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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,
2006**

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 ApplicableTitle of Class

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

There were69,797,348common shares,
without par value, issued and outstanding as of December 31, 2006.

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

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

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

Mineral Resource:As defined by the Canadian Institute
  of Mining, Metallurgy, and Petroleum, a Mineral Resource is a concentration
  or occurrence of natural, solid, inorganic, or fossilized organic material in
  or on the Earths crust in such form and quantity and of such a grade or
  quality that it has reasonable prospects for economic extraction. The location,
  quantity, grade geological characteristics and continuity of a Mineral Resource
  are known, estimated or interpreted from specific geological evidence and knowledge.

Mineral Reserve:As defined by the Canadian Institute of
Mining, Metallurgy, and Petroleum, a Mineral Reserve is the economically
mineable part of a Measured or Indicated Mineral Resource demonstrated by at
least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic and other relevant
factors that demonstrate, at the time of reporting, that economic extraction can
be justified. A Mineral Reserve includes diluting materials and allowances for
losses that may occur when the material is mined.

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

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

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

Probable Mineral Reserve:As defined by the Canadian
Institute of Mining, Metallurgy, and Petroleum, a Probable Mineral Reserve is
the economically mineable part of an Indicated, and in some circumstances a
Measured Mineral Resource demonstrated by at least a Preliminary Feasibility
Study. This Study must include adequate information on mining, processing,
metallurgical, economic, and other relevant factors that demonstrate, at the
time of reporting, that economic extraction can be justified.

Proven Mineral Reserve:As defined by the Canadian Institute
  of Mining, Metallurgy, and Petroleum, a proven mineral reserve, is the economically
  mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary
  Feasibility Study. This Study must include adequate information on mining, processing,
  metallurgical, economic, and other relevant factors that demonstrate, at the
  time of reporting, that economic extraction is justified.

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

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

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.

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

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

CONVERSION TABLE

From
    To
    Multiply ByCubic metres
    Cubic feet
    35.494Feet
    Metres
    0.305Metres
    Feet
    3.281Miles
    Kilometres
    1.609Kilometres
    Miles
    0.621Acres
    Hectares
    0.405


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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. 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

Name
      Position
      Business AddressRobert A. Archer
    President & CEO
    Vancouver, BCKaare G. Foy
    Executive Chairman & CFO
    Vancouver, BCMalcolm A. Burne
    Director
    London, UKJohn T. Kopcheff
    Director
    Perth, AustraliaA. Michael Turko
    Director
    Vancouver, BCFrancisco Ramos Sanchez
    Vice President, Operations
    Queretaro, QTRobert F. Brown
    Vice President, Exploration
    Vancouver, BCWendy M. Ratcliffe
    Corporate Secretary
    Vancouver, BCMing Jang
    Financial Controller
    Vancouver, BCJavier Ramirez Vargas
    Mine General Manager
    Topia, DGOJesus Rico Aguilera
    Mine General Manager
    Guanajuato, GTO


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B. Advisers

Name
      Position
      Business AddressMichael Sikula
    Legal Adviser
    West Vancouver, BCEnrique Del Bosque
    Legal Adviser
    Mexico City, Mexico


C. Auditors

Name
      Position
      Business AddressKPMG LLP
    Auditors
    Vancouver, BC


ITEM
2           Offer Statistics
and Expected Timetable

Not applicable.

ITEM
3           Key
Information

*A.*          *Selected Financial Data*

The following financial data summarizes selected financial data
for our Company prepared in accordance with Canadian generally accepted
accounting principles for the five fiscal years ended December 31, 2006.
Additional information is presented to show the differences which would result
from the application of United States generally accepted accounting principles
to our financial information. The information presented below as at December 31,
2006 and 2005, and for each of the years in the three-year period ended December
31, 2006, is derived from our audited financial statements which are included in
this Annual Report on Form 20-F. The information set forth below should be read
in conjunction with our audited financial statements and related notes included
in this annual report and with the information appearing under the heading "Item
5. Operating and Financial Review and Prospects". The data is presented in
Canadian dollars, unless otherwise stated.

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

Fiscal Year Ended December 31 (Audited)

Canadian GAAP
      2006
      2005
      2004(1)
      2003
      2002Sales or Operating Revenue
    7,069,442
    -
    -
    -
    -Cost of Sales
    7,119,047
    -
    -
    -
    -Director, management and other fees
    1,098,350
    270,576
    321,643
    81,000
    97,393General & Administrative and mineral property
      exploration expenses
    11,940,780
    4,585,650
    2,610,190
    191,151
    173,935Amortization, asset write-down and depletion of mineral
      properties, plant and equipment
    1,421,769
    416,213
    2,719
    1,970
    409,667Income (Loss) From Operations
    (14,510,504)
    (4,868,805)
    (2,934,522)
    (274,121)
    (680,995)Loss for the period
    (15,084,437)
    (5,231,685)
    (2,893,657)
    (273,738)
    (680,906)(Loss) per Common Share  basic and diluted
    (0.25)
    (0.22)
    (0.22)
    (0.16)
    (0.49)Total Assets
    32,132,259
    19,218,970
    3,788,331
    1,001,244
    34,099Net Assets
    28,549,831
    13,382,428
    3,160,218
    703,813
    (291,428)Capital Stock
    46,393,145
    21,536,440
    7,068,595
    2,089,939
    1,152,233Number of Common Shares (adjusted to reflect consolidation
      of common shares)
      69,797,348
      47,349,431
      15,818,677
      4,213,132
      1,442,698Long-Term Debt
    1,628,887
    746,127
    -
    -
    -Cash Dividends per Common Share
    -
    -
    -
    -
    -


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

Fiscal Year Ended December 31 (Audited)

United States GAAP
      2006
      2005
      2004
      2003
      2002
      2001Sales or Operating Revenue
    7,069,442
    -
    -
    -
    -
    -Cost of Sales
    7,119,047
    -
    -
    -
    -
    -Director, management and other
    1,098,350
    270,576
    321,643
    81,000
    97,393
    91,000feesGeneral & Administrative and mineral property
      exploration expenses
    11,940,780
    4,585,650
    2,610,190
    191,151
    173,935
    192,285Amortization, asset write-down and depletion of mineral
      property, plant and equipment
    1,421,769
    416,213
    2,719
    1,970
    409,667
    38,645Income (Loss) From Operations
    (14,510,504)
    (4,868,805)
    (2,934,552)
    (274,121)
    (680,995)
    (321,930)Loss for the period
    (14,934,638)
    (5,231,685)
    (2,893,657)
    (273,738)
    (680,906)
    (320,339)(Loss) per Common Share  basic and diluted
    (0.25)
    (0.22)
    (0.22)
    (0.16)
    (0.49)
    (0.05)Total Assets
    32,132,259
    19,219,795
    3,789,696
    1,014,974
    39,254
    507,442Net Assets
    27,693,630
    13,383,253
    3,161,583
    717,543
    (286,273)
    283,478Capital Stock
    52,604,350
    27,747,645
    13,279,800
    8,301,144
    7,363,438
    7,083,261Number of Common Shares (adjusted to reflect consolidation
      of common shares)
    69,797,348
    47,349,431
    15,818,677
    4,213,132
    1,442,698
    1,104,698Long-Term Debt
    2,485,088
    746,127
    -
    -
    -
    -Cash Dividends per Common Share
    -
    -
    -
    -
    -
    -


Disclosure of Exchange Rate History

On April 18, 2007, 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 $1.1712.

For the past five fiscal years ended December 31, 2006 and for
the period between December 1, 2006 and March 31, 2007, the following exchange
rates were in effect for Canadian dollars exchanged for United States dollars,
expressed in terms of Canadian dollars and based upon the exchange rate as
determined above:

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Year/Month End
    Average
    Low/HighDecember 31, 2002
    $1.5704
    not applicableDecember 31, 2003
    $1.4015
    not applicableDecember 31, 2004
    $1.3015
    not applicableDecember 31, 2005
    $1.2116
    not applicableDecember 31, 2006
    $1.1341
    not applicableDecember 31, 2006
    not applicable
    $1.1415 / $1.1652January 31, 2007
    not applicable
    $1.1750 / $1.1845February 28, 2007
    not applicable
    $1.1586 / $1.1852March 31, 2007
    not applicable
    $1.153 / $1.181


B.          
Capitalization and Indebtedness

Not Applicable

C.          
  Reasons for the Offer and Use of Proceeds

Not applicable

D.          
  Risk Factors

Much of the information included in this annual report includes
or is based upon estimates, projections or other "forward looking statements".
Such forward looking statements include any projections or estimates made by our
Company and our management in connection with our business operations. While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein.

Such estimates, projections or other forward looking statements
involve various risks and uncertainties as outlined below. We caution the reader
that important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other forward
looking statements.

The common shares of our Company are considered speculative.
You should carefully consider the following risks and uncertainties in addition
to other information in this annual report in evaluating our Company and our
business before purchasing shares of our Company's common stock. Our business,
operating and financial condition could be harmed due to any of the following
risks.

Risks Associated with Mining

As our properties are in exploration, development and mining
stages there is no assurance as to the full extent that we will be establishing
commercial discoveries on our properties.

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Despite a 48-year history of continuous production at the Topia
Mine, extensive exploration work on our mineral claims and current commercially
profitable operations there, the full extent of the ore bodies has yet to be
established in accordance with Canadian NI 43-101.

Similarly, at the Guanjuato Mine Complex, with its estimates of
historic production ranging from 700 million ounces to 1.5 billion ounces of
silver and 4 to 7 million ounces of gold since 1548, with extensive exploration
work done to date, with current physical mining and with the production of
increasing quantities of silver and gold concentrates, it is nevertheless too
early to determine the full extent of the ore bodies in accordance with Canadian
NI 43-101.

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 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

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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.

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 recently begun mining and further
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
since 2004, have 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. For the year ended 2006, we generated $7,069,442 in revenue compared to $0
for

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the twelve month period ending December 31, 2005. Although we
have prepared internal mining plans and cash flow analyses for the Topia Mine
and Guanajuato Mine Complex, we have no way to evaluate the likelihood that we
will be able to operate our business successfully or that our properties contain
a sufficient amount of recoverable reserves. We recognize that if we are unable
to generate significant revenues from our mining operations and any dispositions
of our properties, we will not be able to earn profits or continue operations,
potentially resulting in significant losses in the foreseeable future. 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.

The fact that we have only recently generated significant
revenues for one year raises some doubt about our ability to continue as a going
concern.

We have generated revenues for one year since beginning our
mining and exploration activities in Mexico. We may continue to incur greater
operating expenses than revenues until all our mining properties are
sufficiently developed to sustain commercial production and as a result, we may
need to undertake further financing. There can be no assurance that we will be
able to successfully mine, develop and explore our mining properties or that
viable reserves exist on our properties for extraction. If we are unable to
generate sufficient cash inflow to support our business activities during the
fiscal year ending December 31, 2007, we may be forced to delay, scale back, or
eliminate our mining and exploration activities.

Because we have only recently begun to earn revenue from our
business, we may need to raise additional funds for the further exploration and
development of our mining claims and to respond to unanticipated requirements or
expenses. We do not currently have any arrangements for financing and we can
provide no assurance to investors that we will be able to find such financing if
it is required. The most likely source of future funds presently available to
our Company is through the sale of equity capital. All of these circumstances
raise some doubt about its ability to continue as a going concern. The report of
the independent registered public accounting firm on our 2006 annual financial
statements includes an additional explanatory paragraph that states that
conditions or events exist, which raise some doubt about our ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of that uncertainty.

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 commercial
production, we may not be able to continue operations and, as a result, our
shareholders may lose any investment in our Company.

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- 14 -

There is substantial risk that no commercially exploitable
minerals will be found at our exploration properties and our business may fail.

The search for valuable minerals as a business is extremely
risky. We can provide investors with no assurance that the mineral claims that
we have an option to acquire contain commercially exploitable reserves.
Exploration for minerals is a speculative venture necessarily involving
substantial risk. The probability of an individual prospect having reserves and
being commercially profitable is remote and, if a property does not contain any
reserves, the funds we have spent or will spend on exploration of such property
will be lost.

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 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.

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

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- 15 -

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.

Virtually all of the goods and services required by us in
connection with our operations in Mexico and costs for the further acquisition
of interests in our properties, will be paid for in Mexican pesos or United
States dollars. Prices for goods and services offered to members of the mining
industry in Mexico, when quoted in Mexican pesos, are, for the most part,
adjusted so as to remain competitive with prices offered in respect of the same
goods and services in the United States and Canada. Nonetheless, an increase in
the value of the Mexican pesos or of the United States dollar relative to the
Canadian dollar, which is not followed by such an adjustment, may affect the
ability of our Company to carry out our exploration and development programs and
may substantially increase the costs of such programs.

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.

We are dependant on the services of certain key officers,
namely Robert Archer, Kaare Foy and Ing. Francisco Ramos Sanchez, 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, our Chairman of the Board, CFO and a director and Ing.
Francisco Ramos Sanchez, our Vice President, Operations. 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.

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- 16 -

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 or 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.

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.

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- 17 -

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.

We are currently without a proven and reliable source of revenue
  and 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, 2006, there are also outstanding common share purchase
  warrants and options exercisable into 20,380,078 common shares which, if exercised,
  would represent approximately 23% 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 includes 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.

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

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- 18 -

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 2007 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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- 19 -

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 11, 2004, we entered into an option agreement
granting our Company 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 by
making staged cash payments totalling US$165,000 with no underlying NSR and no
work commitments. We made cash payments totaling US$20,000 during the year ended
December 31, 2004, cash payments totalling US$20,000 during year ended December
31, 2005 and cash payments totaling US$30,000 during the year ended December 31,
2006. Subsequent to December 31, 2006, the Company paid an additional US$95,000
thus fulfilling all conditions of the option agreement.

On February 28, 2004, we entered into an option agreement
granting our 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 by making staged cash payments totalling US$965,000 with no
underlying NSR and no work commitments. We made a cash payment of US$50,000
during the year ended December 31, 2004 and a cash payment of US$75,000 during
the 2005 fiscal year in accordance with the option agreement. The Company
elected

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- 20 -

not to make the required US$100,000 payment on February 28,
2006 and as a result forfeited all rights and options to the property.

On December 31, 2004, we entered into a letter of intent to
acquire up to an 80% interest in certain mineral properties located in the Cerro
Colorado Mining District of Pima County in southern Arizona. On February 4,
2005, we elected not to proceed with this proposed acquisition.

On June 13, 2005, we signed 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.
Terms of the agreement call for our Company to make four staged cash payments
and share issuances totaling US$300,000 and 300,000 shares (100,000 issued),
over a period of three years, to the property owner. If the option is exercised,
the property owner will retain a 2% NSR, half of which can be purchased for
US$1,000,000.

In May 2005, we received title for an additional 2,184 hectares
staked by us in the Guadalupe y Calvo Mining District of southwest Chihuahua
State, Mexico, increasing the size of our San Antonio Project to 12,274.7
hectares.

On June 30, 2005, we entered into an agreement to purchase 100%
of the ownership rights in and to all the fixed assets, machinery, equipment and
Topia Silver-Lead-Zinc Mine located in the Municipality of Topia, State of
Durango, Mexico. Upon signing the agreement, we paid a total of US$540,165 to
the vendor and to two divisions of Peñoles, the latter being part of the assumed
debt. The balance of the purchase price, approximately US$1.76 million, is
divided between the vendor (US$946,000 owed) and La Cienega, a division of
Peñoles. While the debt to the vendor will be paid in stages over the next three
years, the debt to La Cienega will be paid effectively from the proceeds of
production as a 10% NSR. We have the option of paying out the debt in full at
any time. During 2006, a total of US$628,507 was paid in respect of the Topia
Mine debt, being US$328,507 to La Cienega subsidiary of Peñoles and US$300,000
to the vendor, Cia Minera de Canelas y Topia S.A. de C.V (Canelas). As at
December 31, 2006, a total of US$1,135,986 was owing by us on the Topia Mine,
namely US$486,067 to La Cienega, and US$646,919 to Canelas.

On July 12, 2005 we incorporated Metalicos de Durango, S.A. de
C.V. and on October 5, 2005 we incorporated Minera de Villa Seca, S.A. de C.V.
These two operational subsidiaries of our Company are responsible for the
day-to-day affairs and operations of the Topia Mine and Guanajuato Mine
respectively.

On October 25, 2005, we signed a formal purchase agreement to
acquire a 100% interest in a group of producing silver-gold mines in Guanajuato,
Mexico. The total purchase price is US$7,250,000 which includes 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 (real estate). At December 31, 2005, we had paid
US$3,650,000 of the total purchase price to the vendor. At December 31, 2006, we
had made the final payment for the Guanajuato Properties.

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 ($403,634) was expensed as part
of the write down of property cost.

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

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- 21 -

On March 8, 2006, we purchased a 100% interest in the Arcoiris
concession. The agreement required a cash payment of US$20,000 upon signing of
the purchase agreement (paid) and additional staggered payments totalling
US$280,000 (US$80,000 paid) over a three year period. The 100 hectare Arcoiris
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. In addition, the new claim contains much of the Don Antonio vein, from
which Peñoles produced silver-lead-zinc in the past.

On May 24, 2006, we announced the purchase of 3.88 hectares of
land adjacent to the plant at our Guanajuato Silver-Gold Mine Complex from
Sociedad Cooperativa Minero Metalurgica Santa Fe de Guanajuato for a total of US
$690,425. A payment of US$ 201,825 was made at the time of signing of the
purchase agreement. The remaining US$488,600 was paid during the 5-month period
that followed. 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 overallotment 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.

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 Venture Exchange exceeds $3.35 for a period
of 20 consecutive trading days.

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.
Proceeds from the Offering have been and will continue to be used to accelerate
the ongoing exploration and development activities on the Guanajuato and Topia
Mines, for evaluation of potential acquisitions and for general corporate
purposes.

On June 15, 2006, we held our annual and special general
meeting, at which Kaare G. Foy, Robert A. Archer, Malcolm A. Burne, and John T.
Kopcheff were elected as our directors, KPMG LLP, Chartered Accountants was
elected auditor for the year, and our rolling 10% incentive stock option plan
was approved by shareholders.

On June 23, 2006, we paid a cash instalment of US$50,000 and
issued a second share allotment of 50,000 to its June 15, 2005 option agreement
with Minera Aciero del Fuego S.A. de C.V. to purchase the Virimoa Property. The
shares were subject to a holding period, which expired October 21, 2006.

On July 7, 2006, Great Panther appointed Mr. A. Michael Turko
to its board of directors.

On September 11, 2006, we signed an option agreement to acquire
a 100% interest in the Mapimi Project in eastern Durango State, Mexico. The
project consists of 17 concessions comprising 3,508 hectares and hosts
significant silver-lead-zinc-gold mineralization with excellent potential for a
large bulk tonnage deposit. The property is bisected by paved highway
approximately 100 kilometres from Peñoles' smelter at Torreon and as such, the
infrastructure is considered excellent. Terms of the agreement call for the
Company to make 6 staged cash payments and share issuances totalling
US$3,000,000 (US$100,000 paid) and 500,000 shares, over a period of 4 years. If
the option is exercised, the vendors will retain a 3% NSR, each 0.5% of which,
up to 2%, can be purchased for US$500,000.

On November 13, 2006, our common shares began trading on the
TSX with the trading symbol GPR. Subsequently, we were de-listed from the
TSX Venture Exchange.

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- 22 -

On December 7, 2006, we signed a letter of intent with Altair
Ventures Inc. whereby Altair has the option to earn 70% interest in our San
Antonio property. The terms of the agreement stipulate that Altair will make
three staged payments and share issuances to Great Panther totalling US$200,000
and 200,000 shares over a period of 3 years. Over the same period, Altair must
spend a total of US$1,000,000 in exploration on the project. Great Panther will
be the operator of the exploration program.

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 the following property interests:

C.          
Primary Mining Properties

Topia Mine

The property consists of three groups of exploitation
concessions covering a total area of 1,555 hectares and one group of exploration
concessions covering a total of 4,844 hectares, for a grand total of 6,399
hectares. The largest group of exploitation concessions, the Topia group,
consists of 39 claims covering 1,275 hectares. In addition to the Topia group
are two satellite claim groups known as the Las Papas group and the Jarillal
group and cover approximately 228 hectares and 52 hectares, respectively. The
exploration concessions completely surround the Topia group.

We had 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.

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. We anticipate commissioning
the plants third ball mill in 2007, which would increase the plants potential
capacity to 300 tonnes per day.

More than a dozen sub-parallel veins are known to exist at
Topia and some extend for more than 4 kilometres along strike. During the year,
ongoing westward development of the mine continued to demonstrate high grades of
silver-lead-zinc. In addition, new underground drilling and sampling has shown
that the deeper portions of the Madre, La Dura, and Animas veins are also
increasingly rich in gold. Although vein widths are narrow in this part of the
district, the Company is continuing to use a resuing method of mining that
significantly reduces dilution, such that the grades reported from sampling are
very close to head grades reported at the plant. The increase in gold grades in
some of these veins will

---

- 23 -

obviously enhance the economics of their development,
particularly as they have been found to be up to ten times the historical gold
grades at Topia.

In order to increase production and maximize efficiencies in
this area, Great Panther purchased a 100% interest in a strategic claim in March
2006 that is contiguous with the existing Topia Mine Property. The 100 hectare
Arcoiris concession contains portions of the strike extension and down-dip
projection of the Dos Amigos Vein that the Company was developing on its own
ground. In addition, the new claim contains much of the Don Antonio vein, from
which Peñoles produced silver-lead-zinc in the past.

Immediately behind the plant, a decline ramp from the main
access adit (tunnel), Level 'A', has intersected the western edge of previous
stoping on the Argentina vein. This is the top priority area for development and
exploitation due to its proximity to the mill and the presence of multiple
parallel, thick and high grade silver-lead-zinc veins. A cross-cut from the ramp
intersected the main vein wherein 3 channel samples returned grades of 2,060 to
2,640 g/t Ag and 29 to 36% combined Pb-Zn over 1.0 metre. The vein in the end of
the westernmost stope is still approximately 1.0 metre wide and consists of
quartz-barite with bands of galena and sphalerite (sampling in progress). The
distance from here to the closest surface drill hole (A04-02 from Great
Panther's 2004 program that returned grades of 708g/t Ag, 4.0% Pb and 4.2% Zn
over 1.8 metres) is approximately 300 metres, part of which contains former
reserve blocks of Peñoles (now classified as Historical Resources). This
represents a large block of potential high grade resources and will be targeted
by an underground drill program. Small scale production from the Argentina vein
began in FY07-Q1 and will build as the veins are developed on multiple levels.

Production - Topia Mine

During the first quarter of the fiscal year, the Company
reached a significant milestone in its transition to becoming a primary silver
producer with the first shipment of concentrates from the Topia Mine in March
2006. Production increased throughout the year and the commissioning of a second
ball mill raised the plants capacity from 120 to 170 tonnes per day (tpd). The
Company anticipates a further increase in the plants throughput to 200 tpd by
mid-2007 and to 300 tpd by early 2008.

For the year, throughput at the plant was 22,445 tonnes at a
head grade of 340 g/t Ag, 0.66 g/t Au, 3.23% Pb and 3.93% Zn, or 25.3 oz/t Ag
Eq. Average recoveries of 86.6% for Ag, 83.0% Au, 85.8% Pb and 84.7% Zn were
realized which resulted in the production of 208,005 oz Ag, 406 oz Au, 1,381,637
lbs Pb and 1,636,139 lbs Zn for a silver equivalent production of 483,775
ounces.

A summary of production at Topia for 2006 is as follows:

FY06-Q1
    FY06-Q2
    FY06-Q3
    FY06-Q4
    TOTALTonnes milled
    3,699.7
    4,592.2
    6,948.3
    7,204.8
    22,445.0Gold ounces
    69.2
    85.4
    106.4
    145.0
    406.0Silver ounces
    40,138.3
    52,859.1
    49,085.8
    65,921.6
    208,004.8Lead tonnes
    121.3
    145.2
    153.0
    208.5
    628.0Zinc tonnes
    130.8
    166.4
    201.8
    244.8
    743.8Silver equivalent
      ounces (Ag eq)
    90,381
    115,672
    121,166
    156,556
    483,775


---

- 24 -

In addition to the material processed for the Companys
account, an additional 5,912 tonnes were processed for various local miners.
This custom milling uses up some of the excess plant capacity, helping to lower
overall costs and increase efficiencies.

Production costs at Topia were reduced throughout the year and
have continued to decline in 2007. Production costs were CDN$3,715,363 for FY06.
The Company also incurred costs with the direct purchase of minerals from
various independent miners.

Guanajuato Mine Complex

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. Silver was discovered in the area in 1548 with estimates of
historical production ranging from 700 million to 1.5 billion ounces of silver,
and 4 to 7 million ounces of gold.

Limited drilling was completed on the property in the 1980's
and 1990's which indicated that silver-gold mineralization continues to depth
under the existing workings. Based upon this work, a "reserve" and "resource"
estimation, representing a possibility of 4.7 million ounces of silver and
38,000 ounces of gold was completed in 2000. This resource and reserve estimate
is considered to be part of the global resource of 2,750,000 tonnes grading 1.56
g/t Au and 176 g/t Ag, established by the previous owners of the property.
Neither of these disclosures follows the requirements for reserves and resources
outlined in NI 43-101 and both are regarded as historical in nature.

Mining at Guanajuato has been conducted since the year 1600,
initially by the Spaniards but since 1939 by a 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. It
stopped completely in August of that year and Great Panther took possession of
the mine in December 2005.

Mining is currently being conducted in the San Vicente North
and Guanajuatito areas, both of 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. Similarly, mining at Guanajuatito is pursuing a zone
of high grade mineralization intersected by the Companys surface drilling in
late 2005. As such, both of these areas are expected to play a significant role
in the near term production plans of the Company. Furthermore, that this
mineralization is located near surface underscores the probability that the
upper levels of the Guanajuato Mine Complex have not been mined out.

In May 2006, the Company purchased an additional 3.88 hectares
of real estate adjacent to the plant at the Guanajuato Silver-Gold Mine Complex
in order to facilitate any future expansion of the plant facilities and to
protect the plant site from any possible development nearby. Great Panther
already owns the land occupied by the plant and administration facilities and
the Company has now received clear title to the new property.

From Q4 2005 to year-end 2006, the surface diamond drilling
program at Guanajuato totaled 6,753 metres in 34 holes and 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 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 means that they can be
developed and mined quickly and cost-effectively.

---

- 25 -

Production - Guanajuato Mine Complex

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, and only in Q1 2007 did these reach
the point where they were contributing to production. As such, the average head
grades at Guanajuato remained low for 2006. With increasing production from the
higher grade zones in 2007, the average grade for the mine has improved.

The plant at Guanajuato contains three ball mills, each of
which has a nominal rating of 400 tpd. The Company initiated production with one
ball mill and brought a second on stream in November 2006 such that the plant
was running at an average of 700 tpd by year-end. It is anticipated that the
third ball mill will be commissioned in mid-2007, effectively raising plant
capacity to 1,200 tpd, although this rate will also depend upon the level of
mine production. The aforementioned delays in the feed of higher grade ore from
the mine meant that the plant did not operate to its full capacity during 2006.
Total throughput for the period of operation in 2006 amounted to 86,111 tonnes
at an average grade of 58 g/t Ag and 0.55 g/t Au, or 2.7 oz/t of silver
equivalent (Ag Eq) for Ag Eq production of 155,085 ounces.

A summary of production at Guanajuato for 2006 is as follows:

FY06-Q1
    FY06-Q2
    FY06-Q3
    FY06-Q4
    TOTALTonnes milled
    -
    10,072.0
    36,106.3
    39,932.0
    86,110.6Gold ounces
    -
    180.6
    387.4
    419.7
    987.7Silver ounces
    -
    13,735.3
    39,245.9
    52,498.8
    105,480.0Silver equivalent ounces (Ag eq)
    -
    22,986
    58,616
    73,484
    155,085


At Guanajuato, total production costs for FY06 totalled
CDN$3,403,684. The Company anticipates 2007 production costs at Guanajuato to be
lower with the achievement of higher grades.

D.          
Primary Exploration Properties

Mapimi Project

The Mapimi Project (formerly Km66) is an advanced stage
exploration project that hosts significant silver-lead-zinc-gold mineralization
with excellent potential for a large bulk tonnage deposit. If continued work
proves successful, it could be developed quickly with the goal of defining a new
resource 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.

On September 11, 2006, the Company signed an Option Agreement
for the right to earn a 100% interest in the 3,508 hectare property, subject to
a 3% Net Smelter Return (NSR). Terms of the agreement call for the Company to
make staged cash payments of US$3,000,000 and share issuances totalling 500,000
shares, over a period of 4 years. If the option is exercised, the Company can
purchase up to 2% of the NSR, for US$500,000 per 0.5% .

On September 28, 2006, the Company filed a NI 43-101 compliant
resource estimate for the property prepared by Wardrop Engineering (Wardrop)
of Vancouver, B.C., which is available for viewing on the

---

- 26 -

Companys website at www.greatpanther.com or under the Companys profile at
www.sedar.com. 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 &
3,614 samples) and 22 diamond drill holes (2,983 metres & 900 samples). The
geological database also includes 422 surface channel samples. Coeur d'Alene
returned the property to the vendor in 1998 due to depressed mineral prices
prevailing at that time. 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.

A first phase exploration program is underway and consists of
detailed geological mapping and re-sampling of outcrops, adits and trenches; an
airborne geophysical survey and ground induced polarization geophysical survey;
and a 5,000 metre core drilling program, which commenced in December 2006.

San Antonio Project

The exploration and exploitation concessions comprising the San
Antonio project cover an area of 12,274.7 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 Nino 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, subsequent to year-end has exercised that
right and is in the process of transferring the title. The Company now owns a
100% undivided interest in the entire San Antonio package. (During the year, the
Company elected to discontinue exploration of the San Taco property, which
previously formed part of the project).

On December 7, 2006, the Company signed a Letter of Intent with
Altair Ventures Incorporated by which Altair was granted an option to earn a 70%
interest in the San Antonio property. Pursuant to the Letter of Intent, Altair
may exercise the option by making staged cash payments of US$200,000, (of which
$20,000 has been received by the Company since December 31, 2006), issuing
200,000 Altair common shares to the Company and incurring a minimum US$1 million
of exploration expenditures over a three-year period.

Virimoa Project

The two Virimoa concessions are located in the Topia Mining
District of Durango, Mexico. The project consists of two mining concessions
comprising 148 hectares and hosts a zone of intense alteration,

---

- 27 -

exposed for more than 350 metres. The Virimoa property is
situated in the heart of the Sierra Madre Mineral Belt and is centrally located
between several significant deposits. It lies approximately 17 kilometres
southwest of the Companys Topia Silver-Lead-Zinc Mine, which can be used for
logistical support, and was identified as a result of Great Panthers ongoing
regional evaluation around the mine. In addition, Virimoa is approximately 30
kilometres west of La Ciénega, Mexicos largest gold mine, currently in
production and owned by Compañía Minera Peñoles.

