | 1,616,639   |   |   | 7,936,134   |   |   | 2,642,364   |  
| |                                                                                                            |   |             |   |   |             |   |   |             |  
| |                                                                                                            | $ | (651,489    | ) | $ | 2,571,473   |   | $ | 110,016     |  

32

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

The significant components of the
  Companys future income tax assets are as follows:

| |                                                              |   |            |   |   |            |  
| | ------------------------------------------------------------ | - | ---------- | - | - | ---------- | -
| |                                                              |   | 2008       |   |   | 2007       |  
| |                                                              |   |            |   |   |            |  
| | Future income tax assets:                                    |   |            |   |   |            |  
| | Mineral
      property, plant and equipment and related debt | $ | 880,991    |   | $ | 1,022,274  |  
| | Office equipment
      financing and other                   |   | 313,855    |   |   | 430,454    |  
| | Capital
      losses                                         |   | 252,794    |   |   | 261,141    |  
| | Non-capital losses                                           |   | 4,068,367  |   |   | 3,717,141  |  
| | Total
      future income tax assets                         |   | 5,516,007  |   |   | 5,431,010  |  
| |                                                              |   |            |   |   |            |  
| | Valuation allowance                                          |   | (5,516,007 | ) |   | (5,431,010 | )
| | Future income tax assets,
      net of allowance             |   | -          |   |   | -          |  
| |                                                              |   |            |   |   |            |  
| | Future income tax liabilities:                               |   |            |   |   |            |  
| | Mineral properties                                           |   | (1,901,614 | ) |   | (2,421,504 | )
| |                                                              |   |            |   |   |            |  
| | Future income tax liability                                  | $ | (1,901,614 | ) | $ | (2,421,504 | )

At December 31, 2008, the Company had
  operating losses of $17,300,903 (2007 - $13,170,509; 2006 - $20,988,000) and
  capital losses of $1,934,816 (2007 - $1,934,816; 2006 - $1,934,816). The
  operating losses at December 31, 2008 includes $15,269,132 (2007 - $12,365,275;
  2006 - $7,285,000) in Canada and $2,031,745 (2007 - $805,233; 2006 -
  $13,703,000) in Mexico. The capital losses are without expiry, and the operating
  losses expire at various dates to 2028.

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, 2008, three of the
  Companys subsidiaries were subject to Income Tax and one subsidiary was subject
  to Flat Tax.

|17. | Related party transactions:                                                    
|--- | -------------------------------------------------------------------------------
|    |                                                                                
|    | The Company entered into the following
      transactions with related parties:

| |                                                         |   | 2008    |  |   | 2007    |  |   | 2006    | 
| | ------------------------------------------------------- | - | ------- |  | - | ------- |  | - | ------- | 
| |                                                         |   |         |  |   |         |  |   |         | 
| | Consulting fees paid or accrued to companies            |   |         |  |   |         |  |   |         | 
| | controlled by directors of the
      Company            | $ | 595,823 |  | $ | 539,000 |  | $ | 388,250 | 
| |                                                         |   |         |  |   |         |  |   |         | 
| | Consulting fees paid or accrued to
      companies      |   |         |  |   |         |  |   |         | 
| | controlled by officers of the Company                   |   | 266,230 |  |   | 395,943 |  |   | 272,578 | 
| |                                                         |   |         |  |   |         |  |   |         | 
| | Cost recoveries received or accrued from a              |   |         |  |   |         |  |   |         | 
| | company with a common director
      of the Company     |   | 82,397  |  |   | 631,117 |  |   | -       | 
| |                                                         |   |         |  |   |         |  |   |         | 
| | Office and administration fees paid or
      accrued to |   |         |  |   |         |  |   |         | 
| | a
      company controlled by a director of the Company |   | 36,138  |  |   | 39,879  |  |   | 101,060 | 

33

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

As at December 31, 2008, $314,435 (2007
   $74,401; 2006  nil) 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 $61,720 (2007  $400,742, 2006 - nil) and were
  included in amounts receivable.

|18. | Commitments and contingencies:
|--- | ------------------------------
|    |                               
|    | (a)                           
|    |                               
|    |                               
|    |                               
|    | (b)                           
|    |                               
|    | (c)                           
|    |                               
|    | (d)                           
|    |                               
|    | (e)                           

| |                                         |   | December
      31, | 
| | --------------------------------------- | - | ------------------ | 
| |                                         |   | 2008               | 
| | Years ending December 31:               |   |                    | 
| | 2009                                    |   | 502,050            | 
| | 2010                                    |   | 480,899            | 
| | Total minimum lease payments            |   | 982,949            | 
| | Less amount
      representing interest |   | 89,663             | 
| | Balance of the obligation               |   | 893,286            | 
| |                                         |   |                    | 
| | Current portion                         |   | 436,498            | 
| |                                         |   |                    | 
| |                                         | $ | 456,788            | 

Included in mineral properties, plant
  and equipment at December 31, 2008, are leased assets with a cost of $785,047
  and accumulated depreciation of $87,375. Interest on the capital lease of
  $24,438 is included in interest expense. Subsequent to year end, the lease
  agreement was amended for new payment terms note 19(d).