In March 2005, fieldwork commenced on the Virimoa Gold Property
with initial exploration comprising detailed and extensive channel sampling and
mapping focused on an exposure of intense iron oxide alteration. This work
attempted to better define the controls on mineralization and to trace its
extent. As the property has good road access, specific drill targets were
generated for a diamond drilling program, the first ever, which was conducted in
April, 2005. The diamond drill program outlined the presence of multiple zones
of gold-silver-copper-zinc mineralization across a width of more than 250
metres.

On June 13, 2005, the Company signed an Option Agreement to
purchase a 100% interest in the Virimoa Property located in the Topia Mining
District, State of Durango, Mexico. Terms of the agreement call for the Company
to make four staged cash payments and share issuances totaling US$300,000 and
300,000 shares, over a period of three years. If the option is exercised, the
property owner will retain a 2% NSR, half of which can be purchased for US$1
million.

There was no work conducted on the Virimoa Project in 2006 as
the Company focused its efforts on getting its two mines into production.

E.          
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 gross 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, 2006, we earned $7,069,442 in
revenue from our Topia and Guanajuato mining operations. Prior years revenues
were nil.

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.

---

- 28 -

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.

Governmental 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.

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 concession is obligated to pay an exploration duty based upon the
number of hectares covered by the concession area. These fees are determined per
hectare as follows:

|1. | during the first year, 2.0230 Mexican Pesos
      (approximately $0.20) per hectare;               
|-- | ---------------------------------------------------------------------------------------------------
|   |                                                                                                    
|2. | from the second to the fourth year, 6.01 Mexican Pesos
      (approximately $0.59) per hectare; and
|   |                                                                                                    
|3. | the fifth and subsequent years, 12.43 Mexican Pesos
      (approximately $1.21) per hectare.       

The holder of an exploitation concession must pay biannual
duties in January and July of each year as described under the LFD. These duties
are in the following amounts:

|1. | during the first and second year, 25.06 Mexican Pesos
      (approximately $2.45) per hectare;
|-- | ----------------------------------------------------------------------------------------------
|   |                                                                                               
|2. | the third and fourth year, 50.34 Mexican Pesos
      (approximately $4.92) per hectare; and   
|   |                                                                                               
|3. | the fifth and subsequent years, 8.29 Mexican Pesos
      (approximately $0.81) per hectare.   

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- 29 -

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.

The investment in exploration work must be at least equal to
the amount resulting from applying the following table to the number of hectares
covered by the exploration concession or by the grouping of mining
concessions:

Surface Area (hectares)
      Minimum Annual Expenditure
        (Mexican Pesos)
      Additional Minimum Annual
        **Expenditure** Per Hectare (Mexican Pesos)1st
        Year
      2ndto
        4th Year
      5thand
        6th YearFrom 1 to 30
      --
      5.00
      20.00
      30.00From 31 to 100
      --
      10.00
      40.00
      60.00From 101 to 500
      500.00
      20.00
      60.00
      120.00From 501 to 1,000
      1,500.00
      18.50
      57.00
      120.00From 1,001 to 5,000
      3,000.00
      17.00
      55.00
      120.00From 5,001 to 50,000
      10,500.00
      15.50
      53.00
      120.00From 50,001 onwards
      100,000.00
      14.00
      50.00
      120.00


In the case of groupings of exploration concessions, the
additional fee per hectare is applied based on the date of issuance of the
oldest concession which is part of the grouping.

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.

F.          
Organizational Structure

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

|1. | New Age Investments Inc., a company incorporated in the
      Province of Alberta. This company is presently inactive.                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                 
|2. | Minera Mexicana el Rosario, S.A. de C.V., 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.

---

- 30 -

|3. | 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.       
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                             
|4. | 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.
|   |                                                                                                                                                                                                                                             
|5. | Minera Exploraciones el Rosario, S.A. de C.V., a company
      incorporated subsequent to December 31, 2006 is responsible for the
      exploration and further development of the Companys mineral
      properties.                     

G.          
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 $9,688 per month.

Our Mexican subsidiary, Minera Mexican 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 $918) 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.

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

Our Mineral Properties/Projects

1. Topia Mine

a. Acquisition

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 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 $1,426,919 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;

---

- 31 -

(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.

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 is 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 is repaid, there is no further NSR.

Other than discussed above, there are no other 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 (US$80,000 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.

b. Location and Accessibility

The property consists of three groups of exploitation
concessions covering a total area of 1,555 hectares and one group of exploration
concessions covering a total area of 4,844 hectares. The largest group of
exploitation concessions, the Topia group, consists of 39 claims covering 1,275
hectares. Two satellite claim groups known as the Las Papas group and the
Jarillal group cover approximately 228 hectares and 52 hectares, respectively.
In addition to the exploitation concessions, the Topia 2 group consists of 14
exploration concessions, staked and owned 100% by our Mexican subsidiary, Minera
Mexicana el Rosario, S.A. de C.V.

The Topia and the Topia 2 groups are located in the
municipality of Topia in the west central part of Durango State, Mexico; the Las
Papas group is about 10 kilometres northeast of the town of Topia; and the
Jarillal group is near the town of Torance about six kilometres east of Topia.
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 property is located within the Sierra Madre Occidental
Mountain Range. The terrain is quite steep and rugged with elevations ranging
from approximately 600m in the river valleys in the western portion of the
property rising to nearly 2,000m 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.

c. Mineralization

The veins of the Topia district have formed along the northeast
series of faults. Mineralized veins are limited to the lower series of andesitic
lavas and interbedded pyroclastics known as the Topia andesites.

---

- 32 -

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.

The workings on the site are named according to the vein worked
and the name of the portal such as the Madre Vein on the Tres Varones level.
Although some of the different veins are connected by crosscuts, in general the
individual veins have been developed individually on several levels. This has
resulted in numerous adits being used for production purposes.

The Victoria portal is one exception to this, whereby it was
designed to be the focal point of the operation for veins east of the Victoria
Fault. The Victoria portal is located at the 1,450 metre elevation well below
most of the productive stopes. This adit crosses through the Victoria fault
within a few hundred metres of its mouth and then extends 1,700 metres to the
north intersecting the Oliva, Madre, Cantanranas and Argentina veins, all on the
eastern side of the Victoria fault. It is at an elevation well below the mill
requiring production ore to be hauled up the steep, narrow dirt roads. The ore
dump at the Victoria portal has been washed out and will require some major
repairs before it can be used again. This level also drains many of the upper
levels with about 10 litres per second of water flowing out the portal. In
operating times this water was pumped up to the mill for use as process
water.

(i) Veta Madre

The principle ore source at Topia has been the Veta Madre
(Mother Vein or Mother Lode). This vein has been mined over a strike length
of more than three kilometres. Early work was focussed primarily east of the
Victoria fault and then later from the Cocinera level west of the Carrizo fault.
The most recent work on the Veta Madre is in 15-22 mine area which is accessed
by the 15-22 (1,522m elev.), the Tres Varones (1,580m elev.) and Don Benito
(1,622m elev.) levels. Although longitudinal sections are available for most of
the other veins, the long section of the Veta Madre best shows the lateral
extent of the mineralization and mine workings at Topia.

One of the prospects for ore is between the Tres Varones and
Cocinera levels of the Veta Madre. This area has good vein widths and is
relatively accessible. The longitudinal section of the Veta Madre shows many
small remnant blocks that may be extracted from the 15-22 level. However, these
small blocks will be costly to define and extract. Of greater interest however
is the area to the west with one drill intercept. This intercept is west of a
major dyke and about 200 metres west of any workings. There is also potential to
the east where mineralization is thought to extend. However, there are no drill
intercepts in this area. The Veta Madre is also unexplored in the area of the
Victoria fault but the owner expressed concern that the vein was faulted into
very small pieces in this area that might not permit efficient mining and may
make it difficult to follow by drifting. This section of the vein is also
directly below the town of Topia.

(ii) Veta Cantanranas

The Veta Cantanranas is the closest vein to the Veta Madre and
in fact splays to the north from the Veta Madre looking toward the east. The
Cantanranas vein tends to dip steeply to the south, somewhat different than the
almost vertical Veta Madre. It has been stoped between sections 200 West and
2600 East and may extend to the Hormiguera mine at 3200 East. The gaps in stope
locations on this vein may be due to the overlap of the Madre vein stopes. The
combination and then splaying of these two veins makes following them difficult
at times and there may be some instances where lost portions of economic veins
remain in the walls.

(iii) Mina Argentina

The Argentina vein is located immediately north of the mill and
has been exploited between sections 900 East and 1,600 East from six main
levels. Vertically the stopes are located between 1,600 and 1,900

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metres. Peñoles had postulated potential strike extensions to
this vein and some drilling was done to test these theories. Four holes were
drilled to the east from surface, in 1986 and in 1987.

The Argentina vein is the northern limit of surface exposure of
Topia andesites as rhyolite outcrop is found making exploration of strike
extensions difficult. There is potential for the Argentina vein to continue west
of the Victoria fault similar to the Madre and Cantanranas veins.

(iv) Animas Vein

The Animas vein is south of the Madre vein and due to the lower
surface elevation there seems to be mineralized sections missing due to the
level of erosion. Other veins in this area and possible continuations may be the
Oliva, La Dura, and Dos Amigos veins. To the north there are other minor veins
stoped such as the Santa Cruz and Santa Juliana. Like the major veins all of
these veins contain small remnant blocks beside, below and above existing stopes
as well as the potential for strike extensions. The numerous faults and splays
make following the veins difficult and there is potential for better veins in
the wall rock in places where the wrong vein has been followed.

(v) Las Papas

The Las Papas area is located about seven kilometres northeast
of Topia. There are 3 known veins with mainly minor underground development and
only the Vicente vein has been stoped. At Las Papas the veins occupy both the
vein and main fault orientation seen at Topia. Another significant difference in
this area is that the Ag:Au ratio is much lower being between 10 and 20 to one
instead of the 300 to 1 seen typically at Topia.

Most of the exploration on the Topia property is by tunneling
on veins found in either crosscuts or on surface. In the Peñoles era veins were
both mapped and sampled, but in the last ten years little geological work seems
to have been maintained. In total over 24 kilometres of horizontal tunnels exist
on the various veins and connecting them.

d. Mineral Resource Estimation

On December 28, 2006, Wardrop Engineering (Wardrop) of
Vancouver, B.C. delivered a NI43-101 compliant resource estimate for our Topia
Silver-Lead-Zinc Mine. Wardrop used a US$60 Gross Metal Value (GMV) cut-off
grade rather than silver equivalents due to the high value of base metals in the
mineralization, reflecting current commodity prices. Silver equivalents can be
calculated by dividing the GMV above by the silver price of US$11.56 used in the
estimation. Doing this would yield a total Measured Resource of 1,185,219oz of
Ag Equivalent, an Indicated Resource of 2,440,384oz of Ag equivalent, and an
Inferred Resource of 1,418,900oz of Ag Equivalent. The following table indicates
the amount of each of the four commodities represented by the Wardrop resource
figures.

The Table below uses the terms Measured Resources, Indicated
Resources and Inferred Resources We advise U.S. investors that while these
terms 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.

Payable Metal from Wardrop Resource:

Category
    Ag ozs
    Au ozs
    Pb lbs
    Zn lbs
    Ag Eq grade (oz/t diluted)
    Ag Eq ozs (total)Measured
      Resources
    848,584
    1,518
    5,858,988
    5,319,835
    22.14
    1,185,219


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Indicated Resources
    1,695,588
    3,083
    12,135,379
    11,315,905
    21.90
    2,440,384Inferred Resources
    1,022,111
    1,582
    6,921,932
    6,451,895
    19.79
    1,418,900


In order to bring these resources into a reserve category,
Wardrop will have to conduct a more detailed analysis of the costs at the Topia
Mine and this will be carried out in 2007.

e. Exploration

The Company had 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.

As known from previous mining, three of these areas (Las
Trancas, Don Benito and Hormiguera) represent portions of the same veins that
extend for more than four kilometres across the property, while the two other
areas represent parallel vein systems approximately one kilometre to the
northwest (Argentina) and two kilometres to the southeast (El Rosario). Several
other veins are known and have yet to be drilled.

The intersections obtained are typical of vein deposits in
general and the widths and grades are consistent with those mined in the past at
Topia. Based upon the success of the drilling in the Argentina area, the Company
began the rehabilitation of the underground workings here. Other areas such as
El Rosario are proving to have similar potential. The drill program provided the
Company with sufficient confidence that the veins have excellent continuity and
therefore the potential to provide resources for a renewed mining effort.

Along the Animas vein, on Level 1550, underground channel
sampling returned 1.62g/t Au, 338g/t Ag, 2.28% Pb, 1.53% Zn over 30 metres
strike length, with an average width of 0.31m (average of 16 samples); and
1.4g/t Au, 429g/t Ag, 1.14% Pb, 6.23% Zn over 35 metres strike length, with an
average width of 0.55m (average of 11 samples).iii

In 2006, mine development continued along the Dos Amigos Vein
system. New sampling of this vein from the east end of the ramp has returned
average grades of 924 g/t Ag, 21.78% Pb and 16.16% Zn along a 30 metre strike
length. Although the vein has an average width of only 0.21 metres along this
length, we are use a mining method called 'resuing' which reduces dilution and
maximizes the grade of the material being recovered.

Along strike of this high grade mineralization and to the
northeast, lie the old La Dura Mine workings that are part of the Companys
property. Recent sampling from the Dos Amigos Vein at the southwest end of La
Dura has returned 475 g/t Ag, 1.01 g/t Au, 3.92% Pb and 5.09% Zn over a strike
length of 89 metres and an average width of 0.36 metres. Slightly lower grade
mineralization continues for another 108 metres to the northeast, returning
average grades of 265 g/t Ag, 1.19 g/t Au, 0.62% Pb and 1.21% Zn over an average
width of 0.52 metres.

There has been no underground development for approximately 200
metres between the southwest end of the La Dura Mine and the ramp mentioned
above, so the potential to find more high grade mineralization is considered
excellent. Collectively, the aforementioned results represent more than 750
metres of strike length along the Dos Amigos Vein and the mineralization is open
to depth along this entire distance.

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- 35 -

Continuing development on this vein system will include
stations for an underground drill program, which will enable the Company to more
easily and quickly determine the overall potential of the vein and to delineate
a new resource that can be added to the mine plan.

During the year, ongoing westward development of veins
continued to demonstrate high grades of silver-lead-zinc through underground
sampling, with deeper portions of the Madre, La Dura, and Animas veins
increasingly rich in gold with the westward development of the mine.

Systematic sampling on the deeper portions of the Animas vein
conducted during the year demonstrated high grades of silver-lead-zinc and
returned the following results (mine levels are named according to their
elevation above mean sea level; therefore level 1380 is 50 metres below level
1430):

Level 1430: 1.47g/t Au, 186g/t Ag, 2.02% Pb, 4.43% Zn over 25
metres strike length with an average width of 0.19m (average of 5 channel
samples).

Level 1420: 3.03g/t Au, 878g/t Ag, 3.19% Pb, 2.74% Zn over 38
metres strike length with an average width of 0.32m (average of 13 channel
samples).

Level 1400: 5.08g/t Au, 679g/t Ag, 7.07% Pb, 6.32% Zn over 45
metres strike length with an average width of 0.42m (average of 16 channel
samples).

Level 1390: 6.84g/t Au, 279g/t Ag, 2.17% Pb, 0.19% Zn over 15
metres strike length with an average width of 0.5m (average of 4 channel
samples).

Level 1380: 5.92g/t Au, 304g/t Ag, 4.35% Pb, 12.72% Zn over 10
metres strike length with an average width of 0.45m (average of 3 channel
samples).

The increase in gold grades in some of these veins will
obviously enhance the economics of their development, particularly as historical
gold grades at Topia have averaged less than 1.0g/t.

In addition, many of the sampled sections reported above
represent the complete length of the current exposure, so the potential to
extend the development of these veins is wide open. The deeper levels of the
Animas vein are virtually untouched over a strike length of 1,000m and will be
drill tested over the next six months.

Along the Animas vein, on Level 1550, underground channel
sampling returned 1.62g/t Au, 338g/t Ag, 2.28% Pb, 1.53% Zn over 30 metres
strike length, with an average width of 0.31m (average of 16 samples); and
1.4g/t Au, 429g/t Ag, 1.14% Pb, 6.23% Zn over 35 metres strike length, with an
average width of 0.55m (average of 11 samples).

Along the La Dura vein, mine development on Level 1495,
returned 4.96g/t Au, 242g/t Ag, 8.32% Pb and 2.42% Zn over 38 metres strike
length with an average width of 0.49m (average grade of 16 samples). Exploration
potential exists above Level 1495 for approximately 150 metres vertical as this
part of the La Dura vein was not previously developed.

The deepest access level on the Madre vein is the 1420 Level
where sampling returned average grades of 5.7g/t Au, 49g/t Ag, 0.17% Pb, 0.18%
Zn over a horizontal length of 45 metres and an average width of 0.32m (average
grade of 12 samples). Further sampling is being completed with the recent
cleaning and safety inspection of this level.

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- 36 -

Immediately behind the plant, a decline ramp from the main
access adit, Level 'A', has intersected the western edge of previous stoping on
the Argentina vein. This is the top priority area for development and
exploitation due to its proximity to the mill and the presence of multiple
parallel, thick and high grade silver-lead-zinc veins. A cross-cut from the ramp
intersected the main vein wherein 3 channel samples returned grades of
2,060-2,640 g/t Ag and 29-36% combined Pb-Zn over 1.0 metre. The vein in the end
of the westernmost stope is still approximately 1.0 metre wide and consists of
quartz-barite with bands of galena and sphalerite. The distance from here to the
closest surface drill hole (A04-02 from Great Panther's 2004 program that
returned grades of 708g/t Ag, 4.0% Pb and 4.2% Zn over 1.8 metres) is
approximately 300 metres, part of which contains former reserve blocks of
Peñoles (now classified as Historical Resources). This represents a large block
of potential high grade resources and will be targeted by the underground drill
program.

An underground diamond drilling program in the deeper portions
of the La Dura vein also is continuing to demonstrate high grades of silver,
gold, lead and zinc, up to 55.7 oz/t silver equivalent* (Ag Eq). In particular,
gold grades up to 7.21g/t in the drilling are significantly higher than the
historical average (less than 1.0g/t) for the Topia Mine.

Eleven principal mineralized vein structures have been defined
on the Topia Mine property, of which development and exploitation is presently
taking place on five, including La Dura. Surface and underground drilling over
the course of 2007 will target nine of the eleven veins in an effort to expand
the Topia Mine mineral resource and the number of veins being developed and
exploited. The recent nine-hole, 637.3 metre underground drilling program at La
Dura is part of the plan to test a 165 metre vertical interval (between the 1420
and 1585 levels) along a 600 metre strike length. These holes represent a 200m
horizontal by 50m vertical portion of that block. To date, there has been no
exploitation below the 1625 level in this part of the La Dura Mine. (Note: Mine
levels are named according to their elevation above mean sea level and the town
of Topia sits at an elevation of 1650 metres, such that most mine levels are
accessed via adits from the sides of the mountains).

Underground drill holes UT06-001 to 005 tested the La Dura vein
and a series of splays and parallel veins within a zone complicated by cross
faulting. One such vein in the hanging wall, called La Dura Alto, is the most
consistent of these in terms of grade and continuity. Significant results from
the first five holes include 0.6m @ 5.96g/t gold, 191g/t silver, 4.35% lead and
4.85% zinc (29.9 oz/t Ag Eq) in UT06-001; and 1.3m @ 3.03g/t gold, 194g/t
silver, 3.51% lead and 11.4% zinc (41.0 oz/t Ag Eq) in UT06-004, both on the
main La Dura vein.

Holes UT06-006 to 008 successfully located the La Dura vein,
with continuing high grades, east of a major fault and 85 metres below previous
workings. Significant results from these holes include 0.55m @ 2.88g/t gold,
609g/t silver, 5.84% lead and 11.1% zinc (55.7 oz/t Ag Eq) in UT06-006; and
1.05m @ 1.24g/t gold, 539g/t silver, 10.1% lead and 4.21% zinc (39.0 oz/t Ag Eq)
in UT06-008 (farthest east). Drill hole UT06-009 was used as an engineering hole
and as such was not oriented to intersecting veins.

Highlights of La Dura Underground Drilling:

Drill Hole
    From (m)
    To (m)
    Width (m)
    True width (m)
    Vein
    Au (g/t)
    Ag (g/t)
    Pb(%)
    Zn (%)
    Ag Eq.UT06-001
    0.00
    0.60
    0.60
    0.50
    La Dura
    5.96
    191
    4.35
    4.85
    29.9UT06-002
    3.25
    3.45
    0.20
    0.20
    La Dura
    5.53
    422
    4.25
    4.30
    35.3


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28.50
    28.85
    0.35
    0.35
    La Dura alto
    0.77
    396
    10.10
    0.80
    25.7UT06-003
    36.60
    37.00
    0.40
    0.30
    La Dura alto
    0.80
    216
    3.35
    10.10
    35.5UT06-004
    5.60
    6.90
    1.30
    0.90
    La Dura
    3.03
    194
    3.51
    11.40
    41.0UT06-005
    3.00
    3.50
    0.50
    0.50
    La Dura
    3.27
    162
    0.60
    1.83
    14.526.60
    26.70
    0.10
    0.10
    La Dura alto
    7.21
    195
    7.02
    2.33
    28.2UT06-006
    31.45
    32.00
    0.55
    0.45
    La Dura
    2.88
    609
    5.84
    11.10
    55.7UT06-007
    23.00
    23.65
    0.65
    0.65
    La Dura
    2.97
    201
    6.71
    8.83
    38.1104.55
    105.60
    1.05
    0.50
    La Dura
    1.24
    539
    10.10
    4.21
    39.0


*Note: Silver Equivalents (Ag Eq) were calculated using prices
of US$575/oz for Au, US$12.00/oz for Ag, US$0.60/lb for Pb and US$1.50/lb for
Zn; and recoveries of 85%, 87%, 90% and 87%, respectively.

Production from the Argentina vein is anticipated to begin in
the near future and will build as the veins are developed on multiple levels,
allowing the Company to achieve its production targets next year.

With so many prospective areas under development, underground
drilling will continue into 2007.

The drilling on the project was contracted to BDW International
Drilling of Mexico, S.A. de C.V. Ongoing geological work is being conducted by
Resource Geosciences de Mexico, S.A. de C.V.

2. Guanajuato Mine Complex

a. Acquisition

On October 25, 2005 we signed a formal purchase 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 is US$7,250,000, which
includes 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. In 2006, we paid the remaining balance of
US$3,625,000.

On May 15, 2006, we announced the purchase of 3.88 hectares of
real estate adjacent to the plant at our Guanajuato Silver-Gold Mine Complex.
The land was purchased from the Sociedad Cooperativa Minero Metalúrgica Santa Fe
de Guanajuato, the same Cooperative from which the mines were purchased in 2006,
for a total of US$690,425. A payment of US$201,825 was made at the time of the
signing of the purchase agreement and the remaining balance of US$488,600 was
paid in the second half of 2006. The Company has received 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.

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- 38 -

b. 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 2327500N, 265500E). The
Guanajuato Mine Complex consists of 1,107.28Ha, made up of 28 non-contiguous
exploitation claims.

Excellent access is availed to Guanajuato with an international
airport 30 minutes to the west near Silao/Leon. Toll free-ways skirt the city
linking it with Leon, Guadalajara, and Mexico City. All of the facilities of the
Santa Fe project 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.

c. History

The Guanajuato Mining District was founded in 1548.

- 1548: The first silver vein at San Bernabé (La Luz) was discovered by a
  local mule driver. Silver ore was hand mined and transported by mule to
  Zacatecas to be milled.
- 1550: Juan de Rayas discovered the Veta Madre system at the site where the
  present day Rayas shaft is located. This triggered an exploration rush which
  saw the discovery of the La Valenciana, Tepeyec, Mellado, Cata and Sirena
  silver occurrences.
- 1726: Production was very limited in early years as the method of
  extracting ores was the fire method where the rock face was heated with a fire
  and then quickly quenched with water, the rapid cooling resulting in the
  shattering of the rocks. It was not until gun powder was introduced by Don
  Jose de Sardeneta y Legaspi in 1726 that production became significant.
  Construction began on the Rayas shaft.
- 1760-1770: Antonio Obregón y Alcocer, who later became Count Valenciana,
  completed numerous exploration ventures, culminating with the discovery of the
  Valenciana ore-shoot and the development of the Valenciana mine.
- 1771: The dream of the Guanajuato miners became a reality with the
  discovery of immense masses of silver sulphides, mixed with ruby silver and
  native silver. After various fortunate discoveries, Antonio Obregón y Alcocer
  became famous, and was considered to be one of the richest men in the world.
  He was honoured with the title of Count Valenciana because, at the time, the
  Valenciana mine was estimated to be producing one-third of the worlds silver.
  Production was increased under the Counts direction, and the Santo Cristo de
  Burgos shaft was sunk to a depth of 150 metres.
- 1775: The San Antonio shaft on the Valenciana vein was sunk to a depth of
  227m.
- 1810-1868: Production stopped as the result of the War of Independence
- 1821: Revolutionaries burned all the mining installations, including the
  headworks of the newly-built Valenciana shaft.

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- 39 -

- 1868: The Valenciana mine was reopened by British investment capital.
- 1936: Peñoles S.A. tested the Veta Madre with four diamond drill holes.
- 1939: The Sociedad Cooperativa Minero Metalúrgica Santa Fe de Guanajuato
  became the legal owner of the properties of the Guanajuato Reduction and Mines
  Company. Starting with no mineral reserves and no working capital, the new
  Cooperative had a difficult time carrying out exploration and mining with
  outdated equipment.
- 1947-1949: The Fresnillo Company completed a diamond drilling program
  consisting of nine holes, which intersected the Veta Madre 80m to 150m below
  the lowest existing workings.
- 1968: The Fresnillo Company acquired the adjacent claims and incorporated
  Cebada a Negociación Minera Santa Lucía and the Peregrina Mine; in the same
  year, Fresnillo discovered the Torres-Cedros orebody during an exploration and
  drilling program.
- 1973: The contracting company Tormex, S.A. completed a photogeological
  study in the area of the Cebada mine holdings (Figure 3). The SCMMSFG
  discovered the Clavo de Rayas bonanza oreshoot.
- 1976: The Cebada mine began production. Between 1976 and 1995, the Cebada
  mine produced 1,277,216 tonnes at an average grade of 4.04 g/t gold and 372
  g/t silver. The Cebada mine is not a part of the Sociedad Cooperativa Minero
  Metalúrgica Santa Fe de Guanajuato holdings.
- 2003: The Grupo Guanajuato closed the Torres, Sirena, Peregrina and Apolo
  mines. The Bolañitos, Golondrinas, Asunción and Cebada mines stayed in
  production on a break-even basis.
- 2004: A Canadian company MexGold Resources (Gammon Lake Resources)
  purchased the near-by El Cubo mine.

Since discovery to 1990, total production from the Guanajuato
Mining District was estimated to be approximately 35,000 tonnes silver (1.12
billion oz Ag) and 175 tonnes gold (5.63 million oz Au).

Sociedad Cooperativa Minero-Metalurgica Santa Fe de Guanajuato
has completed various drill programs since 1939. Most of the historic drill log
and drill assay data exists at the mine but not in a readily accessible form.
The last phase of drilling completed in 1992, was utilized for the estimation of
the Cata mine resources in the 1992 Sociedad Cooperativa Minero-Metalurgica
Santa Fe de Guanajuato report.

d. 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

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- 40 -

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 20m in width but can be as wide as 90m. Most of the
historic production has come from the economically important lower ore level
(2,100m to 1,700m a.s.l.) and is typically associated with faults and both
footwall and hanging wall stockwork vein systems.

The argentiferous mineralization is hosted in quartz veins with
gangue mineralogy of quartz, calcite, pyrite, adularia, and sericite. The
principal silver bearing mineralization is acanthite (argentite), aguilarite and
naumannite while gold occurs as free gold and as electrum. The gold to silver
ratios vary from approximately 1:70 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, 10-40m 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. The higher grade portions of the veins range in width from less
than a meter up to 90m in width, historic average grade in the Veta Madre are
450g/t Ag and 2.5g/t Au.

e. 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. The most recent, noncompliant, resource
estimate was made in 2000 by Sociedad Cooperativa Minero-Metalurgica Santa Fe de
Guanajuato with most of the resource located below the current water level in
the mine.

f. Exploration

The Company commenced a surface diamond drilling program in
2005. The drilling program intersected bonanza grade silver and above average
gold within the Veta Madre vein structure. Highlights of the program include 692
g/t silver and 5.17 g/t gold over 5.8 metres and 1,096 g/t silver and 4.15 g/t
gold over 2.5 metres.

The drilling, comprising 1,163.3 metres in six holes, 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 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
(now owned by Great Panther).

The holes were drilled on four section lines at 50 metre
intervals, covering a strike length of 150 metres. Two styles of mineralization
were noted in the drill holes: silver-gold mineralization in the Veta Madre

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- 41 -

itself and a previously unrecognized zone of
gold-arsenic-antimony mineralization in the hanging wall. Both zones are
epithermal in nature, and likely represent separate pulses of mineralization.

In this part of the mine complex, the Veta Madre is manifested
as a silica breccia at the contact between the hanging wall diorite and the
footwall sediments. Hole GTTO-05-004 was drilled to test the zone of
mineralization in hole 317, mentioned above. Hole 004 intersected a 7.3 metre
wide vein breccia, interpreted as the Veta Madre, of which 5.8 metres (4.1 metre
true width) assayed 692 g/t silver and 5.17 g/t gold. Fifty metres along strike
to the southeast, hole GTTO-05-005 intersected a 3.4 metre thick section of the
same Veta Madre breccia, with a 2.5 metre (1.77 metre true width) portion
assaying 1,096 g/t silver and 4.15 g/t gold. A further 50 metres along strike to
the southeast, hole GTTO-05-006 intersected 7.5 metres of the Veta Madre breccia
with a 1.5 metre (1.06 metre true width) portion assaying 209 g/t silver and
1.55 g/t gold. The most northwesterly holes, GTTO-05-001 & 002, as well as
GTTO-05-003, drilled 50 metres updip from hole 004, did not intersect the Veta
Madre breccia. Details of significant intersections are listed below.

The gold-arsenic-antimony mineralization consists of a 10-30
metre thick (estimated true width) zone of quartz-pyrite veinlets within an
extensive stockwork/breccia in the hanging wall diorite and was intersected in
all six holes. Although gold values in this zone were mostly below 1 g/t in the
drilling, the holes may be too high in the epithermal system, with the
possibility of better mineralization at depth. As such, the hanging wall diorite
breccia is a significant, previously un-assayed, gold target which will be
followed up by surface and underground mapping, rock geochemistry and further
drilling. Elsewhere in the mine, stockwork/breccia zones can achieve thicknesses
of 30 metres or more and have historically provided substantial tonnages of
silver-gold mineralization amenable to bulk underground mining methods.

The Company concluded that the Veta Madre breccia forms the
more appealing target as the drill holes show that it continues with excellent
widths and grades below previous workings at the Guanajuatito ramp. The
aforementioned intersections occurred at a vertical depth of 100 -120 metres
below surface. The Veta Madre is known to extend more than 700 metres vertically
(approximately 1,000 metres down dip) from surface. Mineralized shoots within
the structure are often continuous to depth, which bodes well for these new
intersections, as there has been no drilling or underground development below
them. The Guanajuatito ramp provides easy access to this high grade
mineralization and only a minor amount of mining has taken place in the past.
The underground workings here will be re-sampled and surveyed as part of the
Company's ongoing silver-gold resource evaluation.

An extensive underground sampling program continued through
2006 at Guanajuato. Preliminary sampling in the first quarter of 2006 has
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 old stopes 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.
Consequently, it is presently unknown just how representative these grades may
be from a mining standpoint.

---

- 42 -

Significantly, the sampling came from 6 different stopes above
and below the 285 metre level over a total strike length of about 500 metres.
Grades from the various stopes were comparable. Five of these stopes lie within
200 metres of the Valenciana shaft and there has only been limited development
below this level, approximately 150 metres, to the bottom of the shaft. The
sixth stope, number 1414, lies 400 metres southeast of the shaft and has been
partially developed between the 285 and 320 metre levels. There has been no
development above this for at least 100 metres and there does not appear to have
been any work done below it at all, suggesting that the mineralization is
totally open to depth.

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. Two
channel samples across this zone returned 5.2 g/t Au over 3.2m and 7.6 g/t Au
across 3.0m. A further 100 metres along strike to the southeast of the above, an
exposure of silica breccia and a footwall shear were sampled over a 25 by 45
metre area, yielding anomalous to "ore-grade" (as defined by the current
operators) gold and silver values. In the Promontorio area the Veta Madre and
associated stockwork and shear zones form topographic dip slopes making for easy
drill targets and are readily accessible for potential surface exploitation.
Elsewhere in the mine complex, these mineralized stockworks can reach widths of
30 metres or more and locally exceed 100 metres in strike length and down-dip
extent allowing for bulk tonnage underground mining methods to be used.

Initial evaluations of underground workings near the
Promontorio Shaft, and approximately 150 metres vertically below these surface
outcrops, indicated the presence of similar gold-dominated mineralization.
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, which is to comprise of a minimum of 3,000 metres in
approximately 45 holes. 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. The 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. The work to date in
this northwest area of the Guanajuato Mine Complex has included the collection
of more than 1,000 underground channel samples and is leading to a better
understanding of the distribution of silver-gold mineralization. It has been
observed that, while the Veta Madre quartz breccia is fairly consistent and is
present in almost every hole, silver and gold grades vary somewhat, with higher
grades tending to cluster in pockets with lower grade material in between, a
typical feature of precious metal vein deposits. As such, even low grade
intersections of vein material in drill holes spaced 50 metres apart are
important as they indicate the continuity of the zone. Continued detailed
sampling underground and/or follow-up drilling on a closer spacing will be
needed to better define the actual grade of the zone.

Further underground development is already underway and this
part of the mine is providing about 150 tonnes per day to the mill. Underground
mapping and sampling is continuing in this area and the surface drilling is
continuing in the Animas and Promontorio area in the Cata and Rayas shaft areas
to the southeast. Results for these areas will be released in due course.

While all eight holes in the Animas drilling intersected
silver-gold mineralization, the most significant results include 1.5 metres
averaging 505g/t silver and 1.98g/t gold within 4.5 metres averaging 219g/t

---

- 43 -

silver and 0.86g/t gold in GTT-06-020, and 2.1 metres of 658
g/t silver and 1.7 g/t gold in hole GTT-06-023. Mineralization in these holes,
as well as that of hole GTT-06-21, is hosted within a portion of the Veta Madre
structure that extends into the footwall shale. Approximately 125 metres further
south from GTT-06-20 and 21, GTT-06-022 intersected 230g/t silver and 1.28g/t
gold over 3.0 metres in a hanging wall stockwork. Fifty and seventy metres,
respectively, deeper than hole 22, GTT-06-026 intersected 121g/t silver and
1.05g/t gold over 7.8 metres, and GTT-06-024 intersected 89g/t silver and 0.33
g/t gold over 9.0 metres. Both the intersections in GTT-06-024 and 026 as well
as the narrower intersections in GTT-06-025 and 027 are within stockwork zones
in hangingwall rocks.

In early 2006, we commenced a Phase II surface diamond drilling
program designed to test three separate areas along a 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 6,753 metres drilled in 34 holes 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.

In the Guanajuatito-Encarnación area, results of the diamond
drilling program provided further definition of a new zone of silver-gold
mineralization. Extensive underground sampling also confirmed the extension of
the silver-gold mineralization. Both the drilling and sampling were part of a
comprehensive, ongoing exploration program at Guanajuato to help better
understand and delineate the silver-gold mineralization in area. A total of
3,205 metres was completed under and northwest of the Guanajuatito ramp, and in
the adjacent Encarnación area along the trend of the Veta Madre, approximately
one kilometre northwest of the famous Valenciana Mine (now owned by Great
Panther). The program was initially designed to surround the 2005 drilling that
intersected 692 g/t silver and 5.17 g/t gold over 5.8 metres and 1,096 g/t
silver and 4.15 g/t gold over 2.5 metres. A total of nineteen holes have now
been drilled in this area at approximately 50 metre intervals, covering a strike
length of 400 metres and a vertical extent of 100 to 150 metres.

The work in the northwest area of the Guanajuato Mine Complex
has included the collection of more than 1,000 underground channel samples and
is leading to a better understanding of the distribution of silver-gold
mineralization. It has been observed that, while the Veta Madre quartz breccia
is fairly consistent and is present in almost every hole, silver and gold grades
vary somewhat, with higher grades tending to cluster in pockets with lower grade
material in between, a typical feature of precious metal vein deposits. This is
illustrated on the level plan maps on the Companys website. As such, even low
grade intersections of vein material in drill holes spaced 50 metres apart are
important as they indicate the continuity of the zone. Continued detailed
sampling underground and/or follow-up drilling on a closer spacing will be
needed to better define the actual grade of the zone.

Significant results from the 2006 drilling include 2.87 metres
of 651g/t silver and 3.16g/t gold in hole GTT-06-015, located approximately 50m
vertically below GTT-05-005 (1,096 g/t silver and 4.15 g/t gold over 2.5
metres). Drill hole GTT-06-015 helps define a high grade zone of silver-gold
mineralization below the Guanajuatito ramp in the section 2800N area. Drill hole
GTT-06-014 intersected 9.5m of anomalous Veta Madre mineralization including 6.0
metres of 111g/t silver and 1.55g/t gold under the Guanajuatito level +45
(mining formerly took place above level +45). Drill hole GTT-06-010 intersected
6.0m of anomalous Veta Madre with 1.0 metre of 82g/t silver and 0.35g/t gold.
GTT-06-010 is 40 metres vertically below the high grade GTT-05-004 (692 g/t
silver and 5.17 g/t gold over 5.8 metres). Drill hole GTT-06-013 intersected
8.2m of anomalous Veta Madre, while GTT-06-019 intersected a broad zone of

---

- 44 -

silica breccia with 1.0 metre of 77g/t silver and 0.59g/t gold.
This hole is 60m northwest of former mining on the Encarnación sublevel 45.

As in the 2005 drilling, two styles of mineralization were
noted in the 2006 holes: silver-gold mineralization in the Veta Madre itself and
a zone of gold-arsenic-antimony stockwork mineralization in the hanging wall.
Although only the Veta Madre style has returned grades of an economic level so
far, the stockwork style often contains anomalous levels of gold and will be
evaluated underground to better understand the distribution of the
mineralization.

Highlights of Diamond Drilling:

Hole No.
    From (m)
    To (m)
    Width (m)
    True Width (m)
    Ag (g/t)
    Au (g/t)GTTO-05-004*
    131.7
    137.5
    5.8
    4.1
    692
    5.17GTTO-05-005*
    110.5
    113.0
    2.5
    1.77
    1,096
    4.15GTTO-05-006*
    113.5
    115.0
    1.5
    1.06
    209
    1.55GTT-06-010
    160.0
    161.0
    1.0
    0.9
    82
    0.35GTT-06-013
    156.7
    158.5
    1.8
    1.5
    22
    0.55GTT-06-004
    167.0
    176.5
    9.5
    8.1
    90
    1.13Includes
    169.0
    176.0
    6.0
    5.1
    111
    1.55GTT-06-015
    168.83
    171.7
    2.87
    2.4
    651
    3.16GTT-06-016
    218.5
    220.4
    1.9
    1.6
    127
    0.91GTT-06-019
    220.5
    221.5
    1.0
    0.9
    77
    0.59


* designates results released Dec 1,
2005.

The continued drilling and sampling have helped us better
define a zone of silver-gold mineralization (the Guanajuatito Zone) that appears
to plunge off to the southwest. This zone is approximately 200 metres along
strike and could extend for at least 400 metres down-plunge as it appears to
join up with mineralization intersected in deep drilling from the 1980's.
Structurally, this appears to be a new trend to mineralization in the mine
complex and may be related to the contact between a dioritic intrusive that
forms the hanging wall in the Guanajuatito area and the "Guanajuato
Conglomerate" which is the hanging wall unit along strike to the southeast.

Plan maps for the Guanajuatito +45 level and Encarnación +15
level (all mine levels are referenced to the '0 metre' elevation at the access
to the Rayas shaft) have been included on the Companys website. Re-sampling of
these levels (2450N - 2750N sections) returned some excellent values associated
with the Veta Madre silica breccia. Mineralized intersections in GTT-06-013, 014
and 019 imply further potential in this area and have helped to define the
western limits to the Encarnación Zone, which appears to follow the more common
southeast plunge and is open to depth. Continued evaluation of this part of the
mine will be conducted from underground as is will be more cost-efective than
drilling from surface.

On the Guanajuatito +45 level, 31.6% of the samples assayed
greater than 55 g/t silver equivalent (AgE) using US$525/oz gold and US$10.50/oz
silver. These samples averaged 178 g/t AgE (143 g/t AgE using an 80% historic
mill recovery rate). On the Encarnación +15 level, 57.1% of the samples assayed
greater than 55 g/t silver equivalent (AgE) using the same prices. These samples
averaged 231 g/t AgE (185 g/t

---

- 45 -

AgE using an 80% historic mill recovery rate). On both levels,
the higher grade values cluster into distinct zones as seen on the level plans.

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. Further underground development is
already underway and this part of the mine is providing about 150 tonnes per day
to the mill. Underground mapping and sampling is continuing in this area and the
surface drilling is continuing in the Animas and Promontorio area in the Cata
and Rayas shaft areas to the southeast. Results for these areas will be released
in due course.

The second portion of the 2006 drill program focused on testing
a gap in historical production, known as the Animas area, between the Cata Mine
and San Vicente North Ramp. It represents a section of the Veta Madre vein
structure approximately 175 metres in strike length by 150 metres vertical,
immediately below surface and accessible by ramp. As such, the newly defined
mineralization presents an immediate target for stope development and
mining.

While all eight holes in the Animas drilling intersected
silver-gold mineralization, the most significant results include 1.5 metres
averaging 505g/t silver and 1.98g/t gold within 4.5 metres averaging 219g/t
silver and 0.86g/t gold in GTT-06-020, and 2.1 metres of 658 g/t silver and 1.7
g/t gold in hole GTT-06-023. Mineralization in these holes, as well as that of
hole GTT-06-21, is hosted within a portion of the Veta Madre structure that
extends into the footwall shale. Approximately 125 metres further south from
GTT-06-20 and 21, GTT-06-022 intersected 230g/t silver and 1.28g/t gold over 3.0
metres in a hanging wall stockwork. Fifty and seventy metres, respectively,
deeper than hole 22, GTT-06-026 intersected 121g/t silver and 1.05g/t gold over
7.8 metres, and GTT-06-024 intersected 89g/t silver and 0.33 g/t gold over 9.0
metres. Both intersections in GTT-06-024 and 026 as well as the narrower
intersections in GTT-06-025 and 027 are within stockwork zones in hangingwall
rocks. The latter two were the deepest of the eight holes and may represent a
pinching of the zone at this point. Highlights of Diamond Drilling:

Hole No.
    From (m)
    To (m)
    Width (m)
    True Width (m)
    Ag (g/t)
    Au (g/t)GTT-06-020
    33.0
    37.5
    4.5
    4.5
    219
    0.86Including
    36.0
    37.5
    1.5
    1.5
    505
    1.98GTT-06-021
    37.1
    44.5
    7.4
    5.2
    37
    0.18GTT-06-022
    56.5
    59.5
    3.0
    3.0
    230
    1.28GTT-06-023
    102.9
    105.0
    2.1
    2.1
    658
    1.7GTT-06-024
    124.35
    143.5
    9.15
    9.0
    89
    0.33GTT-06-025
    197.0
    198.0
    1.0
    0.7
    163
    0.3GTT-06-026
    115.3
    124.0
    8.7
    7.8
    121
    1.05GTT-06-027
    172.5
    173.5
    1.0
    0.7
    19
    0.98


As there still remains a portion of the Animas area that is
inaccessible for surface drilling, additional holes to test this gap are being
completed in an underground drill program.

The styles of mineralization at Animas are somewhat different
from the quartz breccia at Guanajuatito in the northwest end of the property. At
Animas, gold-silver mineralization is hosted in quartz-carbonate stockwork zones
in hanging wall conglomerate; in the Veta Madre silica breccia located along the
contact

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- 46 -

between the hanging wall conglomerate and footwall shales; and
in silica flooded (stockwork and breccia) footwall shale. These styles of
mineralization are well displayed in the surface drilling and in underground
workings in the various shallow levels of San Vicente North.

Mining is currently being conducted in the San Vicente North
Ramp area, on levels 55, 75 and 100 adjacent to the southeast side of Animas,
and access to the area is readily available by cross cutting and extending
drifts northward from the ramp development. As such, this area is expected to
play a significant role in the near term production plans of the Company.
Furthermore, the fact that the Animas mineralization is located virtually from
surface down to about the 170 metre level underscores the fact that the upper
levels of the Guanajuato Mine Complex have not been mined out. The third portion
of the 2006 drill program focused on an unexplored area along strike from the
mine workings at the Promontorio shafts. The area represents a section of the
Veta Madre vein structure approximately 150 metres in strike length by 150
metres vertical, immediately below surface and accessible by the San Vicente
South Ramp. As such, the newly defined mineralization presents an immediate
target for stope development and mining.

While all seven holes in the Promontorio drilling intersected
silver-gold mineralization, the most significant results include 149g/t silver
and 2.2g/t gold across 5.4 metres of the Veta Madre in hole GTT-06-031; and
141g/t Ag and 0.54g/t Au across 2.24 metres of the Veta Madre in GTT-06-034,
located 40 metres northwest of hole 31. Another 120m northwest of GTT-06-034,
near the Promontorio shaft, GTT-06-028 intersected 92g/t Ag and1.08g/t Au across
3.65 metres.

Parallel zones to the Veta Madre are also well developed,
including a hanging wall silica stockwork developed in conglomerate. Apparently,
this zone was partially exploited in the past as holes GTT-06-030 and 032 were
unexpectedly lost in unrecorded stopes. However, the remaining hangingwall
stockwork in GTT-06-032 assayed 43g/t Ag and 0.95g/t Au across 4.9 metres.

Of particular note is that a footwall stockwork is locally
developed in the porphyritic diorite. This new zone has been traced for
approximately 150m of strike length with notable intersections of 92g/t Ag and
0.53g/t Au across 4.3 metres in GTT06-028 and 197g/t Ag and 0.57g/t Au across
1.52 metres in GTT-06-034.

Hole No.
    From (m)
    To (m)
    Width (m)
    True Width (m)
    Ag (g/t)
    Au (g/t)
    Zone/CommentsGTT-06-028
    69.75
    73.4
    3.65
    3.65
    31
    1.08
    Vetra Madre76.2
    80.5
    4.3
    4.3
    92
    0.53
    FW stkwkGTT-06-029
    64.7
    71.5
    6.8
    4.8
    44
    0.78
    HW stkwkIncludes
    66.15
    67.2
    1.05
    0.7
    185
    2.31GTT-06-031
    134.5
    139.9
    5.4
    5.4
    149
    2.02
    Vetra MadreGTT-06-032
    115.05
    128.7
    13.6
    9.5
    45
    0.35
    Upper HW stkwk155.95
    162.05
    6.1
    4.9
    43
    0.95
    HW stkwkGTT-06-033
    122.5
    129.5
    7.0
    4.9
    59
    0.21
    HW stkwk131.5
    137.5
    6.0
    4.2
    80
    1.85
    Vetra Madre146.5
    148.5
    2.0
    1.4
    123
    0.44
    FW stkwkGTT-06-034
    125.7
    128.5
    2.8
    2.24
    141
    0.54
    Vetra Madre


---

- 47 -

140.3
    142.2
    1.9
    1.52
    197
    0.57
    FW stkwk


Additional holes in the Promontorio area will be completed by
the underground drill commencing in early 2007.

The styles of mineralization at Promontorio, as seen in the
surface drilling and surface outcroppings, include silver-gold mineralization
hosted in several quartz-carbonate stockwork zones in the hanging wall
conglomerate; silica breccia in the Veta Madre located along the contact between
the conglomerate and footwall diorite porphyry; and in silica flooded (stockwork
and breccia) footwall diorite. Detailed geological mapping and rock sampling of
underground workings in this part of the mine are ongoing.

In early 2006, preliminary 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 old stopes 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.
Consequently, it is presently unknown just how representative these grades may
be from a mining standpoint.

Significantly, the sampling came from 6 different stopes above
and below the 285 metre level over a total strike length of about 500 metres.
Grades from the various stopes were comparable. Five of these stopes lie within
200 metres of the Valenciana shaft and there has been only limited development
below this level to the bottom of the shaft, approximately 150 metres below. The
sixth stope, number 1414, lies 400 metres southeast of the shaft and has been
partially developed between the 285 and 320 metre levels. There has been no
development above this for at least 100 metres and there does not appear to have
been any work done below it at all, suggesting that the mineralization is
totally open to depth. Longitudinal sections of the mine are available for
viewing on the Company's website at www.greatpanther.com.

The Company is continuing to better determine the extent of
this mineralization or to quantify any potential volumes. The most important
issue in doing this is in evaluating the safety level of any procedure that
could be implemented to extract this material from the historic workings. Any
mining below these levels, however, would be in virgin rock and could be
developed using modern techniques and safety standards.

With these grades, this material would not need to be processed
at the on-site plant, but would be shipped directly to the smelter for
processing, thereby decreasing the production costs and increasing the net
value.

The Valenciana Mine has always been known for its high grades.
Mineralization was first discovered here by the Spanish in 1768, and the ore was
so rich that Valenciana quickly became the most productive silver mine in the
world in the second half of the 18th century (Elizabeth Emma Ferry, Cultural
Anthropology, 2002). Of the 3 operating shafts on Great Panther's property,
Valenciana is the deepest, at 500 metres, and limited diamond drilling in the
1980's suggest that the mineralization continues below this for at least another
200 metres.

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- 48 -

As underground development progresses throughout the mine
complex, an underground diamond drilling program will be conducted as a
continuation of the Phase II surface diamond drilling program. A 3,000 metre/45
hole program was to help better define zones of silver-gold mineralization for
production purposes and for the preparation of a NI43-101 compliant resource.

Initially, drilling was focused on the San Vicente North
(SVN) area, on the northwest side of the Rayas Shaft. This was followed by at
least 500 metres in 6 holes in the Guanajuatito - Encarnación area in the
northwest part of the mine property then 900 metres in 10 holes on the 275 metre
level of the Rayas Shaft area.

At San Vicente North, 1,650 metres of drilling, in 28 holes,
are currently planned to better define the silver-gold mineralization within a
flexure in the Veta Madre Structural Zone in this area. The flexure is
approximately 150 metres long and the mineralized silica breccia, along with
silicified zones and stockworks in the hanging wall and footwall rocks, are
approximately 40 metres thick. This presents a zone of significant size
potential for bulk tonnage underground development. Although this area has been
partially mined by the previous operator, much of it has only been cross-cut by
tunnels, thereby providing easy and quick access for future development.

The SVN drilling will be conducted on the 55, 75, 100 and 120
metre levels and will primarily target a zone of stockwork mineralization in the
hangingwall conglomerate that appears to average approximately 30 metres wide by
100 metres along strike and 90 metres down-dip. This zone has been defined
through an extensive program of channel sampling and geological mapping of the
SVN area initiated by Great Panther in 2005 (and is ongoing). The program is
being conducted on 12 levels from the 0 to 190 metre levels of SVN in order to
confirm and expand upon the previous operator's sampling, and establish a
comprehensive geological / structural understanding of the Guanajuato Mine. This
channel sampling has focused on cross-cutting tunnels, stope walls, and pillars,
and samples were spaced to represent as best as possible the geological units,
structures and mineralization.

Of the 1,921 channel samples taken to date in this area, 620
(32.3%) had silver equivalent (AgE) values greater than 74.6g/t AgE (2.4oz/t
AgE). These 620 samples averaged 220g/t AgE (4.9oz/t AgE) with a range of
74.6g/t AgE (2.4oz/t AgE) to 6,376g/t AgE (205oz/t). Silver equivalent values
were calculated by using a 50:1 silver to gold ratio. To place2 the above values
in context, previous operational costs (to 2005) at Guanajuato were in the
neighbourhood of $30US/tonne or approximately 110g/t AgE (3.53 oz/t AgE). A
review of the detailed sampling and geological maps revealed that the higher
values grouped into zones within the main silica breccia (Veta Madre) or within
adjacent footwall and hangingwall stockworks (see schematic map on website).
This is highly encouraging as it allows the Company to further define distinct
zones by core drilling between the levels.

To the southeast of the flexure the Veta Madre mineralized zone
has been extensively exploited over 5-10 metre widths. However, to the northwest
of the flexure the Veta Madre is observed as being 5-10 metres wide in stopes on
level 55 but is otherwise undeveloped and unexplored for approximately 200
metres horizontally and to the 190 level, 135 metres below.

Presently, stopes are being developed on the 55 level of SVN to
exploit the mineralization outlined in the sampling and mapping program. As
these levels are accessible by ramp from surface, development and mining costs
will be reduced.

In addition to the SVN area, extensive underground sampling and
geological mapping has taken place in the Guanajuatito-Encarnación area, where
surface drilling is still underway, and in the Pozo de Niño area on the 275-280
levels of the Rayas Mine.

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3. Mapimi Project

a. Acquisition

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 (US$100,000 paid) and issue
500,000 common shares (200,000 shares issued) 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.

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

b. 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.

c. 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 survery, 81 reverse circulation drill hoes, 22 diamond
drill holes and 422 surface channel samples.

d. Mineralization

Mineralization at Mapimi includes lead, zinc, and silver
minerals with lesser amounts of gold and copper minerals. The mineralization at
Mapimi 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
(~40-60m) of the mineralization at Mapimi 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
meters but is open in all directions. So far 18 breccia bodies have been
identified in 5 main sectors. The focus during the late 1990's was on the
Carmen, La Gloria, and Palmitas sector breccias, with no drilling done on the
others. As the topography of the area is very subdued, other breccias may well
have been overlooked and the extensive property contains excellent potential for
additional mineralization.

e. Mineral Resource and Reserve Estimate

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- 50 -

During the year, 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 &
3,614 samples) and 22 diamond drill holes (2,983 metres & 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.

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.

f. Exploration

Mapimi is viewed as an advanced stage exploration project that
could be developed quickly with the goal of defining a new resource amenable to
open pit mining, thereby significantly enhancing Great Panther's growing
portfolio of silver projects. A first phase exploration program is in the
implementation stage and consists 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 1,000 meter core
drilling program.

On December 16, 2006, we announced the beginning of a 5,000
metre diamond drilling program. Initially, the program will focus on confirming
previous Coeur dAlene drilling results in the Palmitas and La Gloria zones.
Great Panther geologists have also been re-mapping the surface geology,
re-sampling surface trenches and completing plans, sections and a 3D model of
the above zones.

4. San Antonio Project

The San Antonio Project, a gold-copper project, located in the
Guadalupe y Calvo Mining District, State of Chihuahua, Mexico, consists of three
contiguous mining concessions covering in the aggregate 11,711 hectares. These
concessions were staked and are owned 100% by MMR.

a. Acquisition - 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 as follows:

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- 51 -

(a) US $20,000 within 10 days of the date of registration at
the Mining registry of the option agreement;

(b) US $50,000 in five payments of US $10,000 each to be made
by the conclusion of each semester following the date of registration of the
option agreement;

(c) US $95,000 within 45 days of the third anniversary of the
date of registration of the option agreement.

The Company made cash payments totaling US$30,000 during the
year ended December 31, 2006. Subsequent to December 31, 2006, the Company paid
an additional US$95,000 thus fulfilling all conditions of the option agreement.

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

On December 7, 2006, we signed a Letter of Intent with Altair
Ventures Incorporated (Altair) by which Altair was granted an option to earn a
70% interest in the San Antonio Property.

Pursuant to the Letter of Intent, Altair may exercise its right
to earn a 70% interest in the property by making staggered cash payments of
US$200,000 (US$10,000 paid to date), issuing 200,000 Altair common shares to the
Great Panther and incurring a minimum of US$1,000,000 of exploration
expenditures over a three-year period.

b. Acquisition - 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 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 follows:

(a) US $50,000 within 30 days of the signing of the option
agreement;

(b) US $75,000 by the first anniversary of the date of signing
the option agreement;

(c) US $100,000 by the second anniversary of the date of
signing the option agreement;

(d) US $740,000 by the third anniversary of the date of signing
the option agreement.

As of December 31, 2005 we had made the US $50,000 payment in
accordance with (a) above and, the US $75,000 payment in accordance with (b)
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 ($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, we elected to discontinue exploration of the San
Taco property and abandoned the project.

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- 52 -

c. Location and Accessibility

The San Antonio project is located in the municipality of
Guadalupe y Calvo, State of Chihuahua, Mexico, approximately 162km S-SW of the
city of Hidalgo de Parral, Chihuahua, and 265km SW of the city of Chihuahua, and
consists of the following active concessions:

Concession
    Size (hectares)
    Expiry DateSanto Niño
    80
    21/04/2036San Antonio
    9,447
    15/04/2010Iran
    2,184
    09/05/2011


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 255km,
and then to Baborigame via a maintained unsurfaced road, a distance of 90km, and
then via 33km 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 9km.

d. History

The San Antonio prospect lies within the Guadalupe y Calvo
mining region. 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 artesenal mining
has been conducted in the region. The San Antonio project lies outside of the
areas of significant mine development, and little is known of the exploration
history of the project. The numerous workings in the Arroyo San Antonio attest
to minor production from the project area.

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

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

e. 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.

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- 53 -

(i) Sary Zone

The Sary showing comprises a mineralized fault zone that dips
vertically or steeply to the S-SW. The Sary structure is exposed in a small mine
working on the hillside east of the Arroyo San Antonio. The workings comprise a
short adit perpendicular to the structure, and development/exploration drifts to
the east and west along the structure. The workings were entered and sampled.

(ii) Arroyo Zone

A prominent zone of mineralization is exposed in the Arroyo San
Antonio where the projection of the Hortencia vein intersects the arroyo, where
two faults come in contact.

(iii) Piedra Verde

The Piedra Verde mine is developed on a fault bounded
clast-supported breccia zone. The mineralized structure is exposed on surface
and in small workings on the hillside immediately south of the Arroyo San
Antonio.

The workings comprise a short adit perpendicular to the
structure, and development/exploration drifts to the northwest and southeast
along the structure. The workings were entered and sampled.

(iv) Santo Niño Vein

The Santo Niño mine is developed on a brecciated and quartz
veined fault zone. It is exposed at surface on both sides of the Arroyo San
Antonio and in the mine workings developed on the northwest side of the arroyo.
The workings were entered and sampled.

(v) Santo Niño Stockwork

A zone of stockwork quartz-calcite-pyrite-chalcopyrite
microveinlets cutting chloritic fine grained andesite breccia is exposed along
the Arroyo San Antonio upstream (S-SW) of the Santo Niño mine. The zone is
exposed in outcrops along the arroyo over a length in excess of 30m. Some of the
veinlets contain bladed calcite, a textural feature common at high levels of
epithermal systems.

(vi) El Cordon

The El Cordon showing comprises a shallow prospect at arroyo
level and a 20m adit and open stope developed 30m above arroyo level. The
working is developed along a fault breccia that is localized along the contact
of an andesite dike that crosscuts a quartz eye rich felsic volcanic. The fault
breccia is cut by white sugary quartz veinlets.

f. Exploration

Our 2005 exploration program at San Antonio continued with the
geological mapping and sampling, prospecting and soil sampling from the prior
year. 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. Drill targets meritorious of evaluation had already
been identified, but additional geologic and geochemical surveys will be useful
for prioritizing drill targets. The first phase of a detailed mapping and rock
chip geochemical sampling, both on surface and underground, began, with emphasis
on delineating the veins along strike and determining the extent of the
stockwork zone. The first assay results from the sampling program of the Santo
Nino vein were received in June, 2004 and indicated the presence of strong gold
mineralization. The Santo Nino structure is the first and northernmost of three
small underground workings in the San Antonio project to be sampled. More
sampling results in July,

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- 54 -

2004 identified a new area just 75 metres east-northeast of the
Santo Nino vein. 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 other 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. Work to date has improved the
Company's understanding of the geology of the project area. Phase One of the
exploration program, completed in December, 2004, provided numerous diamond
drill targets on the high grade vein system. 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.

In addition to the sampling described above, alteration studies
are being conducted in order to help direct us towards areas of greatest
potential within this extensive system and help to define targets for future
diamond drilling.

No field work was done on the property in 2006.

Exploration 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.

5. Virimoa Project

a. Acquisition

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, also 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 must 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 are required
to issue a total of 300,000 common shares (100,000 issued) to the optionor. If
we exercise this option, the optionor will retain a 2% NSR, half of which can be
purchased by us for US$1 million.

On June 23, 2006, we paid a second cash instalment of US$30,000
and issued a share allotment of 50,000 pursuant to our June 13, 2005, option
agreement with Minera Aciero del Fuego, S.A. de C.V.

b. Location and Accessibility

The property consists of two exploitation concessions covering
a total area of 148 hectares in the municipality of Canelas in the west central
part of Durango State, Mexico. The Virimoa Property is about 17 kilometres south
of the town of Topia and is accessible from there by gravel road. Otherwise,
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 Canelas, a distance of approximately 150 km.
Total driving time from Durango is 8 hours. Canelas contains numerous stores,
restaurants and small hotels. A small airstrip on the north side of the town is
serviced daily from Culiacán, Sinaloa by small aircraft. Flight time from
Culiacán is less than an hour. In addition, Virimoa is approximately 30
kilometres west of La Ciénega, Mexicos largest gold mine, currently in
production and owned by Compaña Minera Peñoles.

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- 55 -

c. Exploration

In March, 2005, fieldwork commenced on the Virimoa Gold
Property with initial exploration comprising detailed and extensive channel
sampling and mapping focused on an exposure of intense iron oxide alteration.
This work attempted to better define the controls on mineralization and to trace
its extent. As the property has good road access, specific drill targets were
generated for a diamond drilling program, the first ever, which was conducted in
April, 2005.