34

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

|19. | Subsequent events:                                                                                                                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                        
|    | (a)                                                                                                                                                                                                    
|    |                                                                                                                                                                                                        
|    | (b)                                                                                                                                                                                                    
|    |                                                                                                                                                                                                        
|    | (c)                                                                                                                                                                                                    
|    |                                                                                                                                                                                                        
|    | (d)                                                                                                                                                                                                    
|    |                                                                                                                                                                                                        
|    | (e)                                                                                                                                                                                                    
|    |                                                                                                                                                                                                        
|20. | 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 balances sheets and
      statements of operations and cash flows is summarized as
      follows:

| |                                 |  | December 31, 2008 |   |  | December 31, 2007 |  
| | ------------------------------- |  | ----------------- | - |  | ----------------- | -
| |                                 |  | Canadian          |   |  | US                |  
| |                                 |  | GAAP              |   |  | GAAP              |  
| |                                 |  |                   |   |  |                   |  
| | Convertible note payable        |  |                   |   |  |                   |  
| | (note 20(a)(iv))                |  | 4,651,690         |   |  | 6,070,000         |  
| | Share capital                   |  | 57,865,462        |   |  | 64,076,667        |  
| | Contributed surplus             |  | 7,724,900         |   |  | 7,739,900         |  
| | Equity component of convertible |  |                   |   |  |                   |  
| | note (note 20(a)(iv))           |  | 2,569,000         |   |  | -                 |  
| | Deficit                         |  | (58,913,891       | ) |  | (63,989,406       | )

35

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

Share capital and contributed surplus:

|                                                                  |   |             |   |   | 2008        |   |   | 2007        |  
|----------------------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                                  |   |             |   |   |             |   |   |             |  
|Share capital and contributed surplus, under                      |   |             |   |   |             |   |   |             |  
|Canadian GAAP                                                     |   |             |   | $ | 65,590,362  |   | $ | 63,249,563  |  
|Adjustment for stock-based compensation for                       |   |             |   |   |             |   |   |             |  
|employees (note 20(a)(ii))                                        |   |             |   |   | 15,000      |   |   | 15,000      |  
|Reversal
      of recapitalization of deficit (note 20(a)(iii))   |   |             |   |   | 6,211,205   |   |   | 6,211,205   |  
|Share capital and contributed surplus, under                      |   |             |   |   |             |   |   |             |  
|US
      GAAP                                                     |   |             |   | $ | 71,816,567  |   | $ | 69,475,768  |  
|                                                                  |   |             |   |   |             |   |   |             |  
|                                                                  |   |             |   |   |             |   |   |             |  
|Deficit:                                                          |   |             |   |   |             |   |   |             |  
|                                                                  |   |             |   |   |             |   |   |             |  
|                                                                  |   |             |   |   | 2008        |   |   | 2007        |  
|                                                                  |   |             |   |   |             |   |   |             |  
|Deficit, under Canadian GAAP                                      |   |             |   | $ | (58,913,891 | ) | $ | (44,628,039 | )
|Adjustment for stock-based compensation for                       |   |             |   |   |             |   |   |             |  
|employees (note 20(a)(ii))                                        |   |             |   |   | (15,000     | ) |   | (15,000     | )
|Reversal of recapitalization of deficit (note
      20(a)(iii))   |   |             |   |   | (6,211,205  | ) |   | (6,211,205  | )
|Interest
      accreted on convertible loan note (note 20(a)(iv)) |   |             |   |   | 1,150,690   |   |   | 527,611     |  
|Deficit, under US
      GAAP                                      |   |             |   | $ | (63,989,406 | ) | $ | (50,326,633 | )
|                                                                  |   |             |   |   |             |   |   |             |  
|                                                                  |   |             |   |   |             |   |   |             |  
|Loss and loss per
      share:                                    |   |             |   |   |             |   |   |             |  
|                                                                  |   |             |   |   |             |   |   |             |  
|                                                                  |   | 2008        |   |   | 2007        |   |   | 2006        |  
|                                                                  |   |             |   |   |             |   |   |             |  
|Loss for the year, under Canadian GAAP                            | $ | (14,285,852 | ) | $ | (19,700,861 | ) | $ | (15,084,437 | )
|Interest accreted on convertible                                  |   |             |   |   |             |   |   |             |  
|loan
      note (note 20(a)(iv))                                  |   | 623,079     |   |   | 377,812     |   |   | 149,799     |  
|Loss for the year,
      under US GAAP                            | $ | (13,662,773 | ) | $ | (19,323,049 | ) | $ | (14,934,638 | )
|                                                                  |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per share, under                           |   |             |   |   |             |   |   |             |  
|US GAAP                                                           | $ | (0.17       | ) | $ | (0.27       | ) | $ | (0.25       | )
|Weighted average number of common                                 |   |             |   |   |             |   |   |             |  
|shares, basic and diluted                                         |   | 81,321,733  |   |   | 72,227,455  |   |   | 59,720,424  |  