Surface sampling at the Virimoa Property returned 1.11 g/t
gold, 23 g/t silver and 1.32% zinc across 250 metres. The zone includes two
higher grade intervals averaging 4.71 g/t gold, 41 g/t silver and 5.78% zinc
across 25 metres near the southeast end of the cross-section and a gold-silver
zone returning 3.13 g/t gold and 46 g/t silver across 20 metres near the
northwest end. This work has not only confirmed previous sampling results of
1.08 g/t gold, 20.5 g/t silver and 1.66% zinc obtained by the vendor across the
same exposure but the consistency of the results is quite remarkable. Great
Panther's sampling however, extended and improved upon the higher grade zone at
the southeast end, which was previously reported as returning 3.38 g/t Au, 26.2
g/t Ag and 4.93% Zn over 16 metres.

Mineralization consists of a closely spaced stockwork of
massive quartz-pyrite+/-sphalerite+/-arsenopyrite veinlets and veins that can
locally exceed several tens of centimetres in width. Disseminated pyrite is
common between the veinlets. Intense iron oxide and argillic alteration of the
host andesitic volcanics is exposed for more than 350 metres across the major
structural trend, including the zone reported above. Along strike, however, the
zone disappears under cover, such that its length is not yet known.

Great Panther's sampling was conducted along an irregular but
continuous traverse line along the bank of a creek and the mineralization
reported above actually comprised 57 continuous five-metre chip samples
representing a tot al length of 285 metres. It is believed to represent a
horizontal straight line distance of 250 metres, estimated to be close to the
true width of the zone. Samples were assayed at ALS Chemex Labs in Vancouver by
fire assay and either atomic absorption (in the case of the Au and Zn) or
gravimetric (for Ag) finish.

A short diamond drilling program, completed in 2005, has
outlined the presence of multiple zones of gold-silver-copper-zinc
mineralization across a width of more than 250 metres. The drilling, comprising
856 metres in four holes, was designed to complete a cross section under a zone
of mineralization exposed on surface that returned 1.11 g/t gold, 23 g/t silver
and 1.32% zinc across 250 metres from continuous channel sampling. As reported
on April 26, 2005 this zone included two higher grade intervals averaging 4.71
g/t gold, 41 g/t silver and 5.78% zinc across 25 metres near the southeast end
of the cross-section and a gold-silver zone returning 3.13 g/t gold and 46 g/t
silver across 20 metres near the northwest end.

Holes 05-VIR01 and 02 were drilled from the same location under
the southeast zone, with holes 05-VIR03 and 04 being drilled behind them in
order to complete a line across the entire mineralized area. Hole 05-VIR04 was
drilled under the northwest zone. The distribution of grade and extent of the
mineralization along strike has not yet been tested. More than a dozen discrete
zones have been outlined, many of which contain copper mineralization not
observed on surface. Although gold and zinc grades were lower in the drilling
than on surface, the drilling displayed a marked zonation to the mineralization
from higher copper in the northwest to higher gold and zinc in the southeast and
this zonation likely also holds true in a vertical sense. Silver values are more
consistent throughout but the best correlation is seen with copper, whereas the
weakest correlation is observed between copper and zinc, as seen in the table
below. As such, copper-silver mineralization may be stronger at depth whereas
gold and zinc appear to be enriched at higher levels. As the surface
mineralization was sampled in a creek exposure in a valley,

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- 56 -

the mineralization strikes into the hill on both sides, thereby
preserving the upper levels of the system and, hopefully the gold-zinc enriched
portion.

Mineralization consists of a closely spaced stockwork of
massive quartz-pyrite+/-sphalerite+/-arsenopyrite and
chalcopyrite+/-tetrahedrite veinlets and veins with disseminated pyrite in
between. These veins carry higher grades, such as 11.1 g/t Au, 458 g/t Ag, 9.47%
Cu and 0.45 % Zn over 0.3m in Hole 05-VIR01 and 8.71 g/t Au, 544 g/t Ag, 6.95 %
Cu and 3.28 % Zn over 0.3m in Hole 05-VIR02, but elsewhere mineralization is
much more consistent, giving wide zones of lower grade material that may be
amenable to bulk tonnage mining methods. Intense iron oxide and sericite
alteration of the host dacite volcanics is exposed for more than 350 metres on
surface before the zone disappears under cover.

In 2006, no field work was done on the property.

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 not 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, 2006, December 31, 2005 and December 31, 2004 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 following critical accounting policies affect our more
significant estimates and assumptions used in preparing our consolidated
financial statements.

Mineral properties, plant and equipment and change in
accounting policy

Our 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 expenditures
continue to be capitalized.

Mineral property sales proceeds or option payments received for
exploration rights are treated as cost recoveries. Mineral property acquisition
costs include the 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.

Once commercial production has commenced, production facilities
and equipment, stated at cost, are depreciated using the straight-line method or
units-of-production method, if sufficient reserve information is available, over
their estimated useful lives, not to exceed the life of the mine to which the
assets relate. As at December 31, 2006, the Company did not have a reliable
estimate of reserves and therefore did not use units-of-productions method.

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- 57 -

Vehicles and office equipment are stated at cost and are
depreciated using the straight-line method over their estimated useful lives.
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.

The management of the Company regularly reviews the carrying
value of its mineral properties. In determining the carrying value of the
property, some factors considered include current base and precious metal
prices, accessibility to the property and estimating mineral potential with
limited available information.

The management of the Company regularly reviews the carrying
value of its plant and equipment. In determining the current carrying value, the
management of the Company regularly reviews the market value of similar items
that are available for purchase, availability of replacement parts, existing
maintenance and service records and observing the overall efficiency of the
items.

Going concern

The consolidated financial statements are prepared on the basis
that we will continue as a going concern. The going concern basis of
presentation assumes we will continue in operation for the foreseeable future
and will be able to realize our assets and settle our liabilities and
commitments in the normal course of business. Our ability to continue as a going
concern and to realize our assets and discharge our liabilities when due in the
normal course of business is dependent upon the existence of economically
recoverable mineral reserves and our ability to raise adequate financing from
lenders, shareholders and other investors to support such business activities.
The consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

Stock-based compensation

We account for employee non-cash stock-based compensation,
beginning January 1, 2003, and non-employee non-cash stock based compensation
under the fair value method. Pursuant to this method, we estimate the fair value
of stock options and warrants granted using the Black-Scholes option pricing
model. 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.

Reclamation and remediation

Our mining and exploration activities are subject to various
laws and regulations governing the protection of the environment. We recognize
the fair value of future reclamation and remediation as a liability in the
period in which we incur 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 into 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. We continually review our accrued liabilities, if any, as evidence
becomes available indicating that our

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- 58 -

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.

A.          
Operating Results

The Company, in its transformation from a company concentrating
on exploration to a company now focused on the mining of precious and base
metals, generated net sales of $7,069,442. This revenue from mining operations
resulted from the sale of metal concentrates derived from the mining and
subsequent processing of mineralization from its Topia and Guanajuato
operations. Revenue for the year has grown on a quarter-by-quarter basis as
production levels have steadily increased at both operations. Revenue from
operations grew from $405,000 in the first quarter to approximately $3.8 million
by the fourth quarter. This increase can be attributed to increased production
levels at the two mining operations.

Total production for both mines for the year was 638,860 ounces
of Silver Equivalent (oz of Ag Eq), including 313,484 oz Ag; 1,394 oz Au;
1,381,637 lbs Pb and 1,636,139 lbs Zn. (In calculating Ag Eq, the Company used
prices of US$525/oz for gold, US$0.50/lb for lead, US$1.20/lb for zinc, and
US$10.25/oz and US$10.50/oz for silver for the first and second semesters,
respectively, of 2006). Throughput at Topia plant increased from a nominal 20
tpd in January 2006 to 160 tpd by December 31, 2006. Guanajuato commenced
production in June 2006 at 400 tpd and reached a throughput of 700 tpd by
December 31, 2006.

The Company incurred significant start-up costs at both Topia
and Guanajuato, and as a result, cash costs, which included all direct and
indirect production costs, were higher in the first months of operation and
declined throughout the year. General site preparation costs and ongoing repair
and maintenance expenditures increased the Companys production costs for the
year. Site preparation costs were necessary to ensure a safe work environment
and to prepare specific areas for mining. Although there are future benefits
associated with these expenditures, the Company elected to expense these costs
as incurred. General repairs and maintenance costs were also higher that
anticipated as much of these costs relate to the general start-up of operations.
Overall cost of sales for the 2006 fiscal year was $7,119,047 and amortization
and depletion of mineral property, plant and equipment was $1,415,231. As
efficiencies are created in the Companys operations, and with much of these
start-up costs associated with bringing both operations back into production now
behind us, management anticipates significantly improved margins in the 2007
fiscal year.

Overall general & administrative expenses (G&A)
incurred, excluding non-cash stock-based compensation expense, was $4,073,923
for FY06 compared to $1,986,450 (FY05) and 710,405 (FY04). This increase is
reflective of the growth of the Company in the past twelve months. During the
year, the Companys employee base grew from approximately 90 to more than 390 by
the end of the FY06. Much of the increase in G&A expenditures can be
attributed to the growth of the operations at Topia and Guanajuato. In addition,
during FY06, the Company also maintained an accounting office in Mexico that
handles many of the accounting and taxation issues specific to Mexico.

Accounting and audit related costs in FY06 was $390,020
compared to $192,148 and $84,664 in FY05 and FY04 respectively. This increased
cost is largely attributed to the complexity of the Companys audit process with
full operating subsidiaries in Mexico. The Company also added additional
personnel in both Mexico and Canada as the growth of the Companys accounting
functions necessitated the increase in staffing levels. Additional costs were
also incurred as a result of documenting and testing the Companys internal
controls related to the Sarbanes-Oxley Act, as regulatory requirement required
by the United States Securities and Exchange Commission.

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- 59 -

Consulting fees for the year increased from $468,989 in fiscal
year 2005 to $690,164 in fiscal year 2006 with the addition of technical and
professionally qualified personnel necessitated by the growth of the Companys
Mexican operations.

Insurance costs increased during the fiscal year with coverage
of the Companys property, plant and equipment coverage for a 12-month period
while in FY05, insurance coverage was for a partial period. This resulted in an
increase in insurance costs from approximately $12,000 in FY05 to $186,000 in
FY06.

During FY06, the Company implemented an aggressive marketing
strategy to promote the Company in the United States and Europe and, in so
doing, incurred approximately $869,000 in investor relations services.
Expenditures in investor relations are necessary to attract new investors and to
inform current shareholders of the Companys progress.

During FY06, the Company graduated to the Toronto Stock
Exchange (TSX) trading under the symbol GPR. As a result, the Company
incurred an additional $225,000 in related filing and legal fees during this
period relative to FY05. The transfer onto TSX is expected to increase the
Companys exposure to institutional and retail investors in both domestic and
international markets.

With the growth in the Company, an increase in office supplies,
telephone costs and rent were incurred during the year. These costs directly
relate to the initial set up of administrative offices at Topia and Guanajuato,
and maintaining an administrative location in Durango. In addition, the
Vancouver office has experienced substantial growth with additional staff
necessitating the move to additional larger premises.

The development of the Companys mining operations resulted in
an increase in travel and related expenses associated with overseeing and
managing activities in Mexico. Travel costs for FY06 were $287,973 compared to
$201,910 and $68,369 for FY 05 and FY04 respectively.

Mineral property exploration costs in FY06 were $3,968,083
compared to $2,340,398 and $1,710,243 in FY05 and FY04, respectively. The
increased costs are largely attributed to the Companys ongoing development of
its mineral properties to better define its resources. With the high demand for
qualified drillers, geologists and other mining related personnel, many
companies like Great Panther are incurring higher than normal costs for these
services because of the general shortage of qualified individuals.

Interest expense was $830,236 for FY06, compared to $27,251 in
FY05 and $14,870 in FY04. The increase is a result of the interest accreted on
debts. On the purchase of the Companys mineral properties, the Company was
required by Canadian GAAP to discount the carrying value of the debt by an
effective rate of interest. The effective rate of interest was estimated to be
26.8% .

The Company also incurred non-cash stock-based compensation
expenses of $4,672,774 for FY06 compared to $357,298 and $393,850 for FY05 and
FY04, respectively. The substantial growth of the Company, and the need to
attract and retain quality individuals, resulted in this additional expense.

Overall, the loss for the twelve months ended December 31, 2006
(FY06) was $15,084,437 compared to $5,231,685 and $2,893,657 for the twelve
month periods ending December 31, 2005 (FY05) and December 31, 2004, (FY04),
respectively for the above noted reasons.

During the year, the Company raised gross cash proceeds of $15
million through one private placement and $2,020,000 from the issuance of a
convertible note. In addition, the Company received proceeds of approximately
$10.1 million through the exercising of warrants and options.

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- 60 -

The Companys working capital at December 31, 2006 was
$12,533,156 compared to $1,407,474 at December 31, 2005. Working capital,
together with the anticipated exercise of warrants and options, should be
adequate to fund the Companys activities and to cover corporate overhead for
the next fiscal year.The total assets of our Company were $32,132,259 as at
December 31, 2006 compared to assets of $19,218,970 as at December 31, 2005. The
increase can be largely attributed to an increase in cash and cash equivalents
over the twelve month period as a result of the financing activities during the
year. The Company also increased its amounts receivable as the Company accrued
revenue related to the 2006 fiscal year. In addition, there was a general
increase in mineral property, plant and equipment over the year with the
purchase of the Arcoiris mineral concessions, the Fundiciones land purchase and
the purchase of machinery to operate the mines.

The Company saw a general decrease in its liabilities.
Liabilities for the period ended December 31, 2006 was $3,582,428 compared to
$5,836,542. The decrease is a result of the full settlement of debt associated
with the Guanajuato mine, and partial settlement of the Topia obligation. The
Company issued a convertible note payable in 2006 with a face value of
$2,020,000.

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 7(b)). Under US GAAP, a value is assigned to
the conversion feature only if the conversion rate is less than the market price
of the common stock at the date of issuance. Accordingly, no value would be
assigned under US GAAP to the conversion feature on the convertible note issued
in 2006.

Applying US GAAP, the convertible note at December 31, 2006
would be recorded at its face value of $2,020,000 and no value would be assigned
to an equity component of the convertible note. In addition, accretion on the
calculated debt discount on the convertible note under Canadian GAAP aggregating
$149,799 (2005 and 2004 - Nil) for the year ended December 31, 2006 would not
have been recorded, reducing interest expense by an equivalent amount.

The Companys subsidiary, Minera de Villa Seca, S.A. de C.V.,
is being reviewed by the Social Security Institution primarily for fees which it
views may be owing by a contractor of the Company during the period March to
October 2006. The Company has determined that it is not possible to assess the
outcome of this review, but the Company does not expect that the outcome will
have a material impact on its financial position, if any.

B.          
Liquidity and Capital Resources

Fiscal year 2006 marked the Companys transition from
exploration to production and revenues. Our financial success will rely on our
ability to continue to generate sufficient revenue through operations and on
management's ability to find additional economically viable mineral deposits.
This process can take many years and is largely based on factors that are beyond
our control.

In order to finance our exploration, development, and
production activities as well as corporate overhead, we are dependent on
investor sentiment remaining positive towards the gold and silver exploration
business generally, and towards our Company in particular, so that funds can be
raised through the sale of our securities. Many factors have an influence on
investor sentiment, including a positive climate for mineral exploration, a
company's track record and the experience and calibre of a company's management.
There is no certainty that equity funding will be available at the times and in
the amounts required to fund our activities.

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- 61 -

1. Cash and Financial Conditions

At December 31, 2006, the Company had cash and cash equivalents
of $9,208,048 compared to $5,295,397 as at December 31, 2005. The Companys
financial instruments are all fully cashable at any time, so there are no
restrictions on availability of funds. The increase in cash and cash equivalents
is a direct result of the additional financing activities completed during the
year. The Company also increased its cash and cash equivalents by approximately
$5 million from $2.4 million in 2005 to $7.4 million in 2006, as excess funds
were placed in guaranteed investment certificates.

The Companys working capital at December 31, 2006 was
$12,533,156 compared to $1,407,474 at December 31, 2005. Working capital,
together with the anticipated exercise of warrants and options, should be
adequate to fund the Companys activities and to cover corporate overhead for
the next fiscal year. Subsequent to December 31, 2006 to April 18, 2007, we have
raised gross cash proceeds of approximately $899,113 from the exercise of
warrants and options.

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

2. Investing Activities

For the twelve months ended December 31, 2006, the Companys
net cash outflows from investing activities of $5,736,570 compared to an outflow
of $6,258,661 for the twelve month period ended December 31, 2005. This
difference is due to the continual rehabilitation of, and investment in, the
Companys mines.

Much of the Companys resources have been directed to the
purchase of capital assets and the modernization and preparation of the mine
sites for future development.

3. Financing Activities

On January 9, 2006, we granted incentive stock options to
directors, officers, employees and consultants incentive stock options to
purchase an aggregate of 2,355,000 common shares. The options are exercisable
until January 5, 2011 at an exercise price of $0.90 per share.

On January 26, 2006, we entered a 24-month consulting agreement
with B& D Capital. The agreement is for an initial period of 24 months and
is renewable there after. As compensation for services provided by B&D
Capital we will pay a monthly fee of $4,000 and have granted the option to
purchase a total of 200,000 common shares at $0.90 until December 31, 2007.

On February 28, 2006, we released the remaining 1,012,500
common shares of our Company previously held in escrow. These shares formed part
of the original 2,250,000 shares issued on the acquisition of our Mexican
subsidiary, Minera Mexicana El Rosario, S.A. de C.V.

On March 8, 2006, we completed a private placement of a $2.02
million convertible loan note with City Natural Resource High Yield Trust PLC.
The note is unsecured, bears interest at 8% per annum payable quarterly, and
matures on March 9, 2010. Prior to maturity, the principal amount of the note,
or any portion thereof, is convertible into common shares of our Company at a
conversion price of $1.32 per share. The conversion price exceeds the market
price of our common shares at the date of the agreement of $1.17. The fair value
of the convertible feature of the note was calculated by our management as
$1,006,000, using the Black-Scholes model as required by Canadian GAAP.

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- 62 -

On June 1, 2006, we issued by private placement 7,500,000 units
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 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.

On December 7, 2006 we granted incentive stock options to
directors, officers, employees and consultants to purchase an aggregate of up to
2,295,000 shares. The options, granted under the Company's Amended and Restated
Incentive Stock Option Plan, are exercisable until December 6, 2011 at $2.65 per
share.

On December 8, 2006 we signed a letter of intent with Altair
Ventures Inc. (TSX-V: AVX.P) whereby Altair will have the option to earn a 70%
interest in our San Antonio Property. Terms of the agreement call for Altair to
make staged payments and share issuances to Great Panther totalling US$200,000
and 200,000 shares over 3 years.

4. Reconciliation to United States Generally Accepted
Accounting Principles

A description of US GAAP and practices prescribed by the US
Securities and Exchange Commission (collectively US GAAP) that result in
material measurement differences from Canadian GAAP are as follows:

(a)          
Income taxes:

As described in note 2(m), the Company follows the asset and
liability method of accounting for income taxes which is also in accordance with
Statement of Financial Accounting Standards Board No. 109 Accounting for Income
Taxes (SFAS 109). Under Canadian GAAP, future tax assets and liabilities are
recorded at substantially enacted tax rates. Under US GAAP, deferred tax assets
and liabilities are recorded at enacted tax rates. For each of the years ended
December 31, 2006, 2005 and 2004, net future tax assets are fully offset by a
valuation allowance as it is not more likely than not that the future tax assets
would be realized. As a result, the application of US GAAP in accounting for
income taxes does not result in any material measurement differences from
Canadian GAAP for future tax assets.

(b) ******Stock-based compensation:

The Company adopted the new recommendations of the Canadian
Institute of Chartered Accountants with respect to the accounting for
stock-based compensation on January 1, 2002 as described in note 2(i). Statement
of Financial Accounting Standards Board No. 123, Accounting for Stock-Based
Compensation (SFAS 123) became effective for US GAAP purposes for fiscal years
beginning after December 15, 1995.

For fiscal years ending prior to December 31, 2003, as allowed
by SFAS 123, the Company followed the intrinsic value principles of APB Opinion
25, Accounting for Stock Issued to Employees and related interpretations, in
measuring compensation expense for employee options. Under the intrinsic value
method, compensation cost is the excess, if any, of the quoted market value of
the stock at the measurement date, which is generally the grant date, over the
amount an employee must pay to acquire the stock. The application of APB 25
resulted in compensation expense of $15,000 being recognized for employees in
the year ended December 31, 2001 under US GAAP and no similar expense was
required

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- 63 -

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 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, 2006.

(c) ******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.

(d) ******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 7(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. Accordingly, no value
would be assigned under US GAAP to the conversion feature on the convertible
note issued in 2006

Applying US GAAP, the convertible note at December 31, 2006
would be recorded at its face value of $2,020,000 and no value would be assigned
to an equity component of the convertible note. In addition, accretion on the
calculated debt discount on the convertible note under Canadian GAAP aggregating
$149,799 (2005 and 2004 - Nil) for the year ended December 31, 2006 would not
have been recorded, reducing interest expense by an equivalent amount.

The amounts in the consolidated balance sheets that differ
significantly from those reported under Canadian GAAP are as follows:

December
        31, 2006
      December
        31, 2005Canadian
      US
      Canadian
      USGAAP
      GAAP
      GAAP
      GAAPConvertible note payable
      1,163,799
      2,020,000
      
      -Share capital
      46,393,145
      52,604,350
      21,536,440
      27,747,645Contributed surplus
      6,077,864
      6,092,864
      1,638,819
      1,653,819


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- 64 -

Equity component ofconvertible note
    1,006,000
    
    
    -Deficit
    (24,927,178)
    (31,003,584)
    (9,842,741)
    (16,068,946)


(e) ******Income statement presentation:

The consolidated statement of operations includes a write down
of the San Taco mineral property in other expenses. Under US GAAP, this amount
would be disclosed as an operations expense.

(f) ******Recent accounting pronouncements:

(i)******
On June 1, 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements.
SFAS 154 requires retrospective application to prior periods financial
statements of any change in accounting principle unless it is impracticable to
do so or a new standard specifically indicates otherwise. This is a change from
the preceding practice that requires most accounting changes to be accounted for
by including in net income, in the period of the change, the cumulative effect
of changing to the new accounting principle. SFAS 154 was effective for
accounting changes and corrections of errors made after December 31, 2005, and
the adoption of this standard had no significant effect on the Companys results
of operations or financial position.

(ii) ******In
June 2006, FASB issued Financial Interpretation No. 48, Accounting for
Uncertainty in Income Taxes - An Interpretation of SFAS Statement No. 109. This
interpretation provides guidance on recognition and measurement of uncertainties
in income taxes and is effective for the Companys 2008 fiscal year end. 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 September 2006, FASB issued SFAS No. 157, Fair Value Measurement to define
fair value, establish a framework for measuring fair value and to expand
disclosures about fair value measurements. The statement only applies to fair
value and is effective for fiscal years beginning after November 15, 2007. 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.

(iv)******
In September 2006, the US Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108 which provides guidance on the consideration of the
effects of prior year misstatements in quantifying misstatements in current year
financial statements. This guidance is applicable for annual statements for
periods ending after November 15, 2006. The adoption of this interpretation did
not result in any adjustments being recognized in the consolidated financial
statements.

(g) ******Reconciliation:

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:

*****(i)* Share capital and contributed surplus:

| |                                                    |   | 2006       |  |   | 2005       | 
| | -------------------------------------------------- | - | ---------- |  | - | ---------- | 
| |                                                    |   |            |  |   |            | 
| | Share capital and contributed surplus,
      under |   |            |  |   |            | 
| | Canadian GAAP                                      | $ | 52,471,009 |  | $ | 23,175,259 | 

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- 65 -

| | Adjustment for stock-based compensation for                |   |            |  |   |            | 
| | ---------------------------------------------------------- | - | ---------- |  | - | ---------- | 
| | employees (note 13(b))                                     |   | 15,000     |  |   | 15,000     | 
| |                                                            |   |            |  |   |            | 
| | Reversal of
      recapitalization of deficit (note 13(c)) |   | 6,211,205  |  |   | 6,211,205  | 
| |                                                            |   |            |  |   |            | 
| | Share capital and contributed surplus, under               |   |            |  |   |            | 
| | US GAAP                                                    | $ | 58,697,214 |  | $ | 29,401,464 | 

****(ii) Deficit:

| |                                                         |   | 2006        |   |   | 2005        |  
| | ------------------------------------------------------- | - | ----------- | - | - | ----------- | -
| | Deficit, under Canadian GAAP                            | $ | (24,927,178 | ) | $ | (9,842,741  | )
| | Adjustment for stock-based compensation for             |   |             |   |   |             |  
| | employees (note 13(b))                                  |   | (15,000     | ) |   | (15,000     | )
| | Reversal of recapitalization of deficit (note 13(c))    |   | (6,211,205  | ) |   | (6,211,205  | )
| | Interest accreted on convertible loan note (note 13(a)) |   | 149,799     |   |   | -           |  
| | Deficit, under US GAAP                                  | $ | (31,003,584 | ) | $ | (16,068,946 | )

****(ii) Loss and loss per share:

| |                                         |   | 2006        |   |   | 2005       |   |   | 2004       |  
| | --------------------------------------- | - | ----------- | - | - | ---------- | - | - | ---------- | -
| |                                         |   |             |   |   |            |   |   | (Restated) |  
| |                                         |   |             |   |   |            |   |   |            |  
| | Loss for the year, under                |   |             |   |   |            |   |   |            |  
| | Canadian GAAP                           | $ | (15,084,437 | ) | $ | (5,231,685 | ) | $ | (5,231,685 | )
| |                                         |   |             |   |   |            |   |   |            |  
| | Interest accreted on convertible        |   |             |   |   |            |   |   |            |  
| | loan note (note 13(d))                  |   | 149,799     |   |   | -          |   |   | -          |  
| | Loss for the year, under US GAAP        | $ | (14,934,638 | ) | $ | (5,231,685 | ) | $ | (2,893,657 | )
| |                                         |   |             |   |   |            |   |   |            |  
| | Basic and diluted loss per share, under |   |             |   |   |            |   |   |            |  
| | US GAAP                                 | $ | (0.25       | ) | $ | (0.22      | ) | $ | (0.22      | )
| | Weighted average number of common       |   |             |   |   |            |   |   |            |  
| | shares, basic and diluted               |   | 59,720,424  |   |   | 23,986,543 |   |   | 13,443,920 |  

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 $719,406 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.

---

- 66 -

F.          
Tabular Disclosure of Contractual Obligations

The following table outlines the contractual obligations of our
Company:

Payments by PeriodContractual Obligations
      Total
      Less than 1 
        year
      1  3 Years
      4  5 Years
      After 5 
        YearsTopia Mine Acquisition
      $1,323,741
      $1,323,741
      -
      -
      -Arcoiris Acquisition
      $   233,060
      $   116,530
      $ 116,530
      -
      -Capital Lease
      -
      -
      -
      -
      -Operating Lease
      -
      -
      -
      -
      -Other Long-Term Liabilities
      -
      -
      -
      -
      -Total Long-Term Debt
      $1,556,801
      $1,440,271
      $ 116,530
      -
      -


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 Minera Exploraciones el RosairoKaare G. Foy
    Executive Chairman, CFO, Director
    Director
    Director
    Director
    Director
    DirectorRobert A. Archer
    President, CEO, Director
    President
    n/a
    Director
    Director
    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/aA. Michael Turko
    Director
    n/a
    n/a
    n/a
    n/a
    n/aWendy M. Ratcliffe
    Corporate Secretary
    Director
    n/a
    n/a
    n/a
    n/aF. Ramos Sanchez
    Vice President - Operations
    Vice President - Operations
    n/a
    Director
    Director
    DirectorRobert Brown
    Vice President - Exploration
    n/a
    n/a
    n/a
    n/a
    Director


---

- 67 -

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 Minera Exploraciones el
      RosairoMing Jang
    Financial Controller
    Financial Controller
    Financial Controller
    Financial Controller
    Financial Controller


Business Experience, Function and Area of Experience

Kaare G. Foy

As our Executive Chairman, Chief Financial Officer 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 experience serving on the boards of
publicly listed companies in Australia, Canada and the United Kingdom, including
Loscam Materials Handling Limited in Australia, and Greenchip Investments PLC in
the United Kingdom.

Mr. Foy is also Executive Chairman and Chief Financial Officer
and a director of Cangold Limited and Monarch Energy Limited, the President of
Oceanic Management Limited, a director of CGA Mining 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. Also, as the President of our Mexican
subsidiary, he is 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.

He has been a self-employed business banker since 1962. Malcolm
Burne is a director and Executive Chairman of Ambrian Capital PLC, Samson
Exploration NL and Jubilee Platinum PLC. He also holds Board positions with
publicly listed companies in Australia, Canada and Europe, including Mano River

---

- 68 -

Resources Inc. and Golden Prospect Precious Metals Limited, a
mineral investments and gold fund company listed on the AIM Exchange in London,
United Kingdom.

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 is Chairman 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.

A. Michael Turko

Mr. Turko was appointed to the Board of Directors of the
Company on July 7, 2006 and is a member of the Companys Audit Committee.

Mr. Turko obtained his Bachelor of Science (Geology) degree at
the University of British Columbia in 1981. In 1993 he became President and CEO
of Gulf Shores Resources Ltd., a company listed on the TSX Venture Exchange,
with interests in petroleum properties in the North Sea, Texas, Alberta,
Manitoba and Newfoundland, a position he currently holds. Mr. Turko also
controls several successful private oil and gas companies, and was recently
appointed President and CEO of Monarch Energy Limited, a company listed on the
TSX Venture Exchange.

Mr. Turko is an independent director.

Wendy Ratcliffe

Ms. Ratcliffe has been our Corporate Secretary since August
2001. She is responsible for making all necessary regulatory filings for our
Company and our 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. Ramos has been our Vice President, Operations since April
30, 2004, and is responsible for our day-to-day operations in Mexico.

Ing. Ramos has been 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 from 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.

Ing. J. Jesús Rico Aguilera

---

- 69 -

Ing. Rico is a Mexican mining engineer with a Masters degree in
Business Administration from the University of Guanajuato. He has almost 30
years experience in the mining industry, primarily for Peñoles. Significantly,
Ing. Rico started his career in Topia in 1976 as a shift boss, and then worked
his way up through Peñoles at ten different mines, to the position of General
Manager. In 1985, he returned to Topia for a four-month interval. He has
extensive experience in all aspects of underground mining and milling of
high-grade silver-lead-zinc deposits in Mexico and, more specifically, has an
intimate knowledge of the multiple veins at Topia.

Ing. Javier Ramirez Vargas

Ing. Ramirez is a Mexican mining engineer with almost 30 years
of mining experience. A graduate from the University of Guanajuato, he took the
role of Mine Manager at our Topia Mine in early 2006, and brings a wealth of
experience to our Company. Prior to joining us, he worked for Plata Panamerica
S.A., Real del Monte y Pachua, S.A., Baztan del Cobre, S.A., Cia Baramin S.A.,
and Minera la Calentan, among which he served as Mine Superintendent and Mine
Manager.

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.

Ming Jang

Mr. Jang has been our Financial Controller since July 2005. He
is a Certified General Accountant and has held numerous senior management
positions in various organizations including most recently, acting Chief
Financial Officer of Cabo Mining Enterprises Corp., one of Canadas largest
exploration and drilling services companies. Prior to Cabo, he served as Chief
Operating Officer for a non-profit organization and as Finance and
Administration Manager for Loomis Armored Cars.

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, 2006. The value of perquisites and

---

- 70 -

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 three financial years ended, the following
persons were or are our executive officers:

Name
    Principal Position
    From
    ToMalcolm A. Burne
    President and Chief Executive Officer
    n/a
    April 27, 2005Robert A. Archer
    President and Chief Executive Officer
    April 27, 2005
    PresentKaare G. Foy
    Chairman Chief Financial Officer
    April 27, 2005 June 10,
      1996
    Present PresentIng. Francisco Ramos Sánchez
    Vice President, Operations
    April 30, 2004
    PresentRobert F. Brown
    Vice President, Exploration
    April 30, 2004
    Present


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 
        ($)
      All Other 
        Compen- 
        sation 
        ($)Malcolm A. Burne
      2006 
        2005 
        2004
      N/A 
        N/A 
        11,500 (1)
      N/A 
        N/A 
        nil
      N/A 
        N/A 
        nil
      N/A 
        N/A 
        150,000 (3)
      N/A 
        N/A 
        nil
      N/A 
        N/A 
        nil
      N/A 
        N/A 
        nilRobert A. Archer
      2006 
        2005 
        2004
      30,000 (1) 
        15,000 (1)
        8,835 (1)
      nil 
        nil 
        nil
      nil 
        nil 
        nil
      275,000 **(10)**
        125,000 (2) (17)
        7150,000 (3) (16)
      nil 
        nil 
        nil
      N/A 
        N/A 
        N/A
      197,750 (6)
        170,880 (6)
        117,624 (7)Kaare G. Foy
      2006 
        2005 
        2004
      30,000 (1) 
        15,000 (1)
        11,500 (1)
      nil 
        nil 
        nil
      nil 
        nil 
        nil
      355,000 (13)
        125,000 (2)(18) 
        150,000 (3)(4)
      nil 
        nil 
        nil
      N/A 
        N/A 
        nil
      291,560 (5)
        180,464 (8)
        145,961 (9)Ing. Francisco Ramos 
        Sánchez
      2006 
        2005 
        2004
      nil 
        nil 
        nil
      nil 
        nil 
        nil
      nil 
        nil 
        nil
      225,000 (14)
        100,000 (2)
        100,000 (3)
      nil 
        nil 
        nil
      N/A 
        N/A 
        nil
      162,628 (11)
        102,076 (11)
        82,335 (11)Robert F. Brown
      2006 
        2005 
        2004
      nil 
        nil 
        nil
      nil 
        nil 
        nil
      nil 
        nil 
        nil
      175,000 (15)
        75,000 (2) (19)
        100,000 (3)
      nil 
        nil 
        nil
      nil 
        nil 
        nil
      109,950 (12)
        84,407 (12)
        40,360 (12)


|(1) | Directors' fees.                                          
|--- | ----------------------------------------------------------
|    |                                                           
|(2) | Exercisable at $0.45 per share until 2010.                
|    |                                                           
|(3) | Exercisable at $0.45 per share until February 8,
    2009.

---

- 71 -

|(4)  | Exercised as to 80,000 common shares on November 18, 2005
      and as to 70,000 common shares on March 28, 2006.                                                                                                                                            
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                              
|(5)  | Of this amount, $190,500 was paid as a management fee and
      $ 101,060 was paid for rent and other services to Oceanic Management, a
      company controlled by Kaare G. Foy                                                                             
|     |                                                                                                                                                                                                                                                              
|(6)  | Consulting fees paid to Platoro Resource Corp., a company
      controlled by Robert A. Archer.                                                                                                                                                              
|     |                                                                                                                                                                                                                                                              
|(7)  | Of this amount, $60,693 was paid as a consulting fee to
      R.A. Archer & Associates and $56,931 was paid as a consulting fee to
      Platoro Resource Corp., both of which are companies controlled by Robert
      A. Archer.                           
|     |                                                                                                                                                                                                                                                              
|(8)  | Of this amount, $112,080 was paid as a management fee;
      $12,800 was paid as a consulting fee; and $78,388 was paid for accounting,
      rent, secretarial and other services to Oceanic Management Limited, a
      company controlled by Kaare G. Foy.
|     |                                                                                                                                                                                                                                                              
|(9)  | Of this amount, $74,000 was paid as a management fee and
      $71,961 was paid for accounting, rent, secretarial and other services to
      Oceanic Management.                                                                                            
|     |                                                                                                                                                                                                                                                              
|(10) | Of this amount, 125,000 are exercisable at $0.90 until
      January 5, 2011 and 150,000 are exercisable at $2.65 until December 6,
      2011.                                                                                                              
|     |                                                                                                                                                                                                                                                              
|(11) | Consulting fees paid to Francisco Ramos
Sánchez.                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                              
|(12) | Consulting fees paid to R.F.B. Geological, a company
      wholly-owned by Robert F. Brown.                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                              
|(13) | Of this amount, 205,000 are exercisable at $0.90 until
      January 5, 2011 and 150,000 are exercisable at $2.65 until December 6,
      2011                                                                                                               
|     |                                                                                                                                                                                                                                                              
|(14) | Of this amount, 125,000 are exercisable at $0.90 until
      January 5, 2011 and 100,000 are exercisable at $2.65 until December 6,
      2011                                                                                                               
|     |                                                                                                                                                                                                                                                              
|(15) | Of this amount, 100,000 are exercisable at $0.90 until
      January 5, 2011 and 75,000 are exercisable at $2.65 until December 6,
      2011.                                                                                                               
|     |                                                                                                                                                                                                                                                              
|(16) | Exercised as to 70,000 common shares on September 15,
      2006 and as to 80,000 common shares on December 19, 2006.                                                                                                                                        
|     |                                                                                                                                                                                                                                                              
|(17) | Exercised as to 25,000 common shares on December 19,
      2006.                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                              
|(18) | Exercised as to 100,000 common shares on April 28,
      2006.                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                              
|(19) | Exercised as to 20,000 common shares on September 12,
      2006, and as to 20,000 common shares on January 17,
2007.                                                                                                                                        

Compensation of Directors

During the financial year ended December 31, 2006, the
remuneration paid 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
    $15,000


We have an incentive stock option plan in which directors are
eligible to participate. During the financial year ended December 31, 2006,
Kaare G. Foy was granted the option to purchase 205,000 common shares of our
Company exercisable at $0.90 per share until January 5, 2011 and 150,000 common
shares exercisable at $2.65 per share until December 6, 2011. Robert A. Archer
was granted the option to

---

- 72 -

purchase 125,000 common shares of our Company exercisable at
$0.90 per share until January 5, 2011 and 150,000 common shares exercisable at
$2.65 per share until December 6, 2011. Malcolm A. Burne was granted the option
to purchase 125,000 common shares of our Company exercisable at $0.90 per share
until January 5, 2011 and 50,000 common shares exercisable at $2.65 per share
until December 6, 2011. John T. Kopcheff was granted the option to purchase
125,000 common shares of our Company exercisable at $0.90 per share until
January 5, 2011 and 50,000 common shares exercisable at $2.65 per share until
December 6, 2011. A. Michael Turko, was granted an option to purchase 50,000
common shares of our Company exercisable at $2.65 per share until December 6,
2011.

C.          
Board Practices

The election and retirement of our directors are provided for
in our by-laws. An election of directors takes place at each annual meeting of
shareholders and all the directors then in office retire but, if qualified, are
eligible for re-election. A director retains office only until the election of
his successor. The number of directors to be elected at such meeting is the
number of directors then in office, unless the directors or the shareholders
otherwise determine. The election is by ordinary resolution of shareholders. If
an election of directors is not held at the proper time, the incumbent directors
continue in office until their successors are elected. Our last annual general
meeting was held on June 15, 2006.

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 include John T. Kopcheff,
Malcolm A. Burne and A. Michael Turko. 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.

We do not currently have a remuneration or compensation
committee.

In 2006, we entered into the following consulting services
contracts with certain of our directors, or companies controlled by them:

On March 22, 2006, we entered into an Executive Consulting
Services Agreement, effective January 1, 2006, with Platoro Resource Corp., a
company controlled by Robert A. Archer, the President, Chief Executive Officer
and a director of our Company. Under the agreement, Platoro Resource Corp.
agreed to provide to our Company the continued services of Robert A. Archer as
President and Chief Executive Officer to devote so much of his time and
attention and abilities as is reasonably necessary for the proper performance of
his duties, which shall not be less than 180 days per year. The agreement has a
term of 5 years. As compensation for the services provided, we agreed to pay
Platoro Resource Corp. a fee, payable monthly, of $700 (the daily fee) for
each day devoted by Mr. Archer exclusively to the interests

---

- 73 -

of our Company. On January 8, 2007, a resolution was passed by
the board of directors, increasing Mr. Archers daily fee to $1,000 for each day
of service. The amount of the daily fee is to be reviewed by our Company not
later than December 31 in each year and any increase shall be not less than 5%
of the fee paid in the previous year. Platoro Resource Corp. is entitled to a
bonus based on the performance of Mr. Archer. The criteria for and the awarding
of a performance bonus is exclusively within the discretion of our compensation
committee or our independent directors, if there is no compensation committee.
The amount of a performance bonus in any year will be up to a maximum of 100% of
the total daily fees paid to Platoro Resource Corp. in that year. In the event
of a change of control of our Company, or the involuntary termination of the
agreement without cause, or a constructive dismissal, or other fundamental
change resulting in Mr. Archer ceasing to be the President and Chief Executive
Officer of our Company, then Platoro Resource Corp. is entitled to receive from
our Company a payment equal to 360 times the daily fee at the then-current rate,
2 times the average of any performance bonus awarded in the previous 2 years and
the equivalent of 2 years of benefits and other compensation, if any.

On March 22, 2006, we entered into an Executive Consulting
Services Agreement, effective January 1, 2006, with Oceanic Management Limited,
a company controlled by Kaare G. Foy, the Executive Chairman, Chief Financial
Officer and a director of our Company. Under the agreement Oceanic Management
Limited has agreed to provide to our Company the continued services of Kaare G.
Foy as Executive Chairman and Chief Financial Officer to devote so much of his
time and attention and abilities as is reasonably necessary for the proper
performance of his duties, which shall not be less than 180 days per year. The
agreement has a term of 5 years. As compensation for the services provided, we
agreed to pay Oceanic Management Limited a fee, payable monthly, of $700 (the
daily fee) for each day devoted by Mr. Foy exclusively to the interests of our
Company. On January 8, 2007, a resolution was passed by the board of directors,
increasing Mr. Foys daily fee to $1,000 per day of services. The amount of the
daily fee will be reviewed by our Company not later than December 31 in each
year and any increase shall be not less than 5% of the fee paid in the previous
year. Oceanic Management Limited is entitled to a bonus based on the performance
of Mr. Foy. The criteria for and the awarding of a performance bonus is
exclusively within the discretion of our compensation committee or our
independent directors, if there is no compensation committee. The amount of a
performance bonus in any year will be up to a maximum of 100% of the total daily
fees paid to Oceanic Management Limited in that year. In the event of a change
of control of our Company, or the involuntary termination of the agreement
without cause, or a constructive dismissal, or other fundamental change
resulting in Mr. Foy ceasing to be the Executive Chairman and Chief Financial
Officer of our Company, then Oceanic Management Limited is entitled to receive
from our Company a payment equal to 360 times the daily fee at the then-current
rate, 2 times the average of any performance bonus awarded in the previous 2
years and the equivalent of 2 years of benefits and other compensation, if
any.

On March 22, 2006, we entered into an Executive Consulting
Services Agreement, effective January 1, 2006, with Francisco Ramos Sànchez, the
Vice President, Operations of our Company. Under the agreement our Company
continues the engagement of Mr. Ramos as Vice President, Operations to devote so
much of his time and attention and abilities as is reasonably necessary for the
proper performance of his duties, which shall not be less than 180 days per
year. The agreement has a term of 5 years. As compensation for the services
provided, our Company has agreed to pay Mr. Ramos a fee, payable monthly, of
$550 (the daily fee) for each day devoted by Mr. Ramos exclusively to the
interests of our Company. Mr. Ramos agreement was amended on January 8, 2007 to
increase his daily fee to $800 per day. The amount of the daily fee will be
reviewed by our Company not later than December 31 in each year and any increase
shall be not less than 5% of the fee paid in the previous year. Mr. Ramos is
entitled to a bonus based on his performance. The criteria for and the awarding
of a performance bonus is exclusively within the discretion of our compensation
committee or our independent directors, if there is no compensation committee.
The amount of a performance bonus in any year will be up to a maximum of 100% of
the total daily fees paid to Mr. Ramos in that year. In the event of a change of
control of our

---

- 74 -

Company, or the involuntary termination of the agreement
without cause, or a constructive dismissal, or other fundamental change
resulting in Mr. Ramos ceasing to be the Vice President, Operations of our
Company, then Mr. Ramos is entitled to receive from our Company a payment equal
to 360 times the daily fee at the then-current rate, 2 times the average of any
performance bonus awarded in the previous 2 years and the equivalent of 2 years
of benefits and other compensation, if any.

D.          
Employees

During the fiscal year ended December 31, 2006, we had 63
direct employees as outlined below. The majority of the Companys workers are
independent contractors rendering services to the different subsidiaries.

For the fiscal year ended, December 31, 2006, our Mexican
subsidiaries had the following number of employees:

Subsidiary
    EmployeesMinera Mexicana el Rosario, S.A. de C.V.
    NilMetalicos de Durango, S.A. de C.V.
    35Minera de Villa Seca, S.A. de C.V.
    28


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.

As of April 18, 2007, we had the following securities issued
and outstanding:

|- | 70,828,862 common shares;                                                                  
|- | -------------------------------------------------------------------------------------------
|  |                                                                                            
|- | incentive stock options for the
      purchase of up to 6,566,700 of our common shares; and
|  |                                                                                            
|- | warrants for the purchase of up
      to 12,901,864 of our common shares.                  

Of the above securities, our directors and officers owned the
  following common shares as of April 18, 2007:

Name Office Held
      Number of Common Shares Beneficially Owned
      Percentage(1)Robert A. Archer, President & CEO
    1,765,100 (2)
    1.95%Robert F. Brown, VP Exploration
    310,000 (3)
    0.34%Malcolm A. Burne, Director
    790,033(4)
    0.87%Kaare G. Foy, Director & CFO
    668,600(5)
    0.74%John T. Kopcheff, Director
    530,000(6)
    0.59%Wendy M. Ratcliffe, Corporate Secretary
    225,000(7)
    0.25%


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- 75 -

Name Office Held
      Number of Common Shares Beneficially Owned
      Percentage(1)Francisco Ramos Sanchez, VP Operations
    1,500,000 (8)
    1.66%Ming Jang, Financial Controller
    444,000 (9)
    0.49%A. Michael Turko, Director
    50,000
    0.06%


(1)******
Based on 70,828,862 common shares issued and outstanding, and 19,468,564 shares
issuable upon the exercise of issued and outstanding incentive stock options and
warrants which are exercisable within 60 days of April 18, 2007.

(2)******
Includes 1,330,100 of our common shares owned by Robert A. Archer, 30,000 of our
common shares owned by Platoro Resource Corp., a company controlled by Robert A.
Archer, incentive stock options to purchase up to 100,000 of our common shares
at an exercise price of $0.45 per share expiring July 26, 2010, incentive stock
options to purchase up to 125,000 of our common shares at an exercise price of
$0.90 per share expiring January 5, 2011; incentive stock options to purchase up
to 150,000 of our common shares at an exercise price of $2.65 per share expiring
December 6, 2011 and warrants to purchase up to 30,000 of our common shares by
Platoro Resource Corp. at an exercise price of $0.90 per share expiring December
20, 2007.

(3)******
Includes incentive stock options to purchase up to 135,000 of our common shares
at an exercise price of $0.45 per share expiring May 25, 2009 as to 100,000,
February 27, 2010 as to 25,000 and July 26, 2010 as to 10,000, incentive stock
options to purchase up to 100,000 of our common shares at an exercise price of
$0.90 per share expiring January 5, 2011, and incentive stock options to
purchase up to 75,000 of our common shares at an exercise price of $2.65 per
share expiring December 6, 2011.

(4)******
Includes 284,133 of our common shares owned by Malcolm A. Burne, 55,900 of our
common shares owned by First Investors Guarantee Ltd, a company controlled by
Malcolm A. Burne, incentive stock options to purchase up to 275,000 of our
common shares at an exercise price of $0.45 per share expiring February 8, 2009
as to 150,000, February 27, 2010 as to 25,000 and July 26, 2010 as to 100,000,
incentive stock options to purchase up to 125,000 of our common shares at an
exercise price of $0.90 per share expiring January 5, 2011, and incentive stock
options to purchase up to 50,000 of our common shares at an exercise price of
$2.65 per share expiring December 6, 2011.

(5) ******Includes 42,400 of our common shares owned by Kaare G. Foy,
246,200 of our common shares owned by Oceanic Management Limited, a company
controlled by Kaare G. Foy, incentive stock options to purchase up to 25,000 of
our common shares at an exercise price of $0.45 per share expiring February 8,
2009, incentive stock options to purchase up to 205,000 of our common shares at
an exercise price of $0.90 per share expiring January 5, 2011, and incentive
stock options to purchase up to 150,000 of our common shares at an exercise
price of $2.65 per share expiring December 6, 2011.

(6)******
Includes 80,000 of our common shares, incentive stock options to purchase up to
275,000 of our common shares at an exercise price of $0.45 per share expiring
February 8, 2009 as to 150,000, February 27, 2010 as to 25,000 and July 26, 2010
as to 100,000, incentive stock options to purchase up to 125,000 of our common
shares at an exercise price of $0.90 per share expiring January 5, 2011, and
incentive stock options to purchase up to 50,000 of our common shares at an
exercise price of $2.65 per share expiring December 6, 2011.

(7)******
Includes incentive stock options to purchase up to 120,000 of our common shares
at an exercise price of $0.45 per share expiring February 8, 2009 as to 70,000,
February 27, 2010 as to 25,000 and July 26, 2010 as to 25,000, incentive stock
options to purchase up to 30,000 of our common shares at an exercise price of
$0.52 per share expiring April 5, 2009, incentive stock options to purchase up
to 25,000

---

- 76 -

of our common shares at an exercise price of $0.90 per share
expiring January 5, 2011, and incentive stock options to purchase up to 50,000
of our common shares at an exercise price of $2.65 per share expiring December
6, 2011.

(8)******
Includes 1,075,000 of our common shares, incentive stock options to purchase up
to 200,000 of our common shares at an exercise price of $0.45 per share expiring
February 8, 2009 as to 100,000, February 27, 2010 as to 25,000 and July 26, 2010
as to 75,000, incentive stock options to purchase up to 125,000 of our common
shares at an exercise price of $0.90 per share expiring January 5, 2011, and
incentive stock options to purchase up to 100,000 of our common shares at an
exercise price of $2.65 per share expiring December 6, 2011.

(9)******
Includes 164,000 of our common shares, incentive stock options to purchase up to
100,000 of our common shares at an exercise price of $0.45 per share expiring
July 11, 2010; incentive stock options to purchase up to 100,000 of our common
shares at an exercise price of $0.90 per share expiring January 5, 2011;
incentive stock options to purchase up to 50,000 of our common shares at an
exercise price of $2.65 per share expiring December 6, 2011 and warrants to
purchase up to 30,000 of our common shares at an exercise price of $0.90 per
share expiring December 20, 2007.

(10) ******Includes
incentive stock options to purchase up to 50,000 of our common shares at an
exercise price of $2.65 per share expiring December 6, 2011.

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

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.

During the year ended December 31, 2006, and subsequently, we
  granted the following stock options:

Name
      Number of Options
      Exercise Price
      Expiry DateIng. J. Jesús Rico Aguilera
    75,000 50,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Robert A. Archer
    125,000 150,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Robert Brown
    100,000 75,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Malcolm A. Burne
    125,000 50,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Kaare G. Foy
    205,000 150,000
    $0.90 $2.65
    January 5, 2011 December 6, 2007


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- 77 -

John T. Kopcheff
    125,000 50,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Wendy M. Ratcliffe
    25,000 50,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Francisco Ramos Sanchez
    125,000 100,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Ming Jang
    100,000 50,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Michael Turko
    50,000
    $2.65
    December 6, 2011Michael Baybak
    400,000 400,000
    $0.90 $2.65
    January 14, 2008 January 14, 2008Reginald Advocaat
    50,000 50,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Adrian Bray
    50,000 25,000
    $0.90 $2,65
    January 5, 2011 December 6, 2011Craig Mackay
    50,000 25,000
    $0.90 $0.90
    January 5, 2011 December 6, 2011Alistair Barrett
    25,000
    $2.65
    December 6, 2011Bill Vanderwall
    100,000
    $2.65
    December 6, 2011Suzanne Simpson
    25,000
    $2.65
    December 6, 2011Laura Gildea
    25,000
    $2.65
    December 6, 2011David Hladky
    25,000
    $2.65
    December 6, 2011Rebeca Castanos
    100,000
    $2.65
    December 6, 2011Martyn Winborn
    50,000
    $2.65
    December 6, 2011Javier Malchor Ramirez Vargas
    150,000
    $2.65
    December 6, 2011Armando Cordero Cabrera
    75,000 25,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Juan Rogelio Gallardo
    75,000 25,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Arturo Gil
    75,000 25,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Luis Martin Bravo Gutierrez
    50,000(1)
    $0.90
    January 5, 2011Jose Augusto Montoya Martinez
    75,000 25,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Sergio Alberto Montoya Martinez
    100,000 25,000
    $0.90 $2.65
    January 5, 2011 December 6, 2011Scott Gibson
    150,000
    $0.90
    December 31, 2007Don Mosher
    200,000
    $0.90
    December 31, 2007Roxana Ortega Damas
    15,000
    $2.65
    December 6, 2011Ing. Carlos Alonso Bueno Flores
    50,000
    $2.65
    December 6, 2011Raymundo Garza Fuentes
    15,000
    $2.65
    December 6, 2011Ing. Refugio Garcia
    75,000
    $2.65
    December 6, 2011Consuelo Ortega Gomez
    15,000
    $2.65
    December 6, 2011Micaela Ortega Gomez
    50,000
    $2.65
    December 6, 2011Tiburcio Rubio Lopez
    15,000
    $2.65
    December 6, 2011Arturo Gil Loya
    15,000
    $2.65
    December 6, 2011Ing. Pedro Humberto Reyna Luna
    75,000
    $2.65
    December 6, 2011Francisco Javier Millan
    15,000
    $2.65
    December 6, 2011Nora Pena
    15,000
    $2.65
    December 6, 2011


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- 78 -

Ing.Jose Rosario Navarro Rodriguez
    50,000
    $2.65
    December 6, 2011Alba Suarez Julio
    15,000
    $2.65
    December 6, 2011Colmenero Sandoval Arturo
    15,000
    $2.65
    December 6, 2011Gallardo Flores Rodrigo
    15,000
    $2.65
    December 6, 2011Gonzales Barrera Rocio Adriana
    25,000
    $2.65
    December 6, 2011Guerrero Razo Carolina
    15,000
    $2.65
    December 6, 2011Hernandez Torres Cesar Arturo
    15,000(2)
    $2.65
    December 6, 2011Manjarrez Guerra Irma
    15,000
    $2.65
    December 6, 2011Mares Alejandro
    15,000(2)
    $2.65
    December 6, 2011Medina Mendoza Francisco
    25,000
    $2.65
    December 6, 2011MoralesGranados Enrique
    15,000
    $2.65
    December 6, 2011Moran Lopez Jose Mauro Pablo
    15,000(2)
    $2.65
    December 6, 2011Palmas Espinosa Ana Karina
    15,000
    $2.65
    December 6, 2011Preciado Huerta Angelica Fatima
    15,000
    $2.65
    December 6, 2011Puente Solis Ivan Rafael
    15,000
    $2.65
    December 6, 2011Quintero Reyes Martin
    15,000
    $2.65
    December 6, 2011Rocha Rocha Aristeo
    15,000
    $2.65
    December 6, 2011Rocha Santana Blanca Patricia
    15,000
    $2.65
    December 6, 2011Rodriguez Olmos Fernando
    15,000
    $2.65
    December 6, 2011Salas Morales Ramiro
    25,000
    $2.65
    December 6, 2011Valadez Perez Jose Luis
    15,000
    $2.65
    December 6, 2011Vargas Gonzales Francisco
    15,000
    $2.65
    December 6, 2011Vazquez Villegas Ma Del Carmen
    15,000
    $2.65
    December 6, 2011Velazquez Leon Cozett
    15,000
    $2.65
    December 6, 2011Venegas Sanchez Gonzalo
    15,000
    $2.65
    December 6, 2011Arturo Loya Cano
    75,000
    $2.65
    March 11, 2012Carlos Contreras
    15,000
    $2.65
    March 11, 2012Betty Joy LeBlanc
    50,000
    $2.65
    March 11, 2012Paula Mariana Fregonese
    25,000
    $2.65
    March 11, 2012


(1) ******During the year ended December 31, 2006, the incentive stock
options were cancelled 30 days after resignation.

(2) ******Subsequent to December 31, 2006, the incentive stock options were
cancelled 30 days after resignation.

ITEM
7 **Major
Shareholders and Related Party Transactions

A.          
Major Shareholders

As of April 18, 2007, Computershare Trust Company of Canada,
our registrar and transfer agent, reported that we had 70,828,862 common shares
issued and outstanding. Of those common shares, 65,958,494 common shares were
registered to Canadian residents (94 shareholders); 4,218,532 common shares were
registered to residents of the United States (200 shareholders); and 651,836
common shares were registered to residents of other foreign countries (361
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.

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- 79 -

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 2006 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.

During the year ended December 31, 2006, we entered into the
following transactions with related parties:

|1. | Paid or accrued consulting fees totalling $197,750 (2005
      - $170,880; 2004 - $111,757) to a company controlled by a director of our
      Company, $162,628 (2005 - $84,407; 2004 - $40,360) to a company controlled
      by an officer of our Company and $190,500 (2005 - $102,076; 2004 -
      $82,335) to a director of our Company respectively.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                             
|2. | Paid or accrued office rental and administration
      totalling $101,060 (2005 - $78,388; 2004 - $43,462) to a company
      controlled by a director of our Company.                                                                                                                                                                                      

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

|- | Report of Independent Registered Public Accounting Firm
      dated March 16, 2007.                                  
|- | ---------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                      
|- | Consolidated balance sheets for the fiscal years ended
      December 31, 2006, and 2005.                            
|  |                                                                                                                      
|- | Consolidated statements of operations and deficit for the
      fiscal years ended December 31, 2006, 2005, and 2004.
|  |                                                                                                                      
|- | Consolidated statements of cash flows for the fiscal
      years ended December 31, 2006, 2005 and 2004.             
|  |                                                                                                                      
|- | Notes to consolidated financial statements                                                                           

The audited financial statements as at December 31, 2006 and
2005, and for each of the years ended December 31, 2006, 2005 and 2004 can be
found under Item 17 "Financial Statements".

Legal Proceedings

---

- 80 -

The Company is aware of legal proceedings in which The Sociedad
Cooperativa Minero Metalúrgica Santa Fe de Guanajuato (the Cooperativa), as
principal defendant, and the Company, Minera Mexicana el Rosario, S.A. de C.V.
(MMR) and one of MMRs officers have been named as secondary defendants in a
lawsuit filed by several dissident members of the Cooperativa. The lawsuit
alleges that the sale of the Guanajuato mine assets should be nulled on the
basis that the proceedings leading to the approval of the sale did not meet
specific requirements as set out in the bylaws of the Cooperativa.

The Companys legal representatives have reviewed the basis of
their claim and have concluded that the sale of the assets by the Cooperativa to
MMR met the requirements set out by the bylaws of the Cooperativa and, as such,
the lawsuit is without merit.

Dividend Distributions

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

Significant Changes

Other than as disclosed in this annual report, no significant
change has occurred in our Company's financial statements since the financial
year ended December 31, 2006.

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, 2001
    $0.23
    $0.04December 31, 2002
    $0.14
    $0.03December 31, 2003*
    $0.60
    $0.01December 31, 2004
    $0.77
    $0.33


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- 81 -

Year Ended
    High
    LowDecember 31, 2005
    $1.17
    $0.36December 31, 2006
    $2.79
    $0.90


*Our common shares were consolidated on October 2, 2003
on the basis of one new common share for each ten old common shares. Figures for
previous periods have not been restated.

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

Quarter Ended
    High
    LowMarch 31, 2004
    $0.77
    $0.44June 30, 2004
    $0.72
    $0.40September 30, 2004
    $0.47
    $0.33December 31, 2004
    $0.45
    $0.35March 31, 2005
    $0.55
    $0.36June 30, 2005
    $0.53
    $0.41September 30, 2005
    $0.65
    $0.46December 31, 2005
    $1.17
    $0.53March 31, 2006
    $1.90
    $0.80June 30, 2006
    $2.55
    $1.40September 30, 2006
    $2.22
    $1.48December 31, 2006
    $2.79
    $1.52March 31, 2007
    $2.36
    $1.77


The high and low market prices for our common shares for each
of the most recent six months, from October, 2006 through February, 2007 were as
follows:

Month Ended
    High
    LowOctober 31, 2006
    $2.15
    $1.52November 30, 2006
    $2.79
    $1.96December 31, 2006
    $2.64
    $2.17January 31, 2007
    $2.53
    $2.01February 28, 2007
    $2.53
    $2.06


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

B.          
Plan of Distribution

Not applicable.

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- 82 -

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.

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

Our material contracts entered into up to the date of filing
our Registration Statement on Form 20-F are incorporated by reference from our
Registration Statement on Form 20-F, which was filed on August 10, 2004.

Since the date of filing our Registration Statement on Form
20-F, we have entered into the following additional material contracts:

On January 4, 2005, we signed a letter of intent with Minera
Acero del Fuego, S.A. de C.V. for an option 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. The project consists of two
concessions comprising 148 hectares and hosts a zone of intense alteration,
exposed for more than 350 metres. Terms of the agreement call for our Company to
make four staged cash payments and share issuances totaling US$300,000 and
300,000 shares (100,000 issued), over a period of three years, to the property
owner. If the option is exercised, the property owner will retain a 2% NSR, half
of which can be purchased for US$1,000,000.

On June 30, 2005, we entered into an agreement with Compañia
Minera de Canelas y Topia S.A. de C.V(the vendor) to purchase 100% of
the ownership rights in and to all the fixed assets, machinery, equipment and
Topia Silver-Lead-Zinc Mine located in the Municipality of Topia, State of
Durango, Mexico. We exercised our option to acquire the mine, which includes a
200 tonne per day mill and complete mining infrastructure, after a 7,436 metre
surface diamond drilling program completed by our Company in 2004-05 indicated
that the property had significant potential to host additional resources.