36

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| | (a) | These 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)                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                               

37

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

Effective January 1, 2006, the Company
  adopted Statement of Financial Accounting Standard (SFAS 123R) Share Based
    Payment using the modified prospective method for all employee awards
  granted, modified or settled after the effective date using the fair value
  measurement method of this standard. For unvested employee equity awards as of
  the effective date, compensation is to be recognized based upon the grant date
  fair value determined under SFAS 123, adjusted to reflect the estimated impact
  of forfeitures. Upon adoption of SFAS 123R, there was no cumulative effect
  adjustment required. Non-employee awards are accounted for under the fair value
  method under both Canadian and US GAAP.

There were no significant differences
  in accounting for stock-based compensation between Canadian GAAP and US GAAP
  during the three years ended December 31, 2008.

| | (iii) | Elimination of deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |       | During the year ended December 31, 1999, the Company
      reduced its paid-up capital by $6,211,205 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 note payable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |       | Under Canadian GAAP, the proceeds of the financing
      allocated to the estimated fair value of the conversion feature of the
      debt is 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,
      2008 would be recorded as a liability at face value of $6,070,000 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 $623,079 (2007 - $377,812, 2006 - $149,799)
      for the year ended December 31, 2008 would not have been recorded,
      reducing interest expense by an equivalent amount.                                              
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (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 7 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. This
      measurement difference is not material for all reporting
      periods.                                                                                                         

38

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| | (b) | Recently adopted United States accounting
      pronouncements:
| | --- | ---------------------------------------------------------------
| |     |                                                                
| |     | (i)                                                            
| |     |                                                                
| |     | (ii)                                                           
| |     |                                                                
| |     | (iii)                                                          
| |     |                                                                
| | (c) | Recently issued United States accounting
      pronouncements: 
| |     |                                                                
| |     | (i)                                                            
| |     |                                                                
| |     |                                                                
| |     |                                                                
| |     | (ii)                                                           
| |     |                                                                
| |     |                                                                
| |     |                                                                
| |     |                                                                

39

---

|GREAT PANTHER RESOURCES LIMITED                   
|--------------------------------------------------
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS    
|(Expressed in Canadian Dollars)                   
|Years ended
      December 31, 2008, 2007 and 2006

| |  |       | most acquisition-related costs would be recognized as expenses as incurred
        (they would no longer be part of the purchase consideration)non-controlling interests would be measured at fair value at the date of
        acquisition (i.e. 100% of the assets and liabilities would be measured at fair
        value even when an acquisition is less than 100%)goodwill, if any, arising on a business combination reflects the excess of
        the fair value of the acquiree, as a whole, over the net amount of the
        recognized identifiable assets acquired and liabilities assumed. Goodwill is
        allocated to the acquirer and the non-controlling interest.                                                            
| |  | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |       | The statement is effective for periods
      beginning on or after December 15, 2008. The Company does not expect the
      adoption of this Interpretation to have a significant effect on the Companys
      results of operations or financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | (iii) | In March 2008, the FASB issued FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities.
      This new statement enhances disclosures regarding an entitys derivative
      and hedging activities. This statement is effective for the Company
      beginning January 1, 2009. The Company is currently assessing the impact
      of this new standard.                                                                                                                                                                                                                                                                                                                                                           
| |  |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | (iv)  | In May 2008, the FASB issued Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that may be Cash Settled
      Upon Conversion,which clarifies the accounting for convertible debt
      instruments that may be settled in cash upon conversion. The guidance
      specifies that issuers of such instruments should separately account for
      the liability and equity components of those instruments by allocating the
      proceeds from issuance between the liability component and the embedded
      conversion option. The guidance is effective for the Company beginning
      January 1, 2009. The Company is currently assessing the impact of this new
      standard on the Companys financial statements.



40

---