---

- 83 -

Upon signing the agreement for the Topia Silver-Lead-Zinc Mine,
we paid a total of US$540,165 to the vendor and to two divisions of Peñoles, the
latter being part of the assumed debt. The balance of the purchase price,
approximately US$1.76 million, is divided between the vendor (US$946,000 owed)
and La Cienega, a division of Peñoles. While the debt to the vendor will be paid
in stages over the next three years, the debt to La Cienega will be paid
effectively from the proceeds of production as a 10% Net Smelter Return (NSR)
royalty, until the debt is fully repaid, at which time the NSR ceases. We have
the option of paying out the debt in full at any time.

On October 25, 2005, we signed a formal purchase agreement with
the Sociedad Cooperativa Minero Metalúrgica Santa Fe de Guanajuato to acquire a
100% interest in a group of producing silver-gold mines in Guanajuato, Mexico.
The three principal mines in the Companys acquisition, the Valenciana, Cata and
Rayas, 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 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 (real estate). At December 31, 2006, all payments and
other contractual obligations have been met.

On September 11, 2006, we signed a letter of intent to acquire
100% in the Mapimi Project (formerly Km66). The agreement is subject to a 3%
NSR to the present property owners. Each 0.5% of the NSR, up to a maximum of 2%,
can be purchased for $500,000. As part of the agreement, Great Panther is
required to make 6 staged cash payments and share issuances totaling $3,000,000
and 500,000 shares over the subsequent 4 years.

On December 7, 2006 we signed a Letter of Intent with Altair
Ventures Incorporated (Altair) by which Altair was granted an option to earn a
70% interest in the San Antonio Property. Pursuant to the Letter of Intent,
Altair may exercise its right to earn 70% interest in the property by making
staggered cash payments of US$200,000 (US$10,000 has been paid), issuing 200,000
Altair common shares to Great Panther (100,000 have been issued) and incurring a
minimum of US$1,000,000 of exploration expenditures over a three-year
period.

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.

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Accordingly, holders and prospective holders of our common
shares should consult with their own tax advisors with respect to the income tax
consequences of them purchasing, owing and disposing of our common shares should
we cease to be listed on a prescribed stock exchange.

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

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

Dividends

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

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.

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Capital Gains

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

(a) ******the non-resident holder;

(b) ******persons with whom the non-resident holder did not deal at arm's
length; or

(c) ******the non-resident holder and persons with whom he did not deal at
arm's length,

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

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

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

(c) ******they formed part of the business property or were otherwise
effectively connected with a permanent establishment or fixed base that the
holder has or 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

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does not consider the potential effects, both adverse and
beneficial, of any recently proposed legislation which, if enacted, could be
applied, possibly on a retroactive basis, at any time.

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

U.S. Holders

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

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

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

Disposition of Common Shares

If a "U.S. Holder" is holding shares as a capital asset, a gain
or loss realized on a sale of our common shares will generally be a capital gain
or loss, and will be long-term if the shareholder has a holding period of more
than one year. However, gains realized upon sale of our common shares may, under
certain circumstances, be treated as ordinary income, if we were determined to
be a "collapsible corporation" within the meaning of Code Section 341 based on
the facts in existence on the date of the sale (See below for definition of
"collapsible corporation"). The amount of gain or loss recognized by a selling
U.S. Holder will be measured by the difference between (i) the amount realized
on the sale and (ii) his tax basis in our common shares. Capital losses are
deductible only to the extent of capital gains. However, in the case of
taxpayers other than corporations (U.S.)$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 Registrant.
Our management is of the opinion that there is little, if not, any likelihood
that we will be deemed a "Foreign Personal Holding Company", a "Foreign
Investment Company" or a "Controlled Foreign Corporation" (each as defined
below) under current and anticipated conditions.

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Foreign Personal Holding Company

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

Foreign Investment Company

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

Passive Foreign Investment Company

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

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 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 qualify as a PFIC on his pro-rata share of our (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

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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 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 qualified as a PFIC in a prior
year, then the U.S. Holder may make an "Unpedigreed QEF Election" by recognizing
as an "excess distribution" (i) under the rules of Section 1291 (discussed
below), any gain that he would otherwise recognize if the U.S. Holder sold his
stock on the qualification date (Deemed Sale Election) or (ii) if we are a
controlled foreign corporation ("CFC"), the Holder's pro rata share of the
corporation's earnings and profits (Deemed Dividend Election) (But see
"Elimination of Overlap Between Subpart F Rules and PFIC Provisions"). The
effect of either the deemed sale election or the deemed dividend election is to
pay all prior deferred tax, to pay interest on the tax deferral and to be
treated thereafter as a Pedigreed QEF as discussed in the prior paragraph. With
respect to a situation in which a Pedigreed QEF election is made, if we no
longer qualify 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 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 a
PFIC and the U.S. Holder holds our shares) (a "Unpedigreed Election"), the QEF

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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 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 are strongly urged
to consult their own tax advisors concerning the impact of these rules on their
investment in our Company. For a discussion of the impact of the Taxpayer Relief
Act of 1997 on a U.S. Holder of a PFIC, see "Mark-to-Market Election For PFIC
Stock Under the Taxpayer Relief Act of 1997" and "Elimination of Overlap Between
Subpart F Rules and PFIC Provisions" below.

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.

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

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

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

Controlled Foreign Corporation Status

If more than 50% of the voting power of all classes of stock or
the total value of the stock of our Company is owned, directly or indirectly, by
U.S. Holders, each of whom own after applying rules of attribution 10% or more
of the total combined voting power of all classes of stock of our Company, we
would be treated as a "controlled foreign corporation" or "CFC" under Subpart F
of the Code. This classification would bring into effect many complex results
including the required inclusion by such 10% U.S. Holders in income of their pro
rata shares of "Subpart F income" (as defined by the Code) of our Company and
our earnings invested in "U.S. property" (as defined by Section 956 of the
Code). In addition, under Section 1248 of the Code if we are considered a CFC at
any time during the five year period ending with the sale or exchange of its
stock, 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.

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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.

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) Minera Exploraciones El Rosario, S.A. de C.V. The
latter company was incorporated subsequent to December 31, 2006 and is
responsible for the exploration and further development of the Companys mineral
properties.

ITEM
11 **Quantitative and Qualitative Disclosures About Market Risk

Some of our property exploration requirements and expenditures
are either due in United States currency or Mexican currency. As a Canadian
company, however, the reporting and functional currency of our Company and our
subsidiaries is the Canadian dollar. Therefore, we may become exposed to some
exchange rate risk. We consider the amount of risk to be manageable and do not
currently, nor will we likely in the foreseeable future, conduct hedging to
reduce our exchange rate risk.

At December 31, 2006, the Company has not entered into any
derivatives or other financial instruments to mitigate the risk of foreign
currency fluctuations.

ITEM
12 **Description of Securities Other Than Equity Securities

A. ******Debt Securities

Not applicable.

B.          
Warrants and Rights

Not applicable.

PART II

ITEM
13 **Defaults, Dividend Arrearages and Delinquencies

Not applicable.

---

- 93 -

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

Not applicable.

ITEM
15 **Controls
and Procedures

The Company's Chief Executive Officer and Chief Financial
Officer are responsible for establishing and maintaining the Company's
disclosure controls and procedures to provide reasonable assurance that all
relevant information is gathered and reported to them on a timely basis so that
the appropriate decisions can be made regarding public disclosures.

The Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of the Company's disclosure controls and procedures
have concluded that, as at December 31, 2006, the Company's disclosure controls
and procedures were not fully effective, due to material weaknesses in the
Company's internal control over financial reporting described below under
"Internal Control over Financial Reporting".

Internal Controls over Financial Reporting

The Company's Chief Executive Officer and Chief Financial
Officer are responsible for establishing and maintaining internal control over
financial reporting, and have designed internal control over financial reporting
or caused internal control over financial reporting to be designed under their
supervision in order to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of the financial statements for
external purposes in accordance to Canadian generally accepted accounting
principles (GAAP), including a reconciliation to United States GAAP.

Due to its inherent limitations, internal control over
financial reporting may not prevent or detect material 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.

The Chief Executive Officer and Chief Financial Officer have
commenced the evaluation of the effectiveness of the Company's internal control
over financial reporting as of December 31, 2006, pursuant to the requirements
of Multilateral Instrument 52-109 and Rule 13a-15 under the U.S. Securities
Exchange Act of 1934, as amended. In making its assessment of internal control
over financial reporting, management used the criteria issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework.

Management has concluded that, as of December 31, 2006,
material weaknesses existed in the Company's internal control over financial
reporting. An internal control material weakness is a significant deficiency, or
aggregation of deficiencies, that does not reduce to a relatively low level the
risk that material misstatements in financial statements will be prevented or
detected on a timely basis by employees in the normal course of their work.
Management has concluded that material weaknesses existed in the effectiveness
of the Company's internal control over financial reporting as at December 31,
2006 resulting in a lack of accuracy and timely submission of financial
reporting from its Mexican operations, including a lack of timely and accurate
reconciliations of certain balance sheet items. Management has determined that
the material weakness was caused by personnel constraints within the Company,
evidenced by insufficient supervision by management. Such material weakness
could result in a failure to detect breakdowns in the effective operation of
underlying controls and could result in material misstatements in the financial
statements.

---

- 94 -

In addition, management has also concluded that, as of December
31, 2006, a material weakness also existed in the Companys segregation of
duties within the accounting and financing department. Certain duties within the
accounting and finance departments were not properly segregated due to the
limited number of individuals employed in this area. In addition, authorization
of routine and top-side journal entries was identified as a weakness within the
Companys accounting and finance departments. None of the segregation of duty
authorization or authorization deficiencies has resulted in a misstatement to
the financial statements. These deficiencies however, may be considered a
material weakness resulting in a more than remote likelihood that a material
misstatement of the Companys annual or interim financial statements would not
be prevented or detected.

In the preparation of the consolidated financial statements for
the year ended December 31, 2006, the Chief Executive Officer and Chief
Financial Officer ensured additional procedures were undertaken to compensate
for the weaknesses described above.

Management has concluded that it needs to assign specific
control monitoring responsibilities among senior executives to correct this
material weakness and build capacity of its staff in its operations. Management
plans to recruit and train staff so as to remedy the above noted material
weakness.

The Company is not a "large accelerated filer" as defined in
the rules promulgated by the U.S. Securities and Exchange Commission.
Accordingly, this management internal control report is not accompanied by an
attestation report of the Company's auditors.

Changes in Internal Control Over Financial Reporting

No changes were made in the Company's internal control over
financial reporting during 2006 that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial
reporting.

ITEM
16 **Reserved

ITEM
16A **Audit Committee
Financial Expert

Our board of directors has determined that one member of our
Company's audit committee, Mr. John T. Kopcheff, possesses the educational and
professional qualifications as well as the experience to qualify as an "audit
committee financial expert" as defined in Item 401(e) of Regulation S-B. The
disclosure regarding Mr. Kopcheff in Item 6A is hereby incorporated by
reference. Mr. Kopcheff is "independent" as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as
amended. In addition, we believe that the other members of our board of
directors are collectively capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
reporting.

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 that applies to, among other
persons, our Company's President and Chief Executive Officer (being our
principal executive officer) and our Company's Chairman and Chief Financial
Officer (being our principal financial and accounting officer), as well as
persons performing similar functions. As adopted, our Code of Business Conduct
and Ethics sets forth written standards that are designed to deter wrongdoing
and to promote:

---

- 95 -

(1) honest and ethical conduct, including the ethical handling
of actual or apparent conflicts of interest between personal and professional
relationships;

(2) full, fair, accurate, timely, and understandable disclosure
in reports and documents that we file with, or submit to, the Securities and
Exchange Commission and in other public communications made by us;

(3) compliance with applicable governmental laws, rules and
regulations;

(4) the prompt internal reporting of violations of the Code of
Business Conduct and Ethics to an appropriate person or persons identified in
the Code of Business Conduct and Ethics; and

(5) accountability for adherence to the Code of Business
Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other
things, that all of our Company's personnel shall be accorded full access to our
president and secretary with respect to any matter which may arise relating to
the Code of Business Conduct and Ethics. Further, all of our Company's personnel
are to be accorded full access to our Company's board of directors if any such
matter involves an alleged breach of the Code of Business Conduct and Ethics by
our president or secretary.

In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our Company,
consistent with generally accepted accounting principles, and federal,
provincial and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to his or her immediate supervisor or to our Company's President or
Secretary. If the incident involves an alleged breach of the Code of Business
Conduct and Ethics by the President or Secretary, the incident must be reported
to any member of our Board of Directors. Any failure to report such
inappropriate or irregular conduct of others is to be treated as a severe
disciplinary matter. It is against our Company policy to retaliate against any
individual who reports in good faith the violation or potential violation of our
Company's Code of Business Conduct and Ethics by another.

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, 2006. The aggregate fees billed by KPMG LLP,
Chartered Accountants, for professional services rendered for the audit of our
2006 annual financial statements included in this annual report for the year
ended December 31, 2006 were $150,000 compared to $80,000 for the year ended
December 31, 2005, and $29,500 for the year ended December 31, 2004.

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 $27,500 for the year ended December 31,
2006, compared to $nil for the year ended December 31, 2005 and $590 for the
year ended December 31, 2004.

---

- 96 -

Tax Fees

The aggregate fees billed for tax compliance, tax advice and
tax planning by KPMG LLP, Chartered Accountants, were $3,400 for the year ended
December 31, 2006, compared to $3,175 for the year ended December 31, 2005, and
compared to $2,930 for the year ended December 31, 2004.

All Other Fees

The aggregate fees billed by KPMG LLP, Chartered Accountants,
for other non-audit professional services, other than those services listed
above, were $nil for the year ended December 31, 2006 compared to $18,200 for
the year ended December 31, 2005, and $21,000for the year ended December
31, 2004.

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.

---

- 97 -

PART III

ITEM
17 **Financial Statements

Financial Statements Filed as Part of the Annual Report:

|- | Report of Independent Registered Public Accounting Firm
      dated March 16, 2007.                                  
|- | ---------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                      
|- | Consolidated balance sheets for the fiscal years ended
      December 31, 2006 and 2005.                             
|  |                                                                                                                      
|- | Consolidated statements of operations and deficit for the
      fiscal years ended December 31, 2006, 2005, and 2004.
|  |                                                                                                                      
|- | Consolidated statements of cash flows for the fiscal
      years ended December 31, 2006, 2005 and 2004.             
|  |                                                                                                                      
|- | Notes to consolidated financial statements                                                                           

---











Consolidated Financial Statements (Expressed in Canadian
dollars)

GREAT PANTHER RESOURCES LIMITED

Years ended December 31, 2006, 2005 and 2004









---

| | 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 Directors of Great Panther Resources Limited

We have audited the accompanying consolidated balance sheets
  of Great Panther Resources Limited as of December 31, 2006 and 2005 and the
  consolidated statements of operations and deficit and cash flows for each of
  the years in the three-year period ended December 31, 2006. 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 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 audit opinion.

In our opinion, the consolidated financial statements referred
  to above present fairly, in all material respects, the financial position of
  Great Panther Resources Limited as of December 31, 2006 and 2005 and the results
  of its operations and its cash flows for each of the years in the three-year
  period ended December 31, 2006 in accordance with Canadian generally accepted
  accounting principles.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in note 1 to
  the consolidated financial statements, the Company has suffered recurring losses
  and operating cash flow deficiencies that raise substantial doubt about its
  ability to continue as a going concern. Management’s plans in regard to
  these matters are also described in note 1. The consolidated financial statements
  do not include any adjustments that might result from the outcome of this uncertainty.

Canadian generally accepted accounting principles vary in certain
  significant respects from accounting principles generally accepted in the United
  States of America. Information relating to the nature and effect of such measurement
  differences is presented in note 13 to the consolidated financial statements.

Chartered Accountants

Vancouver, Canada

March 16, 2007



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

---

F-2

GREAT PANTHER RESOURCES LIMITEDConsolidated Balance Sheets (Expressed in Canadian
dollars)

December 31, 2006 and 2005

|                                                          |   | 2006        |   |   | 2005       |  
|--------------------------------------------------------- | - | ----------- | - | - | ---------- | -
|                                                          |   |             |   |   |            |  
|Assets                                                    |   |             |   |   |            |  
|                                                          |   |             |   |   |            |  
|Current assets:                                           |   |             |   |   |            |  
|Cash and cash equivalents                                 | $ | 9,208,048   |   | $ | 5,295,397  |  
|Amounts receivable, net
      (note 3)                    |   | 4,120,584   |   |   | 1,001,121  |  
|Inventory                                                 |   | 605,127     |   |   |            |  
|Prepaid expenses and deposits                             |   | 821,614     |   |   | 183,912    |  
|                                                          |   | 14,755,373  |   |   | 6,480,430  |  
|Office equipment, net of accumulated
      amortization   |   |             |   |   |            |  
|of $51,006 (2005 - $44,468)                               |   | 113,817     |   |   | 99,865     |  
|Mineral properties, plant and equipment (note 5)          |   | 17,263,069  |   |   | 12,638,675 |  
|                                                          |   |             |   |   |            |  
|                                                          | $ | 32,132,259  |   | $ | 19,218,970 |  
|                                                          |   |             |   |   |            |  
|Liabilities and Shareholders Equity                      |   |             |   |   |            |  
|                                                          |   |             |   |   |            |  
|Current liabilities:                                      |   |             |   |   |            |  
|Accounts payable and accrued
      liabilities            | $ | 911,928     |   | $ | 231,866    |  
|Income taxes payable                                      |   | 127,475     |   |   | -          |  
|Current portion of long-term debt (note 7)                |   | 1,182,814   |   |   | 4,841,090  |  
|                                                          |   | 2,222,217   |   |   | 5,072,956  |  
|Long-term debt (note 7(a))                                |   | 104,127     |   |   | 746,127    |  
|Convertible payable note (note 7(b))                      |   | 1,163,799   |   |   | -          |  
|                                                          |   |             |   |   |            |  
|Asset retirement obligations (note
      5(iii))          |   | 92,285      |   |   | -          |  
|                                                          |   |             |   |   |            |  
|Future income taxes (note 10)                             |   | -           |   |   | 17,459     |  
|                                                          |   | 3,582,428   |   |   | 5,836,542  |  
|                                                          |   |             |   |   |            |  
|Shareholders equity:                                     |   |             |   |   |            |  
|Capital stock (note 8)                                    | $ | 46,393,145  |   | $ | 21,536,440 |  
|Contributed surplus (note 8)                              |   | 6,077,864   |   |   | 1,638,819  |  
|Equity component of
      convertible note                |   | 1,006,000   |   |   | -          |  
|Shares to be issued on exercise of
      warrants         |   | -           |   |   | 49,910     |  
|Deficit                                                   |   | (24,927,178 | ) |   | (9,842,741 | )
|                                                          |   | 28,549,831  |   |   | 13,382,428 |  
|                                                          |   |             |   |   |            |  
|Continuing operations (note 1)                            |   |             |   |   |            |  
|Commitments and contingencies (notes 4, 5,
      6 and 7) |   |             |   |   |            |  
|Subsequent events
      (notes 6 and 12)                  |   |             |   |   |            |  
|                                                          | $ | 32,132,259  |   | $ | 19,218,970 |  

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

|Robert A.
      Archer |  | Kaare G. Foy         
|------------------------ |  | -----------------------
|Chief Executive Officer  |  | Chief Financial Officer

---

F-3

GREAT PANTHER RESOURCES LIMITEDConsolidated Statements of Operations and Deficit (Expressed
in Canadian dollars)

Years ended December 31, 2006, 2005 and 2004

|                                                        |   | 2006        |   |   | 2005       |   |   | 2004       |  
|------------------------------------------------------- | - | ----------- | - | - | ---------- | - | - | ---------- | -
|                                                        |   |             |   |   |            |   |   |            |  
|Mineral sales                                           | $ | 7,069,442   |   | $ | -          |   | $ | -          |  
|Cost of sales                                           |   | 7,119,047   |   |   | -          |   |   | -          |  
|Amortization and depletion of mineral
      properties, |   |             |   |   |            |   |   |            |  
|plant and equipment                                     |   | 1,415,231   |   |   | -          |   |   | -          |  
|                                                        |   | (1,464,836  | ) |   | -          |   |   | -          |  
|                                                        |   |             |   |   |            |   |   |            |  
|Expenses:                                               |   |             |   |   |            |   |   |            |  
|General and administrative                              |   |             |   |   |            |   |   |            |  
|Incurred (schedule)                                     |   | 4,073,923   |   |   | 1,986,450  |   |   | 710,405    |  
|Stock-based compensation                                |   | 3,898,774   |   |   | 258,802    |   |   | 189,542    |  
|Mineral property
      exploration                      |   |             |   |   |            |   |   |            |  
|expenditures (notes 2(f) and 6)                         |   | 3,968,083   |   |   | 2,340,398  |   |   | 1,710,243  |  
|Director fees:                                          |   |             |   |   |            |   |   |            |  
|Incurred                                                |   | 135,000     |   |   | 60,000     |   |   | 43,335     |  
|Stock-based compensation                                |   | 774,000     |   |   | 98,496     |   |   | 204,308    |  
|Management fees                                         |   | 189,350     |   |   | 112,080    |   |   | 74,000     |  
|Amortization                                            |   | 6,538       |   |   | 12,579     |   |   | 2,719      |  
|                                                        |   | 13,045,668  |   |   | 4,868,805  |   |   | 2,934,552  |  
|                                                        |   | (14,510,504 | ) |   | (4,868,805 | ) |   | (2,934,552 | )
|                                                        |   |             |   |   |            |   |   |            |  
|Other income (expenses):                                |   |             |   |   |            |   |   |            |  
|Interest income                                         |   | 366,319     |   |   | 27,251     |   |   | 14,870     |  
|Interest expense                                        |   | (830,236    | ) |   | (357,011   | ) |   | -          |  
|Write-down of San Taco mineral
      property           |   |             |   |   |            |   |   |            |  
|acquisition costs (note 5)                              |   | -           |   |   | (403,634   | ) |   | -          |  
|Gain on sale of investment                              |   | -           |   |   | -          |   |   | 26,025     |  
|                                                        |   | (463,917    | ) |   | (733,394   | ) |   | 40,895     |  
|                                                        |   |             |   |   |            |   |   |            |  
|Loss before provision for income taxes                  |   | (14,974,421 | ) |   | (5,602,199 | ) |   | (2,893,657 | )
|                                                        |   |             |   |   |            |   |   |            |  
|Income tax recovery (expense)                           |   | (110,016    | ) |   | 370,514    |   |   | -          |  
|                                                        |   |             |   |   |            |   |   |            |  
|Loss for the year                                       |   | (15,084,437 | ) |   | (5,231,685 | ) |   | (2,893,657 | )
|                                                        |   |             |   |   |            |   |   |            |  
|Deficit, beginning of year                              |   | (9,842,741  | ) |   | (4,611,056 | ) |   | (1,717,399 | )
|                                                        |   |             |   |   |            |   |   |            |  
|Deficit, end of year                                    | $ | (24,927,178 | ) | $ | (9,842,741 | ) | $ | (4,611,056 | )
|                                                        |   |             |   |   |            |   |   |            |  
|Diluted and basic loss per share (note
      2(n))      | $ | (0.25       | ) | $ | (0.22      | ) | $ | (0.22      | )
|Weighted average number of common                       |   |             |   |   |            |   |   |            |  
|shares outstanding                                      |   | 59,720,424  |   |   | 23,986,543 |   |   | 13,443,920 |  

See accompanying notes to consolidated financial statements.

---

F-4

GREAT PANTHER RESOURCES LIMITEDConsolidated Statements of Cash Flows (Expressed in Canadian
dollars)

Years ended December 31, 2006, 2005 and 2004

|                                                       |   | 2006        |   |   | 2005       |   |   | 2004       |  
|------------------------------------------------------ | - | ----------- | - | - | ---------- | - | - | ---------- | -
|Cash flows used in operating activities:               |   |             |   |   |            |   |   |            |  
|Loss for the
      year                                | $ | (15,084,437 | ) | $ | (5,231,685 | ) | $ | (2,893,657 | )
|Items not involving cash:                              |   |             |   |   |            |   |   |            |  
|Amortization and depletion of mineral                  |   |             |   |   |            |   |   |            |  
|properties, plant and equipment                        |   | 1,415,231   |   |   | -          |   |   | -          |  
|Amortization                                           |   | 6,538       |   |   | 12,579     |   |   | 2,719      |  
|Foreign exchange                                       |   | (12,395     | ) |   | (119,478   | ) |   | (38,509    | )
|Stock-based compensation                               |   | 4,672,774   |   |   | 357,298    |   |   | 393,850    |  
|Shares issued for mineral exploration                  |   |             |   |   |            |   |   |            |  
|expenditures                                           |   | 613,000     |   |   | 50,000     |   |   | -          |  
|Future income tax recovery                             |   | (17,459     | ) |   | (370,514   | ) |   | -          |  
|Write-down of mineral property acquisition costs       |   | -           |   |   | 403,634    |   |   | -          |  
|Interest accretion on debt discount                    |   | 378,363     |   |   | 357,011    |   |   | -          |  
|Interest accretion on convertible note payable         |   | 149,799     |   |   | -          |   |   | -          |  
|Gain
      on sale of short-term investment            |   | -           |   |   | -          |   |   | (14,870    | )
|Changes in
      non-cash operating working capital:   |   |             |   |   |            |   |   |            |  
|Amounts receivable                                     |   | (3,119,463  | ) |   | (733,324   | ) |   | (207,850   | )
|Inventory                                              |   | (605,127    | ) |   | -          |   |   | -          |  
|Prepaid expenses and deposits                          |   | (637,702    | ) |   | (133,758   | ) |   | (38,889    | )
|Accounts payable and accrued liabilities               |   | 680,062     |   |   | 29,380     |   |   | 114,525    |  
|Income taxes payable                                   |   | 127,475     |   |   | -          |   |   | -          |  
|Net cash used in operating activities                  |   | (11,433,341 | ) |   | (5,378,857 | ) |   | (2,682,681 | )
|Cash flows from financing activities:                  |   |             |   |   |            |   |   |            |  
|Due to directors
      and related parties             |   | -           |   |   | (37,654    | ) |   | (171,816   | )
|Issuance of shares for cash, net
      of issue costs  |   | 13,866,639  |   |   | 13,874,042 |   |   | 3,925,712  |  
|Proceeds on
      issuance of convertible note         |   |             |   |   |            |   |   |            |  
|payable                                                |   | 2,020,000   |   |   | -          |   |   | -          |  
|Repayment of
      long-term debt                      |   | (4,897,504  | ) |   | -          |   |   | -          |  
|Proceeds received in advance and
      on exercise     |   |             |   |   |            |   |   |            |  
|of warrants                                            |   | 9,224,170   |   |   | 1,136,555  |   |   | -          |  
|Proceeds on exercise of options                        |   | 869,257     |   |   | 36,000     |   |   | -          |  
|Net cash from financing activities                     |   | 21,082,562  |   |   | 15,008,943 |   |   | 3,753,896  |  
|Cash flows used in investing activities:               |   |             |   |   |            |   |   |            |  
|Mineral
      properties expenditures                  |   | (5,716,080  | ) |   | (852,655   | ) |   | -          |  
|Acquisition of subsidiary                              |   | -           |   |   | -          |   |   | (66,167    | )
|Invested in
      short-term investments               |   | -           |   |   | -          |   |   | -          |  
|Proceeds from disposal of
      short-term investments |   | -           |   |   | -          |   |   | 15,410     |  
|Purchase of net
      assets of Topia mine             |   | -           |   |   | (888,405   | ) |   | -          |  
|Purchase of net assets of
      Guanajuato mines       |   | -           |   |   | (4,428,416 | ) |   | -          |  
|Purchase of equipment                                  |   | (20,490     | ) |   | (89,185    | ) |   | (20,549    | )
|Net cash used in investing activities                  |   | (5,736,570  | ) |   | (6,258,661 | ) |   | (71,306    | )
|Increase (decrease) in cash and cash
      equivalents |   | 3,912,651   |   |   | 3,371,425  |   |   | 999,909    |  
|Cash and cash
      equivalents, beginning of year     |   | 5,295,397   |   |   | 1,923,972  |   |   | 924,063    |  
|Cash and cash equivalents, end of year                 | $ | 9,208,048   |   | $ | 5,295,397  |   | $ | 1,923,972  |  

---

F-5

GREAT PANTHER RESOURCES LIMITEDConsolidated Statements of Cash Flows, Continued (Expressed
in Canadian dollars)

Years ended December 31, 2006, 2005 and 2004

|                                                     |   | 2006    |  |   | 2005      |  |   | 2004      | 
|---------------------------------------------------- | - | ------- |  | - | --------- |  | - | --------- | 
|                                                     |   |         |  |   |           |  |   |           | 
|Supplementary cash flow information:                 |   |         |  |   |           |  |   |           | 
|Income taxes
      paid                              | $ | -       |  | $ | -         |  | $ | -         | 
|Interest expense paid                                |   | -       |  |   | -         |  |   | -         | 
|Interest income
      received                       |   | 302,074 |  |   | 27,251    |  |   | 14,870    | 
|Non-cash financing and investing
      transactions: |   |         |  |   |           |  |   |           | 
|Shares issued and increase in mineral                |   |         |  |   |           |  |   |           | 
|properties on acquisition                            |   | -       |  |   | -         |  |   | 1,456,982 | 
|Shares issued in exchange for prior year             |   |         |  |   |           |  |   |           | 
|share subscription advances                          |   | -       |  |   | -         |  |   | 261,775   | 
|Warrants and options issued for financing fee        |   | 251,500 |  |   | 606,083   |  |   | 242,602   | 
|Assumption of debt on purchase of                    |   |         |  |   |           |  |   |           | 
|net assets of Topia mine                             |   | -       |  |   | 1,430,937 |  |   | -         | 
|Assumption of debt on purchase of                    |   |         |  |   |           |  |   |           | 
|net assets of Guanajuato mines                       |   | -       |  |   | 3,918,747 |  |   | -         | 
|Assumption of debt on purchase of Arcoiris           |   |         |  |   |           |  |   |           | 
|Concession (note 4(c))                               |   | 231,260 |  |   | -         |  |   | -         | 
|Mineral property addition upon recognition           |   |         |  |   |           |  |   |           | 
|of asset retirement obligation                       |   | 92,285  |  |   | -         |  |   | -         | 
|Shares issued and funds received                     |   |         |  |   |           |  |   |           | 
|in prior years                                       |   | 49,910  |  |   | -         |  |   | -         | 

See accompanying notes to consolidated financial statements.

---

F-6

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|1. | Nature of continuing operations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | 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 every ten common shares before consolidation became
      one common share after consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The Company is in the business of acquisition,
      production, development and exploration of mineral properties in Mexico.
      Of the properties in which the Company has an interest, the Topia and
      Guanajuato mines were in production at the balance sheet date. 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. The underlying value and the
      recoverability of amounts shown for exploration stage properties is
      dependent upon the existence of economically recoverable mineral
      resources, the ability of the company to obtain financing necessary to
      complete exploration and development of the mineral property interest and
      future profitable production or proceeds from the disposition of mineral
      property interests.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | During the years ended December 31, 2006 and 2005, the
      Company incurred losses of approximately $15,084,000 and $5,232,000,
      respectively, and used cash in operations of approximately $11,433,000 and
      $5,379,000, respectively. As at December 31, 2006, the Company had an
      accumulated deficit of approximately $24,927,000 and a working capital
      balance of $12,533,156.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Notwithstanding these continuing losses and operating
      cash flow deficiencies, these consolidated financial statements have been
      prepared by management on a going concern basis in accordance with
      Canadian generally accepted accounting principles. The going concern basis
      of presentation assumes that the Company will continue in operation for
      the foreseeable future and will be able to realize its assets and settle
      its liabilities and commitments in the normal course of
business.                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | The ability of the Company to continue as a going concern
      and to realize on its assets and discharge its liabilities when due in the
      normal course of business is dependent upon 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. Management plans to raise funds through equity financings if
      additional funds are required in the next fiscal year. These consolidated
      financial statements do not include any adjustments that might result from
      the outcome of these uncertainties.                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

F-7

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

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

---

F-8

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

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

---

F-9

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

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

---

F-10

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

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

---

F-11

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|2. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------
|   |                                               
|   | (n)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (o)                                           
|   |                                               
|   |                                               
|   |                                               
|3. | Amounts receivable,
net:                      

| |                                      |   | 2006      |   |   | 2005      |  
| | ------------------------------------ | - | --------- | - | - | --------- | -
| |                                      |   |           |   |   |           |  
| | Value added tax recoverable          | $ | 3,002,521 |   | $ | 1,118,568 |  
| | Other                                |   | 1,268,063 |   |   | 32,553    |  
| |                                      |   | 4,270,584 |   |   | 1,151,121 |  
| | Allowance for
      doubtful amounts |   | (150,000  | ) |   | (150,000  | )
| |                                      |   |           |   |   |           |  
| |                                      | $ | 4,120,584 |   | $ | 1,001,121 |  

|   | 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. The Company has
      made a provision for any amounts which may not be recoverable.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                           
|4. | Acquisitions:                                                                                                                                                                                                                                                                                                                                                             

|(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.
|    |                                                                                                                                                                                                                                                                                  
|    | In consideration for the rights outlined in the Topia
      Purchase Agreement, the Company initiated payments totaling US$2,551,678
      as follows:                                                                                                                           
|    |                                                                                                                                                                                                                                                                                  
|    | (i)                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                  
|    | (ii)                                                                                                                                                                                                                                                                             

---

F-12

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|4. | Acquisitions (continued):
|-- | -------------------------
|   |                          
|   | (a)                      
|   |                          
|   |                          
|   |                          
|   |                          

The net present value of the Companys
post acquisition payment requirements pursuant to the Topia Purchase Agreement
and assumed debt has been determined by discounting the face value of the
US$1,761,493 (CAD$2,158,534) at the Companys estimated current borrowing cost
to the date of acquisition, to equal $1,430,937. The carrying value of this
liability of $1,323,741 (note 7(a)) at December 31, 2006 is being accreted to
its face value over a period of up to two years.

The acquisition was accounted for as
an asset acquisition. The following table summarizes the fair value of
consideration given and the estimate fair value of assets acquired as at the
acquisition date:

| | Assets acquired:                           |   |           | 
| | ------------------------------------------ | - | --------- | 
| | Plant                                      | $ | 1,730,573 | 
| | Mineral properties                         |   | 269,516   | 
| | Offices and mobile
      equipment         |   | 319,253   | 
| |                                            |   |           | 
| |                                            | $ | 2,319,342 | 
| |                                            |   |           | 
| | Consideration given:                       |   |           | 
| | Cash and direct costs of
      acquisition | $ | 888,405   | 
| | Debt                                       |   | 1,430,937 | 
| |                                            |   |           | 
| |                                            | $ | 2,319,342 | 

| |     | The Company incurred mineral exploration expenditures on
      mineral property included in the Topia Mine Project both prior and
      subsequent to the acquisition transaction (note 6).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (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). The total purchase price was
      US$7,250,000 (paid) consisted of staged cash payments to the end of 2006.
      The cash paid and direct acquisition costs incurred at the acquisition
      date totaled $4,428,416. The payments had been discounted at the Company
      estimated current borrowing rate to the date of acquisition, which net
      present value equals $3,918,747. As at December 31, 2006, no remaining
      obligations remained.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | The acquisition was accounted for as an asset purchase.
      The following table summarizes the fair value of consideration given and
      the estimated fair value of assets acquired at the acquisition
  date:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

---

F-13

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|4. | Acquisitions
(continued):
|-- | -------------------------

| | (b) | Guanajuato Mine (continued):
| | --- | ----------------------------

| | Assets acquired:                           |   |           | 
| | ------------------------------------------ | - | --------- | 
| | Plant                                      | $ | 2,049,063 | 
| | Mineral
      properties                   |   | 3,750,000 | 
| | Offices and mobile
      equipment         |   | 811,722   | 
| | Land                                       |   | 1,736,378 | 
| |                                            |   |           | 
| |                                            | $ | 8,347,163 | 
| |                                            |   |           | 
| | Consideration given:                       |   |           | 
| | Cash and direct costs of
      acquisition | $ | 4,428,416 | 
| | Debt                                       |   | 3,918,747 | 
| |                                            |   |           | 
| |                                            | $ | 8,347,163 | 

| |     | The Company incurred mineral exploration expenditures on
      mineral properties included in the Guanajuato Mine Project both prior and
      subsequent to the acquisition transaction (note 6).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Legal proceedings exist in which The Sociedad Cooperativa
      Minero Metalúrgica Santa Fe de Guanajuato (the Cooperativa), Minera
      Mexicana el Rosario, S.A. de C.V. (MMR) and one of MMRs officers have
      been named as defendants in a lawsuit filed by several members of the
      Cooperativa. The lawsuit alleges that the sale of the Guanajuato mine
      assets should be nullified on the basis that the proceedings leading to
      the approval of the sale did not meet specific requirements as set out in
      the bylaws of the Cooperativa. The claimants are also seeking unspecified
      damages, lost profits and payment of expenses and lawyers fees.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | The Companys legal representatives have reviewed the
      basis of their claim and have concluded that the sale of the assets by the
      Cooperativa to MMR met the requirements set out by the bylaws of the
      Cooperativa and, as such, management believes the lawsuit is without
      merit.                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (c) | Arcoiris Concession:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | 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 totaling US$280,000 (US$80,000 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.                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (d) | Fundiciones Property:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | On May 15, 2006, the Company purchased a 100% interest in
      the Fundiciones property. The agreement requires cash payments of
      Pesos$2,250,000 (CAD$222,300) (paid) upon signing of the purchase
      agreement and an additional payment of Pesos$5,447,029 (CAD$538,166)
      (paid). 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.                                                                                                                                                                                                   

---

F-14

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|5. | Mineral properties, plant and equipment:                                                                                           
|-- | -----------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                    
|   | The major components of the Company's mineral properties,
      plant and equipment at December 31, 2006 and 2005 are as
  follows:

| |                                                               |   | 2006       |   |   | 2005       | 
| | ------------------------------------------------------------- | - | ---------- | - | - | ---------- | 
| |                                                               |   |            |   |   |            | 
| | Topia Mine (note 4(a)):                                       |   |            |   |   |            | 
| | Mineral properties                                            | $ | 1,577,851  |   | $ | 1,320,489  | 
| | Plant and equipment (i)                                       |   | 5,002,155  |   |   | 2,396,847  | 
| | Building and mobile
      equipment                           |   | 383,086    |   |   | 319,253    | 
| | Asset retirement obligations (iii)                            |   | 52,734     |   |   | -          | 
| |                                                               |   | 7,015,826  |   |   | 4,036,589  | 
| | Accumulated depreciation and depletion                        |   | (615,898   | ) |   | -          | 
| |                                                               |   | 6,399,928  |   |   | 4,036,589  | 
| |                                                               |   |            |   |   |            | 
| | Guanajuato Mines (note 4(b)):                                 |   |            |   |   |            | 
| | Mineral properties                                            | $ | 3,750,000  |   | $ | 3,750,000  | 
| | Plant and equipment
      (i)                                 |   | 4,248,128  |   |   | 2,235,444  | 
| | Building and mobile equipment                                 |   | 1,075,714  |   |   | 811,722    | 
| | Land                                                          |   | 2,480,539  |   |   | 1,736,378  | 
| | Asset retirement obligations (iii)                            |   | 39,551     |   |   | -          | 
| |                                                               |   | 11,593,932 |   |   | 8,533,544  | 
| | Accumulated depreciation and depletion                        |   | (799,333   | ) |   | -          | 
| |                                                               |   | 10,794,599 |   |   | 8,533,544  | 
| | Other mineral properties  Santo Nino and San Taco
      (ii) |   | 68,542     |   |   | 68,542     | 
| |                                                               | $ | 17,263,069 |   | $ | 12,638,675 | 

| | (i)  | After acquisition of the Topia Mine and Guanajuato Mine
      in fiscal year 2005 (note 4(a) and 4(b), the Company incurred plant
      rehabilitation expenditures of $539,519 and $160,444, and acquired mine
      equipment of $126,755 and $25,937, respectively, which have been
      capitalized to plant and equipment in 2005. Plant facilities, building and
      plant rehabilitation expenditures were not amortized in 2005 as the plants
      were not in service in 2005 to allow for plant maintenance and upgrading
      subsequent to their acquisition.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (ii) | During the year ended December 31, 2005, the Company
      elected to discontinue exploration of the San Taco property. The fair
      value of the property as at December 31, 2005 was determined to be nil and
      as a result, the carrying value of $403,634 was written off in 2005
      resulting in the recovery of future income taxes of
  $102,813.                                                                                                                                                                                                             

---

F-15

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|5. | Mineral properties, plant and equipment
      (continued):
|-- | ----------------------------------------------------------
|   |                                                           
|   | (iii)                                                     
|   |                                                           
|   |                                                           

| |                                                  |   | 2006   |  |   | 2005 | 
| | ------------------------------------------------ | - | ------ |  | - | ---- | 
| |                                                  |   |        |  |   |      | 
| |                                                  |   |        |  |   |      | 
| | Beginning balance - January 1, 2006              | $ | -      |  | $ | -    | 
| | Liabilities incurred in
      the current period |   | 92,285 |  |   | -    | 
| | Accretion expense                                |   | -      |  |   | -    | 
| |                                                  |   |        |  |   |      | 
| |                                                  | $ | 92,285 |  | $ | -    | 

| |      | The provision for asset retirement obligations are based
      upon the following assumptions:                                                                                                                                                                                                                                                                                                                                                                                          
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | • The total undiscounted cash flow required to
        settle the obligation is approximately US$175,000;                                                                                                                                                                                                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | • Asset retirement obligation payments are expected to occur during
      fiscal year 2011; and                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      | • A credit adjusted risk-free rate of 26.8% has been used to discount
      cash flows.                                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (iv) | The Companys subsidiary, Minera de Villa Seca, S.A. de
      C.V., is being reviewed by the Social Security Institution primarily for
      fees which it views may be owing by a contractor of the Company during the
      period March to October 2006. The Company has determined that it is not
      possible to assess the outcome of this review, but the Company does not
      expect that the outcome will have a material impact on the Companys
      financial position.

|6. | Mineral property exploration
  expenditures:                                              
|-- | ------------------------------------------------------------------------------------------
|   |                                                                                           
|   | The continuity of the expenditures on the mineral
      properties for 2006 is as follows:

| |                        |   |         |  |   |         |  |   |         |  |   |            |     |   | Property    |     |   |            |     |   |         |  |   |         |  |   |           | 
| | ---------------------- | - | ------- |  | - | ------- |  | - | ------- |  | - | ---------- | --- | - | ----------- | --- | - | ---------- | --- | - | ------- |  | - | ------- |  | - | --------- | 
| |                        |   |         |  |   | Santo   |  |   | San     |  |   | Topia      |     |   | Topia       |     |   |            |     |   |         |  |   |         |  |   |           | 
| |                        |   | San     |  |   | Nino    |  |   | Taco    |  |   | Main Block |     |   | II to IV    |     |   | Guanajuato |     |   | Virimoa |  |   | Mapimi  |  |   |           | 
| |                        |   | Antonio |  |   | (a)     |  |   | (b)     |  |   | note 4     | (a) |   | note
    (4 | (a) |   | note
    4 | (b) |   | (c)     |  |   | (d)     |  |   | 2006      | 
| |                        |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |         |  |   |           | 
| | Exploration expenses:  |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |         |  |   |           | 
| | Option payments        | $ | -       |  | $ | 11,495  |  | $ | -       |  | $ | -          |     | $ | -           |     | $ | -          |     | $ | 192,337 |  | $ | 625,639 |  | $ | 829,471   | 
| | 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 | 
| | Miscellaneous          |   | -       |  |   | -       |  |   | -       |  |   | -          |     |   | -           |     |   | 3,625      |     |   | -       |  |   | -       |  |   | 3,625     | 
| | Project administration |   | 16,006  |  |   | -       |  |   | -       |  |   | 127,244    |     |   | -           |     |   | 126,059    |     |   | -       |  |   | 9,020   |  |   | 278,329   | 
| |                        |   | 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 | 

---

F-16

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|6. | Mineral property exploration expenditures
      (continued):                              
|-- | ------------------------------------------------------------------------------------------
|   |                                                                                           
|   | The continuity of the expenditures on the mineral
      properties for 2005 is as follows:

| |                        |   |         |  |   |         |  |   |         |  |   | Property   |     |   |             |     |   |            |     |   |         |  |   |           | 
| | ---------------------- | - | ------- |  | - | ------- |  | - | ------- |  | - | ---------- | --- | - | ----------- | --- | - | ---------- | --- | - | ------- |  | - | --------- | 
| |                        |   |         |  |   | Santo   |  |   | San     |  |   | Topia      |     |   | Topia       |     |   |            |     |   |         |  |   |           | 
| |                        |   | San     |  |   | Nino    |  |   | Taco    |  |   | Main Block |     |   | II to IV    |     |   | Guanajuato |     |   | Virimoa |  |   |           | 
| |                        |   | Antonio |  |   | (a)     |  |   | (b)     |  |   | note
    4 | (a) |   | note
    (4 | (a) |   | note
    4 | (b) |   | (c)     |  |   | 2005      | 
| |                        |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |           | 
| | Exploration expenses:  |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |           | 
| | Option payments        | $ | 4,099   |  | $ | 24,492  |  | $ | 93,516  |  | $ | -          |     | $ | -           |     | $ | -          |     | $ | -       |  | $ | 122,107   | 
| | Analysis               |   | 18,553  |  |   | 9,414   |  |   | 2,814   |  |   | 78,142     |     |   | 14,909      |     |   | 7,571      |     |   | 14,952  |  |   | 146,355   | 
| | Drilling               |   | 13,986  |  |   | 160,900 |  |   | 85,176  |  |   | 423,324    |     |   | -           |     |   | 353,057    |     |   | 80,209  |  |   | 1,116,642 | 
| | Field costs            |   | 906     |  |   | 1,851   |  |   | 1,058   |  |   | 31,928     |     |   | 556         |     |   | 776        |     |   | 850     |  |   | 37,925    | 
| | Geology                |   | 86,907  |  |   | 62,971  |  |   | 62,298  |  |   | 288,302    |     |   | 75,529      |     |   | 47,059     |     |   | 77,834  |  |   | 700,900   | 
| | Land taxes             |   | 11,277  |  |   | 1,640   |  |   | 1,886   |  |   | 44,171     |     |   | 6,813       |     |   | -          |     |   | -       |  |   | 65,787    | 
| | Project administration |   | 29,998  |  |   | 1,237   |  |   | 2,267   |  |   | 106,942    |     |   | 282         |     |   | 6,340      |     |   | 3,606   |  |   | 150,672   | 
| |                        |   | 165,726 |  |   | 262,505 |  |   | 249,015 |  |   | 972,809    |     |   | 98,089      |     |   | 414,803    |     |   | 177,451 |  |   | 2,340,398 | 
| |                        |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |           | 
| | Cumulative expenses,   |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |           | 
| | beginning of year      |   | 33,300  |  |   | 101,626 |  |   | 176,450 |  |   | 1,373,000  |     |   | 25,867      |     |   | -          |     |   | -       |  |   | 1,710,243 | 
| |                        |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |           | 
| | Cumulative expenses,   |   |         |  |   |         |  |   |         |  |   |            |     |   |             |     |   |            |     |   |         |  |   |           | 
| | end of year            | $ | 199,026 |  | $ | 364,131 |  | $ | 425,465 |  | $ | 2,345,809  |     | $ | 123,956     |     | $ | 414,803    |     | $ | 177,451 |  | $ | 4,050,641 | 

The continuity of the expenditures on
the mineral properties for 2004 is as follows:

| |                        |   |         |  |   |         |  |   | Property |  |   |            |     |   |             |     |   |           | 
| | ---------------------- | - | ------- |  | - | ------- |  | - | -------- |  | - | ---------- | --- | - | ----------- | --- | - | --------- | 
| |                        |   |         |  |   | Santo   |  |   | San      |  |   | Topia      |     |   | Topia       |     |   |           | 
| |                        |   | San     |  |   | Nino    |  |   | Taco     |  |   | Main Block |     |   | II to IV    |     |   |           | 
| |                        |   | Antonia |  |   | (a)     |  |   | (b)      |  |   | note
    4 | (a) |   | note
    (4 | (a) |   | 2004      | 
| |                        |   |         |  |   |         |  |   |          |  |   |            |     |   |             |     |   |           | 
| | Exploration expenses:  |   |         |  |   |         |  |   |          |  |   |            |     |   |             |     |   |           | 
| | Option payments        | $ | -       |  | $ | 38,762  |  | $ | 64,461   |  | $ | 127,280    |     | $ | -           |     | $ | 230,503   | 
| | Staking                |   | -       |  |   | -       |  |   | -        |  |   | -          |     |   | 12,602      |     |   | 12,602    | 
| | Analysis               |   | 3,564   |  |   | 6,456   |  |   | 6,196    |  |   | 46,883     |     |   | -           |     |   | 63,099    | 
| | Drilling               |   | -       |  |   | -       |  |   | -        |  |   | 732,494    |     |   | -           |     |   | 732,494   | 
| | Field costs            |   | -       |  |   | 656     |  |   | 656      |  |   | 4,259      |     |   | -           |     |   | 5,571     | 
| | Geology                |   | 17,065  |  |   | 37,834  |  |   | 97,585   |  |   | 281,096    |     |   | 6,102       |     |   | 439,682   | 
| | Land taxes             |   | 3,191   |  |   | 10,784  |  |   | 3,198    |  |   | 68,569     |     |   | 1,043       |     |   | 86,785    | 
| | Mine rehabilitation    |   | -       |  |   | -       |  |   | -        |  |   | 8,588      |     |   | -           |     |   | 8,588     | 
| | Miscellaneous          |   | 11      |  |   | 1,109   |  |   | 213      |  |   | 4,034      |     |   | -           |     |   | 5,367     | 
| | Project administration |   | 9,469   |  |   | 6,025   |  |   | 4,141    |  |   | 99,797     |     |   | 6,120       |     |   | 125,552   | 
| |                        |   | 33,300  |  |   | 101,626 |  |   | 176,450  |  |   | 1,373,000  |     |   | 25,867      |     |   | 1,710,243 | 
| |                        |   |         |  |   |         |  |   |          |  |   |            |     |   |             |     |   |           | 
| | Cumulative expenses,   |   |         |  |   |         |  |   |          |  |   |            |     |   |             |     |   |           | 
| | beginning of year      |   | -       |  |   | -       |  |   | -        |  |   | -          |     |   | -           |     |   | -         | 
| |                        |   |         |  |   |         |  |   |          |  |   |            |     |   |             |     |   |           | 
| | Cumulative expenses,   |   |         |  |   |         |  |   |          |  |   |            |     |   |             |     |   |           | 
| | end of year            | $ | 33,300  |  | $ | 101,626 |  | $ | 176,450  |  | $ | 1,373,000  |     | $ | 25,867      |     | $ | 1,710,243 | 

---

F-17

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|6. | Mineral property exploration expenditures
      (continued):
|-- | ------------------------------------------------------------
|   |                                                             
|   | (a)                                                         
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   | (b)                                                         
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   | (c)                                                         
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             

If the option is exercised, the
property owner will retain a 2% Net Smelter Return, half of which can be
purchased by the Company for US$1,000,000.

---

F-18

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|6. | Mineral property exploration expenditures
      (continued):
|-- | ------------------------------------------------------------
|   |                                                             
|   | (d)                                                         
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             

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.

---

F-19

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|7. | Long-term debt:
|-- | ---------------

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

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2006      |   |   | 2005      |  
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------- | - | - | --------- | -
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |   |   |           |  
| | Topia mine acquisition (note 4(a)) carrying
      value of debt assumed of US$489,067 (Cienega debt), without interest and
      discounted at an effective interest rate of 26.8% per annum, repayable in
      the form of a 10% Net Smelter Royalty or US$25,000 per shipment, whichever
      is higher and is secured by a general security agreement over the assets
      of the Topia operations. The remaining debt balance is fully repayable on
      the third anniversary of the acquisition on June 30, 2008. | $ | 569,886   |   | $ | 947,373   |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |   |   |           |  
| | Topia mine acquisition (note 4(a)) carrying
      value of US$646,919 (Caneles debt), without interest and discounted at an
      effective interest rate of 26.8% per annum, payable in two payments of
      US$300,000 and US$346,919 due June 2008 and 2009 respectively. Terms of
      the agreement requires retirement of the Caneles debt upon full payment of
      the Cienega debt.                                                                                                                             |   | 753,855   |   |   | 1,101,267 |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |   |   |           |  
| | Guanajuato mine acquisition (note 4(b))                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | -         |   |   | 4,186,880 |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |   |   |           |  
| | Arcoiris concession acquisition carrying value of
      US$200,000 (note 4(c)), without interest and discounted at an effective
      interest rate of 26.8% per annum, payable in four staged payments over
      three years.                                                                                                                                                                                                                                                                                             |   | 233,060   |   |   | -         |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 1,556,801 |   |   | 6,235,440 |  
| | Less: unamortized discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | (269,860  | ) |   | (648,223  | )
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 1,286,941 |   |   | 5,587,217 |  
| | Current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 1,182,814 |   |   | 4,841,090 |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |           |   |   |           |  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $ | 104,127   |   | $ | 746,127   |  

The face value of annual gross
principal repayments on long term debt based on managements future estimates of
payments, including those under the Topia Mine Net Smelter Royalty, are as
follows:

| | 2007 | $ | 1,441,161 | 
| | ---- | - | --------- | 
| | 2008 |   | 115,640   | 
| |      |   |           | 
| |      | $ | 1,556,801 | 

Interest accreted on long-term debt
totaled $378,363 in 2006 (2005 - $357,011).

---

F-20

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|7. | Long-term debt (continued):
|-- | ---------------------------
|   |                            
|   | (b)                        
|   |                            
|   |                            
|   |                            
|   |                            

| |                                  |   | 2006      |   |   | 2005 | 
| | -------------------------------- | - | --------- | - | - | ---- | 
| | Convertible note  face value    | $ | 2,020,000 |   | $ | -    | 
| | Less. unamortized
      discount |   | (856,201  | ) |   | -    | 
| |                                  | $ | 1,163,799 |   | $ | -    | 

|8. | Capital stock:
|-- | --------------

| | (a) | Authorized:                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Unlimited number of common shares without par value                                                                                                                                                       
| |     | Unlimited number of Class A preferred shares without par value, issuable
      in
      series             
      Unlimited number of Class B preferred shares without par value, issuable
      in series
| |     |                                                                                                                                                                                                           
| | (b) | Issued:                                                                                                                                                                                                   
| |     | The continuity of the Companys issued share capital is as
  follows:                                                                                                                                     

| |                                                                |  | Number
      of |  |   | Stated    |  
| | -------------------------------------------------------------- |  | --------------- |  | - | --------- | -
| |                                                                |  | common shares   |  |   | value     |  
| |                                                                |  |                 |  |   |           |  
| | Balance, December 31, 2003                                     |  | 4,213,132       |  | $ | 2,089,939 |  
| |                                                                |  |                 |  |   |           |  
| |                                                                |  |                 |  |   |           |  
| | Private placement at $0.37 per unit, net of costs
      (i)    |  | 2,280,500       |  |   | 838,077   |  
| | Short form offering at $0.56 per unit, net
      of costs (ii) |  | 3,783,085       |  |   | 1,853,621 |  
| | Private placement at $0.50 per unit, net of costs
      (iii)  |  | 3,000,000       |  |   | 1,364,407 |  
| | Exercise of "A" warrants at $0.45 per share                    |  | 272,500         |  |   | 122,625   |  
| | Exercise of finders warrants at $0.45 per share               |  | 14,460          |  |   | 6,507     |  
| | Exercise of agents warrants at $0.45 per
      share          |  | 5,000           |  |   | 2,250     |  
| | Consideration on Acquisition (note 4)                          |  | 2,250,000       |  |   | 1,030,500 |  
| | Issue of warrants for financing services                       |  | -               |  |   | (242,602  | )
| | Reclass from
      contributed surplus on exercise of options  |  | -               |  |   | 3,271     |  
| |                                                                |  |                 |  |   |           |  
| | Balance carried forward, December 31, 2004                     |  | 15,818,677      |  |   | 7,068,595 |  

---

F-21

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

| | (b) | Issued (continued):
| | --- | -------------------

| |                                                                      |  | Number
      of |  |   | Stated     |  
| | -------------------------------------------------------------------- |  | --------------- |  | - | ---------- | -
| |                                                                      |  | common shares   |  |   | value      |  
| |                                                                      |  |                 |  |   |            |  
| | Balance brought forward, December 31, 2004                           |  | 15,818,677      |  |   | 7,068,595  |  
| |                                                                      |  |                 |  |   |            |  
| | Private placement at $0.45 per unit, net of
      costs (iv)         |  | 4,358,944       |  |   | 1,882,301  |  
| | Private placement at $0.45 per unit, net of costs
      (v)          |  | 12,363,000      |  |   | 5,008,713  |  
| | Private placement at $0.62 per unit, net of
      costs (vi)         |  | 12,250,310      |  |   | 6,983,028  |  
| | Exercise of "B" warrants at $0.45 per share                          |  | 1,140,000       |  |   | 513,000    |  
| | Exercise of "C" warrants at $0.45 per share                          |  | 1,142,500       |  |   | 514,125    |  
| | Exercise of "D" warrants at $0.45 per share                          |  | 96,000          |  |   | 59,520     |  
| | Exercise of options                                                  |  | 80,000          |  |   | 36,000     |  
| | Issue of options and warrants for financing services                 |  | -               |  |   | (606,083   | )
| | Issue of shares for property                                         |  | 100,000         |  |   | 50,000     |  
| | Reclass from
      contributed surplus on exercise of options        |  | -               |  |   | 27,241     |  
| |                                                                      |  |                 |  |   |            |  
| | Balance, 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
      (vii)        |  | 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 |  

No preferred shares have been issued.

| | (i) | On January 14, 2004, the Company issued by private
      placement 2,280,500 units at a price of $0.37 per unit for gross proceeds
      of $843,785 and paid issue costs of $5,708. Each unit consists of one
      common share of the Company and one non-transferable series C share
      purchase warrant. Each whole warrant entitles the holder to acquire one
      common share of the Company at $0.45 for a period of twelve months.
      Directors of the Company participated by acquiring 150,000
  units.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

F-22

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

| | (b) | Issued (continued):
| | --- | -------------------

| | (ii)  | On March 29, 2004, the Company closed the financing under
      its Short Form Offering Document having an Effective Date of March 10,
      2004 and issued 3,571,428 units at a price of $0.56 per unit for gross
      proceeds of $2,000,000 and paid issue costs of $48,907. Each unit consists
      of one common share of the Company and one-half of one non-transferable
      series D share purchase warrant. Each whole warrant entitles the holder
      to acquire one common share of the Company at $0.62 for a period of twelve
      months. Subsequent to the year ended December 31, 2004, the expiry date of
      the series D share purchase warrants was extended by an additional two
      months. The Company issued the private placement agent 535,714 agents
      warrants with each agents warrant entitling the holder to acquire one
      common share of the Company at $0.62 for a period of twelve months. The
      Company also issued the agent 100,000 common shares at a price of $0.60
      per share as a corporate finance fee. The agent was paid commissions of
      $97,472 in cash and $62,528 in the form of 111,657 agents units valued at
      $0.56 per unit. Each agents unit consists of one common share of the
      Company and one-half of one non-transferable warrant with each whole
      agents warrant entitling the holder to acquire one common share of the
      Company at $0.62 per share for a period of twelve months. The fair value
      of agents warrants of $132,802 is recorded as a cost of financing and is
      included in contributed surplus.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (iii) | On April 23, 2004, the Company issued by private
      placement 3,000,000 units at a price of $0.50 per unit for gross proceeds
      of $1,500,000 and paid issue costs of $15,593. Each unit consists of one
      common share of the Company and one-half of one non-transferable series
      E share purchase warrant. Each whole warrant entitles the holder to
      acquire one common share of the Company at $0.62 for a period of twelve
      months. Subsequent to the year ended December 31, 2004, the expiry date of
      the series E share purchase warrants was extended by an additional one
      month. The Company issued the private placement broker 450,000 agents
      warrants with each agents warrant entitling the holder to acquire one
      common share of the Company at $0.62 for a period of twelve months. The
      broker was paid a commission of $120,000. The fair value of agents
      warrants of $109,800 is recorded as a cost of financing and is included in
      contributed surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (iv)  | On July 19, 2005, the Company issued by private placement
      4,358,944 units at a price of $0.45 per unit for gross proceeds of
      $1,961,525 and paid issue costs of $79,224. Each unit consists of one
      common share of the Company and one-half of one non-transferable series
      F share purchase warrant. Each whole warrant entitles the holder to
      acquire one common share of the Company at $0.62 for a period of twelve
      months. The Company also issued 175,700 finders warrants entitling the
      holder to acquire one common share of the Company at $0.62 for a period of
      twelve months. The fair value of agents warrants of $19,583 is recorded
      as a cost of financing and is included in contributed
  surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

F-23

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

| | (b) | Issued (continued):
| | --- | -------------------

| | (v)   | On October 5, 2005, the Company issued by private
      placement 12,363,000 units at a price of $0.45 per unit for gross proceeds
      of $5,563,350 and paid issue costs of $554,638. Each unit consists of one
      common share of the Company and one-half of one non-transferable series
      G or H share purchase warrant. Each whole warrant entitles the holder
      to acquire one common share of the Company at $0.62 for a period of twelve
      months. The Company also issued 1,163,760 agent options entitling the
      holder to purchase for a twelve month period at $0.45, one unit comprising
      one common share and one-half of one non-transferable agents warrant.
      Each full agents warrant entitles the holder to acquire, upon exercise,
      one further common share of the Company at a price of $0.62 for a period
      of twelve months. The fair value of agents options of $147,000 is
      recorded as a cost of financing and is included in contributed surplus. An
      officer of the Company participated by acquiring 120,000 units.                                                                                                                                                                                                                                                                                                                                         
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (vi)  | On December 20, 2005, the Company issued by private
      placement 12,200,000 units at a price of $0.62 per unit for gross proceeds
      of $7,564,000 and paid issue costs of $626,250. Each unit consists of one
      common share of the Company and one non-transferable series I or J
      share purchase warrant. Each whole warrant entitles the holder to acquire
      one common share of the Company at $0.90 for a period of two years. The
      Company also issued 50,310 agent units entitling the holder to purchase
      one unit comprising one common share and one whole non-transferable
      agents warrant, at $0.62 per unit. Each full agents warrant entitles the
      holder to acquire, upon exercise, one further common share of the Company
      at $0.90 for a period of twenty four months. The fair value of agents
      options of $13,000 is recorded as a cost of financing and is included in
      contributed surplus. The Company also issued 1,096,000 agents warrants
      entitling the holder to acquire one common share of the Company at $0.90
      for a period of twenty four months. The fair value of agents options and
      the agents warrants of $426,500 is recorded as a cost of financing and is
      included in contributed surplus. An officer and two companies controlled
      by Directors, participated by acquiring an aggregate of 259,000
    units.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (vii) | On June 1, 2006, the Company issued by private placement
      7,500,000 units 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 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.                                                                                                                                                                                                                                                                                                                                                                                         
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |       | Included in issued capital stock as at December 31, 2006
      are nil common shares (2005 - 1,012,500) held in escrow. During the year
      ended December 31, 2006, 1,012,500 (2005 - 675,000; 2004 - 562,500 shares)
      were released pursuant to time-based provisions of the escrow
      agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---

F-24

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

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

| |                                                                |   | Stated    |  
| | -------------------------------------------------------------- | - | --------- | -
| |                                                                |   | value     |  
| |                                                                |   |           |  
| | Balance, December 31, 2003                                     | $ | 69,498    |  
| |                                                                |   |           |  
| | Issue of warrants for financing activities                     |   | 242,602   |  
| | Reclassification to common shares on exercise of warrants      |   | (3,271    | )
| | Stock-based compensation for non-employee
      awards         |   | 167,099   |  
| | Stock-based
      compensation for employee awards             |   | 226,751   |  
| |                                                                |   |           |  
| | Balance, December 31, 2004                                     |   | 702,679   |  
| |                                                                |   |           |  
| | Issue of options and warrants for financing activities         |   | 606,083   |  
| | Reclassification to common shares on
      exercise of options |   | (27,241   | )
| | Stock-based compensation for non-employee awards               |   | 258,802   |  
| | Stock-based compensation for employee awards                   |   | 98,496    |  
| |                                                                |   |           |  
| | 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 for non-employee
      awards         |   | 3,898,774 |  
| | Stock-based
      compensation for employee awards             |   | 774,000   |  
| |                                                                |   |           |  
| | Balance, December
      31, 2006                               | $ | 6,077,864 |  

| | (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, 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 common shares 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.

---

F-25

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

| | (d) | Stock options and warrants (continued):                             
| | --- | --------------------------------------------------------------------
| |     |                                                                     
| |     | The continuity of common stock options for 2006 is as
      follows:

Balance
      
      
      
      BalanceExercise
      
      December 31,
      
      Cancelled/
      
      December 31,price
      Expiry date
      2005
      Granted
      expired
      Exercised
      20060.45
      February 8, 2009
      710,000
      -
      -
      (220,000)
      490,0000.52
      April 5, 2009
      60,000
      -
      -
      (30,000)
      30,0000.45
      May 25, 2009
      100,000
      -
      -
      -
      100,0000.45
      February 27, 2010
      250,000
      -
      -
      (50,000)
      200,0000.45
      May 2, 2006
      100,000
      -
      -
      (100,000)
      -0.45
      July 11, 2010
      100,000
      -
      -
      -
      100,0000.45
      August 30, 2010
      125,000
      -
      (50,000)
      -
      75,0000.45
      July 26, 2010
      700,000
      -
      -
      (120,000)
      580,0000.60
      September 13, 2006
      747,260
      -
      -
      (747,260)
      -0.60
      September 29, 2007
      125,000
      -
      -
      -
      125,0000.45
      October 4, 2006
      416,500
      -
      -
      (416,500)
      -0.90
      January 5, 2011
      -
      1,605,000
      (50,000)
      (3,300)
      1,551,7000.90
      December 31, 2007
      -
      350,000
      -
      (112,500)
      237,5000.90
      January 14, 2008
      -
      400,000
      -
      -
      400,0002.65
      January 14, 2008
      -
      400,000
      -
      -
      400,0002.65
      December 6, 2011
      -
      2,295,000
      -
      -
      2,295,0003,433,760
      5,050,000
      (100,000)
      (1,799,560)
      6,584,200Weighted average exercise price
      $ 0.46
      $ 1.83
      $ 0.68
      $ 0.48
      $ 1.50


As at December 31, 2006, all share
options are fully vested.

The continuity of common stock options
for 2005 is as follows:

Balance
      
      
      
      BalanceExercise
      
      December 31,
      
      Cancelled/
      
      December 31,price
      Expiry date
      2004
      Granted
      expired
      Exercised
      20050.45
      February 8, 2009
      790,000
      -
      -
      (80,000)
      710,0000.52
      April 5, 2009
      60,000
      -
      -
      -
      60,0000.52
      April 30, 2009
      400,000
      -
      (400,000)
      -
      -0.45
      May 25, 2009
      100,000
      -
      -
      -
      100,0000.45
      February 27, 2010
      -
      250,000
      -
      -
      250,0000.45
      May 2, 2006
      -
      100,000
      -
      -
      100,0000.45
      July 11, 2010
      -
      100,000
      -
      -
      100,0000.45
      August 30, 2010
      -
      125,000
      -
      -
      125,0000.45
      July 26, 2010
      -
      700,000
      -
      -
      700,0000.60
      September 13, 2006
      -
      747,260
      -
      -
      747,2600.60
      September 29, 2007
      -
      125,000
      -
      -
      125,0000.45
      October 4, 2006
      -
      416,500
      -
      -
      416,5001,350,000
      2,563,760
      (400,000)
      (80,000)
      3,433,760Weighted average exercise price
      $ 0.47
      $ 0.46
      $ 0.52
      $ 0.45
      $ 0.46


---

F-26

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

| | (d) | Stock options and warrants (continued):                             
| | --- | --------------------------------------------------------------------
| |     |                                                                     
| |     | The continuity of common stock options for 2004 is as
      follows:

Balance
      
      
      
      BalanceExercise
      
      December 31,
      
      Cancelled/
      
      December 31,price
      Expiry date
      2003
      Granted
      expired
      Exercised
      20041.00
      June 4, 2006
      40,000
      
      (40,000)
      -
      -1.60
      August 20, 2006
      30,000
      
      (30,000)
      -
      -0.45
      February 8, 2009
      -
      790,000
      -
      -
      790,0000.52
      April 5, 2009
      -
      60,000
      -
      -
      60,0000.52
      April 30, 2009
      -
      400,000
      -
      -
      400,0000.45
      May
        25, 2009
      -
      100,000
      -
      -
      100,00070,000
      1,350,000
      (70,000)
      -
      1,350,000Weighted
        average exercise price
      $ 1.26
      $ 0.47
      $ 1.26
      $ -
      $ 0.47


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, 2006, the Company recorded compensation
expense for the fair value of employee stock options of $774,000 (2005 -
$98,496, 2004 - $226,754) for stock options that were granted during the year.
The weighted average fair value of options granted during 2006 was $1.66 (2005 -
$0.45, 2004 - $0.45) . The fair value per option was determined using the
following weighted average assumptions:

| |                         | 2006      | 2005      | 2004     
| | ----------------------- | --------- | --------- | ---------
| |                         |           |           |          
| | Risk-free interest rate | 3.8%      | 3.0%      | 2.5%     
| | Dividend yield          | 0.0%      | 0.0%      | 0.0%     
| | Expected life           | 2.0 years | 2.0 years | 2.0 years
| | Volatility              | 79.1%     | 70.0%     | 111.1%   

The Company applies the fair value
based method of accounting for non-employees stock options granted after January
1, 2002. During the year ended December 31, 2006, the Company recorded
compensation expense for the fair value at stock options of $3,898,774 (2005 -
$258,802, 2004 - $167,099) granted during the year. The weighted average fair
value of options granted during the year was $1.88 (2005 - $0.51, 2004 - $0.49)
.. The average fair value per option was determined using the following weighted
average assumptions:

| |                         | 2006      | 2005      | 2004     
| | ----------------------- | --------- | --------- | ---------
| |                         |           |           |          
| | Risk-free interest rate | 3.8%      | 3.4%      | 3.2%     
| | Dividend paid           | 0.0%      | 0.0%      | 0.0%     
| | Expected life           | 4.1 years | 4.1 years | 2.7 years
| | Volatility              | 61.6%     | 82.0%     | 84.3%    

---

F-27

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

| | (e) | Warrants:                                           
| | --- | ----------------------------------------------------
| |     |                                                     
| |     | The continuity of warrants for 2006 is as
  follows:

| |                     |          |                    | Balance    |           |              |         | Balance     
| | ------------------- | -------- | ------------------ | ---------- | --------- | ------------ | ------- | ------------
| |                     | Exercise |                    | December   |           |              |         | December 31,
| |                     |          |                    | 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     | 2.65     | 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  

The continuity of warrants for 2005 is
as follows:

| |                     |          |                | Balance      |            |             |             | Balance     
| | ------------------- | -------- | -------------- | ------------ | ---------- | ----------- | ----------- | ------------
| |                     | Exercise |                | December 31, |            |             |             | December 31,
| | Series              | price    | Expiry date    | 2004         | Issued     | Exercised   | Expired     | 2005        
| |                     |          |                |              |            |             |             |             
| | Series "B" Warrants | 0.45     | Mar. 22, 2005  | 1,715,000    | -          | (1,140,000) | (575,000)   | -           
| | Series "C" Warrants | 0.45     | Jan. 13, 2005  | 2,280,500    | -          | (1,142,500) | (1,138,000) | -           
| | Series "D" Warrants | 0.62     | Mar. 28, 2005  | 1,785,714    | -          | (96,000)    | (1,689,714) | -           
| | Agents' Warrants    | 0.62     | Mar. 28, 2005  | 591,543      | -          | -           | (591,543)   | -           
| | Series "E" Warrants | 0.62     | May 27, 2005   | 1,500,000    | -          | -           | (1,500,000) | -           
| | Agents' Warrants    | 0.62     | Apr. 22, 2005  | 450,000      | -          | -           | (450,000)   | -           
| | 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  | -           | -           | 4,103,200   
| | Agents' Warrants    | 0.90     | Nov. 30, 2007  | -            | 410,320    | -           | -           | 410,320     
| | Series "J" Warrants | 0.90     | Dec. 20, 2007  | -            | 8,096,800  | -           | -           | 8,096,800   
| | Agents Warrants    | 0.90     | Dec. 20, 2007  | -            | 735,990    | -           | -           | 735,990     
| |                     |          |                | 8,322,757    | 21,882,982 | (2,378,500) | (5,944,257) | 21,882,982  

---

F-28

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|8. | Capital stock
(continued):
|-- | --------------------------

| | (e) | Warrants (continued):                               
| | --- | ----------------------------------------------------
| |     |                                                     
| |     | The continuity of warrants for 2004 is as
  follows:

| |                     |          |               | Balance      |           |           |           | Balance     
| | ------------------- | -------- | ------------- | ------------ | --------- | --------- | --------- | ------------
| |                     | Exercise |               | December 31, |           |           |           | December 31,
| | Series              | price    | Expiry date   | 2003         | Issued    | Exercised | Expired   | 2004        
| |                     |          |               |              |           |           |           |             
| | Purchase Warrants   | 1.20     | Sept.27, 2004 | 25,000       | -         | -         | (25,000)  | -           
| | Series "A" Warrants | 0.45     | Oct.22, 2004  | 362,500      | -         | (272,500) | (90,000)  | -           
| | Finders' Warrants   | 0.45     | Oct.22, 2004  | 29,000       | -         | (14,460)  | (14,540)  | -           
| | Series "B" Warrants | 0.45     | Dec.22, 2004  | 1,715,000    | -         | -         | -         | 1,715,000   
| | (extended to)       |          | Mar. 22, 2005 |              |           |           |           |             
| | Agents' Warrants    | 0.45     | Dec.22, 2004  | 325,850      | -         | (5,000)   | (320,850) | -           
| | Series "C" Warrants | 0.45     | Jan. 13, 2005 | -            | 2,280,500 | -         | -         | 2,280,500   
| | Series "D" Warrants | 0.62     | Mar. 28, 2005 | -            | 1,785,714 | -         | -         | 1,785,714   
| | (extended to)       |          | May 27, 2005  |              |           |           |           |             
| | Agents' Warrants    | 0.62     | Mar. 28, 2005 | -            | 591,543   | -         | -         | 591,543     
| | Series "E" Warrants | 0.62     | Apr. 22, 2005 | -            | 1,500,000 | -         | -         | 1,500,000   
| | (extended to)       |          | May 27, 2005  |              |           |           |           |             
| | Agents' Warrants    | 0.62     | Apr. 22, 2005 | -            | 450,000   | -         | -         | 450,000     
| |                     |          |               | 2,457,350    | 6,607,757 | (291,960) | (450,390) | 8,322,757   

|9.  | Related party transactions:                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                               
|    | The Company entered into the following transactions with
      related parties:                                                                               
|    |                                                                                                                                                               
|    | (a)                                                                                                                                                           
|    |                                                                                                                                                               
|    | (b)                                                                                                                                                           
|    |                                                                                                                                                               
|10. | Income taxes:                                                                                                                                                 
|    |                                                                                                                                                               
|    | Income tax expense (recovery) differs from the amount
      which would result from applying the statutory Canadian tax rates for the
      following reasons:

| |                                                          |   | 2006        |   |   | 2005       |  
| | -------------------------------------------------------- | - | ----------- | - | - | ---------- | -
| |                                                          |   |             |   |   |            |  
| | Net income (loss) before tax                             | $ | (14,974,421 | ) | $ | (5,602,199 | )
| | Canadian income tax rate                                 |   | 34.12%      |   |   |            |  
| |                                                          |   |             |   |   |            |  
| | Income tax recovery expected                             |   | (5,109,272  | ) |   | (1,911,470 | )
| | Items not deductible                                     |   | 1,766,992   |   |   | 121,910    |  
| | Difference in tax rates                                  |   | 809,932     |   |   | 252,662    |  
| | Benefit of tax attributes not recognized and other items |   | 2,642,364   |   |   | 1,166,384  |  
| |                                                          |   |             |   |   |            |  
| |                                                          | $ | 110,016     |   | $ | (370,514   | )

---

F-29

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|10. | Income taxes
(continued):
|--- | -------------------------

| |          |   | 2006    |   |   | 2005     |   |   | 2004 | 
| | -------- | - | ------- | - | - | -------- | - | - | ---- | 
| | Current  | $ | 127,475 |   | $ | -        |   | $ | -    | 
| | Deferred |   | (17,459 | ) |   | (370,514 | ) |   | -    | 
| |          | $ | 110,016 |   | $ | (370,514 | ) | $ | -    | 

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

| |                                                              |   | 2006       |   |   | 2005       |  
| | ------------------------------------------------------------ | - | ---------- | - | - | ---------- | -
| |                                                              |   |            |   |   |            |  
| | Future income tax assets:                                    |   |            |   |   |            |  
| | Mineral property, plant and equipment
      and related debt | $ | 1,033,103  |   | $ | 1,403,250  |  
| | Office equipment
      financing and other                   |   | 442,343    |   |   | 506,882    |  
| | Capital losses                                               |   | 300,285    |   |   | 344,170    |  
| | Non-capital losses                                           |   | 6,095,103  |   |   | 2,700,003  |  
| | Total future income tax assets                               |   | 7,870,834  |   |   | 4,954,305  |  
| |                                                              |   |            |   |   |            |  
| | Valuation allowance                                          |   | (7,585,674 | ) |   | (4,686,604 | )
| | Future income tax
      assets, net of allowance             |   | 285,160    |   |   | 267,701    |  
| |                                                              |   |            |   |   |            |  
| | Future income tax liabilities:                               |   |            |   |   |            |  
| | Mineral properties                                           |   | (285,160   | ) |   | (285,160   | )
| |                                                              | $ | -          |   | $ | (17,459    | )

|    | At December 31, 2006, the Company had operating losses of
      $20,988,000 (2005 - $8,795,000; 2004 - $2,805,000) and capital losses of
      $1,934,816 (2005 - $1,989,000; 2004 - $1,989,000). The operating losses at
      December 31, 2006 includes $7,285,000 (2005 - $3,881,000; 2004 -
      $2,647,000) in Canada and $13,703,000 (2005 - $4,914,000; 2004 - $158,000)
      in Mexico. The capital losses are without expiry, and the operating losses
      expire at various dates to 2026.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|11. | Financial instruments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| | (a) | Fair value:                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | The carrying value of cash and cash equivalents,
      short-term investments, amounts receivable, accounts payable and accrued
      liabilities and income taxes payable approximate their fair value due to
      the short- term nature of the items. The fair value of long-term debt to
      third parties approximate their carrying value as their term reflect
      estimated market terms at December 31, 2006.                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     | In evaluating the fair value information, considerable
      judgment is required to interpret the market data used to develop the
      estimates. The use of different market assumptions and/or 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.

---

F-30

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|11. | Financial instruments (continued):                                                                                                                                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                          
|    | (b)                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    | (c)                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|12. | Subsequent events:                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                          
|    | Subsequent to December 31, 2006 the Company received proceeds of $798,312 from the exercise of 807,014 warrants and 112,500 options.                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                          
|13. | Reconciliation between Canadian and United States generally accepted accounting principles:                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                          
|    | 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 material measurement differences from Canadian GAAP are as follows:
|    |                                                                                                                                                                                                                                                                                                                                                          
|    | (a)                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          
|    | (b)                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                          

---

F-31

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|13. | Reconciliation between Canadian and United States generally accepted accounting principles (continued):
|--- | -------------------------------------------------------------------------------------------------------
|    |                                                                                                        
|    | (b)                                                                                                    
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    | (c)                                                                                                    
|    |                                                                                                        
|    |                                                                                                        

---

F-32

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|13. | Reconciliation between Canadian and United States
      generally accepted accounting principles (continued):
|--- | -------------------------------------------------------------------------------------------------------------
|    |                                                                                                              
|    | (d)                                                                                                          
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              

| |                          |  | December 31, 2006 |   |  |             |   |  | December 31, 2005 |   |  |             |  
| | ------------------------ |  | ----------------- | - |  | ----------- | - |  | ----------------- | - |  | ----------- | -
| |                          |  | Canadian          |   |  | US          |   |  | Canadian          |   |  | US          |  
| |                          |  | GAAP              |   |  | GAAP        |   |  | GAAP              |   |  | GAAP        |  
| |                          |  |                   |   |  |             |   |  |                   |   |  |             |  
| | Convertible note payable |  | 1,163,799         |   |  | 2,020,000   |   |  |                   |   |  | -           |  
| | Share capital            |  | 46,393,145        |   |  | 52,604,350  |   |  | 21,536,440        |   |  | 27,747,645  |  
| | Contributed surplus      |  | 6,077,864         |   |  | 6,092,864   |   |  | 1,638,819         |   |  | 1,653,819   |  
| | Equity component of      |  |                   |   |  |             |   |  |                   |   |  |             |  
| | convertible note         |  | 1,006,000         |   |  |             |   |  |                   |   |  | -           |  
| | Deficit                  |  | (24,927,178       | ) |  | (31,003,584 | ) |  | (9,842,741        | ) |  | (16,068,946 | )

| | (e) | Statement of operations presentation:                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                  
| |     | The consolidated statement of operations includes a
      write-down of San Taco mineral property in other expenses. Under US GAAP,
      this amount would be disclosed as an operating expense.
| |     |                                                                                                                                                                                                  
| | (f) | Recent accounting pronouncements:                                                                                                                                                                
| |     |                                                                                                                                                                                                  
| |     | (i)                                                                                                                                                                                              

---

F-33

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|13. | Reconciliation between Canadian and United States
      generally accepted accounting principles (continued):
|--- | -------------------------------------------------------------------------------------------------------------
|    |                                                                                                              
|    | (f)                                                                                                          
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              
|    | (f)                                                                                                          
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              
|    |                                                                                                              

| |                                                            |   | 2006       |  |   | 2005       | 
| | ---------------------------------------------------------- | - | ---------- |  | - | ---------- | 
| |                                                            |   |            |  |   |            | 
| | Share capital and contributed surplus, under               |   |            |  |   |            | 
| | Canadian
      GAAP                                        | $ | 52,471,009 |  | $ | 23,175,259 | 
| | Adjustment for stock-based compensation for                |   |            |  |   |            | 
| | employees
      (note 13(b))                               |   | 15,000     |  |   | 15,000     | 
| | Reversal of
      recapitalization of deficit (note 13(c)) |   | 6,211,205  |  |   | 6,211,205  | 
| |                                                            |   |            |  |   |            | 
| | Share capital and contributed surplus, under               |   |            |  |   |            | 
| | US GAAP                                                    | $ | 58,697,214 |  | $ | 29,401,464 | 

---

F-34

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

|13. | Reconciliation between Canadian and United States
      generally accepted accounting principles
(continued):
|--- | -------------------------------------------------------------------------------------------------------------

| | (g) | Reconciliation (continued):
| | --- | ---------------------------

| | (ii) | Deficit:
| | ---- | --------

| |                                                         |   | 2006        |   |   | 2005        |  
| | ------------------------------------------------------- | - | ----------- | - | - | ----------- | -
| |                                                         |   |             |   |   |             |  
| | Deficit, under Canadian GAAP                            | $ | (24,927,178 | ) | $ | (9,842,741  | )
| | Adjustment for stock-based compensation for             |   |             |   |   |             |  
| | employees (note
      13(b))                            |   | (15,000     | ) |   | (15,000     | )
| | Reversal of recapitalization of deficit (note 13(c))    |   | (6,211,205  | ) |   | (6,211,205  | )
| | Interest accreted on convertible loan note (note 13(a)) |   | 149,799     |   |   | -           |  
| |                                                         |   |             |   |   |             |  
| | Deficit, under US GAAP                                  | $ | (31,003,584 | ) | $ | (16,068,946 | )

| | (iii) | Loss and loss per share:
| | ----- | ------------------------

| |                                         |   | 2006        |   |   | 2005       |   |   | 2004       |  
| | --------------------------------------- | - | ----------- | - | - | ---------- | - | - | ---------- | -
| |                                         |   |             |   |   |            |   |   |            |  
| | Loss for the year, under                |   |             |   |   |            |   |   |            |  
| | Canadian GAAP                           | $ | (15,084,437 | ) | $ | (5,231,685 | ) | $ | (2,893,657 | )
| | Interest accreted on convertible        |   |             |   |   |            |   |   |            |  
| | loan note (note 13(d))                  |   | 149,799     |   |   | -          |   |   |            |  
| |                                         |   |             |   |   |            |   |   |            |  
| | Loss for the year,
      under US GAAP  | $ | (14,934,638 | ) | $ | (5,231,685 | ) | $ | (2,893,657 | )
| |                                         |   |             |   |   |            |   |   |            |  
| | Basic and diluted loss per share, under |   |             |   |   |            |   |   |            |  
| | US GAAP                                 | $ | (0.25       | ) | $ | (0.22      | ) | $ | (0.22      | )
| | Weighted average number of common       |   |             |   |   |            |   |   |            |  
| | shares, basic and diluted               |   | 59,720,424  |   |   | 23,986,543 |   |   | 13,443,920 |  

---

F-35

|GREAT PANTHER RESOURCES LIMITED               
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|(Expressed in Canadian dollars)               
|                                              
|Years ended December 31, 2006, 2005 and 2004  
|                                              

| |                                       |   | 2006      |   |   | 2005      |  |   | 2004    |  
| | ------------------------------------- | - | --------- | - | - | --------- |  | - | ------- | -
| |                                       |   |           |   |   |           |  |   |         |  
| | Accounting and audit                  | $ | 390,020   |   | $ | 192,148   |  | $ | 84,664  |  
| | Automobile                            |   | -         |   |   | 5,503     |  |   | 2,452   |  
| | Bad debt expense                      |   | -         |   |   | 150,000   |  |   | -       |  
| | Bank charges and interest             |   | 41,633    |   |   | 12,673    |  |   | 6,515   |  
| |                                       |   |           |   |   |           |  |   |         |  
| | Consulting                            |   | 690,164   |   |   | 468,989   |  |   | 189,140 |  
| | Filing fees                           |   | 245,899   |   |   | 22,949    |  |   | 45,179  |  
| | Foreign exchange                      |   | (10,358   | ) |   | 19,294    |  |   | (33,504 | )
| | General exploration and mine expenses |   | 382,870   |   |   | 275,974   |  |   | 60,562  |  
| |                                       |   |           |   |   |           |  |   |         |  
| | Insurance                             |   | 185,795   |   |   | 11,537    |  |   | -       |  
| | Investor relations                    |   | 869,047   |   |   | 219,609   |  |   | 110,741 |  
| | Legal                                 |   | 254,605   |   |   | 126,769   |  |   | 57,446  |  
| | Office costs                          |   | 155,766   |   |   | 17,540    |  |   | 22,593  |  
| |                                       |   |           |   |   |           |  |   |         |  
| | Office supplies                       |   | 336,811   |   |   | 124,403   |  |   | 14,065  |  
| | Printing                              |   | 40,901    |   |   | 19,879    |  |   | 17,383  |  
| | Rent                                  |   | 140,936   |   |   | 70,570    |  |   | 27,191  |  
| | Salaries                              |   | -         |   |   | 17,387    |  |   | 22,564  |  
| |                                       |   |           |   |   |           |  |   |         |  
| | Telephone                             |   | 28,272    |   |   | 13,278    |  |   | 5,265   |  
| | Transfer agent fees                   |   | 33,589    |   |   | 16,038    |  |   | 9,780   |  
| | Travel                                |   | 287,973   |   |   | 201,910   |  |   | 68,369  |  
| |                                       |   |           |   |   |           |  |   |         |  
| |                                       | $ | 4,073,923 |   | $ | 1,986,450 |  | $ | 710,405 |  

---

- 98 -

Form 52-109F1

Certification of Annual Filings

I, Kaare G. Foy, Chief Financial Officer of Great Panther
  Resources Limited, certify that:

|1. | I have reviewed the annual filings
        (as this term is defined in Multilateral Instrument 52-109 Certification
        of Disclosure in Issuers Annual and Interim Filings) of Great
        Panther Resources Limited(the issuer) for the period ending December
        31, 2006;                                                                       
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                 
|2. | Based on my knowledge, the annual filings
        do not contain any untrue statement of a material fact or omit to state
        a material fact required to be stated or that is necessary to make a statement
        not misleading in light of the circumstances under which it was made,
        with respect to the period covered by the annual filings;
|   |                                                                                                                                                                                                                                                                                                                                                                 
|3. | Based on my knowledge, the annual financial
        statements together with the other financial information included in the
        annual filings fairly present in all material respects the financial condition,
        results of operations and cash flows of the issuer, as of the date and
        for the periods presented in the annual filings;    
|   |                                                                                                                                                                                                                                                                                                                                                                 
|4. | The issuers other certifying officers
        and I are responsible for establishing and maintaining disclosure controls
        and procedures and internal control over financial reporting for the issuer,
        and we have:                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                 
|   | (a)                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                 
|   | (b)                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                 
|   | (c)                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                 
|5. | I have caused the issuer to disclose in the
        annual MD&A any change in the issuers internal control over
        financial reporting that occurred during the issuers most recent
        interim period that has materially affected, or is reasonably likely to
        materially affect, the issuers internal control over financial reporting.   

Date: April 30, 2007

Kaare G. FoyKaare G. Foy Chief Financial Officer

---

- 99 -

Form 52-109F1

Certification of Annual Filings

I, ***Robert A. Archer, President and Chief Executive
  Officer of Great Panther Resources Limited***, certify that:

|1. | I have reviewed the annual filings
        (as this term is defined in Multilateral Instrument 52-109 *Certification
        of Disclosure in Issuers’ Annual and Interim Filings*) of ***Great
        Panther Resources Limited*** (the issuer) for the period ending
        ***December 31, 2006***;                                                             
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                      
|2. | Based on my knowledge, the annual filings
        do not contain any untrue statement of a material fact or omit to state
        a material fact required to be stated or that is necessary to make a statement
        not misleading in light of the circumstances under which it was made,
        with respect to the period covered by the annual filings;     
|   |                                                                                                                                                                                                                                                                                                                                                                      
|3. | Based on my knowledge, the annual financial
        statements together with the other financial information included in the
        annual filings fairly present in all material respects the financial condition,
        results of operations and cash flows of the issuer, as of the date and
        for the periods presented in the annual filings;         
|   |                                                                                                                                                                                                                                                                                                                                                                      
|4. | The issuer’s other certifying officers
        and I are responsible for establishing and maintaining disclosure controls
        and procedures and internal control over financial reporting for the issuer,
        and we have:                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                      
|   | (a)                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                      
|   | (b)                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                      
|   | (c)                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                      
|5. | I have caused the issuer to disclose in the
        annual MD&A any change in the issuer’s internal control over
        financial reporting that occurred during the issuer’s most recent
        interim period that has materially affected, or is reasonably likely to
        materially affect, the issuer’s internal control over financial
        reporting.

Date: April 30, 2007

Robert A. ArcherRobert A. Archer**President and Chief Executive Officer**

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- 100 -

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 | Form of Series A Warrant (incorporated by reference from
      our Registration Statement on Form 20-F, filed on August 10,
  2004).                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                         
|2.2 | Form of Series B Warrant (incorporated by reference from
      our Registration Statement on Form 20-F, filed on August 10,
  2004).                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                         
|2.3 | Form of Series C Warrant (incorporated by reference from
      our Registration Statement on Form 20-F, filed on August 10,
  2004).                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                         
|2.4 | Form of Series D Warrant (incorporated by reference from
      our Registration Statement on Form 20-F, filed on August 10,
  2004).                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                         
|2.5 | Form of Series E Warrant (incorporated by reference from
      our Registration Statement on Form 20-F, filed on August 10,
  2004).                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                         
|2.6 | Stock Option Plan (incorporated by reference from our
      Registration Statement on Form 20-F, filed on August 10, 2004).                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                         
|3.  | Material Contracts                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                         
|3.1 | Share Purchase Agreement dated December 9, 2003 with
      Robert A. Archer and Ing. Francisco Ramos Sánchez (incorporated by
      reference from our Registration Statement on Form 20-F, filed on August
      10, 2004).                                                                                            
|    |                                                                                                                                                                                                                                                                                                                         
|3.2 | Option Agreement dated February 11, 2004 between our
      subsidiary, Minera Mexicana el Rosario, S.A. de C.V. and Eduardo Rodriguez
      Chávez, acting in representation of Alfredo Rodriguez Chávez (incorporated
      by reference from our Registration Statement on Form 20-F, filed on August
      10, 2004).

---

- 101 -

|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).                     
|      |                                                                                                                                                                                                                                                                                                                                                                             
|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   | Minera Exploraciones
        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).                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                             
|12.   | 302 Certification                                                                                                                                                                                                                                                                                                                                                           
|      |                                                                                                                                                                                                                                                                                                                                                                             
|12.1* | Section
        302 Certification under Sarbanes-Oxley Act of 2002 for Robert A. Archer.                                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                             
|12.2* | Section
        302 Certification under Sarbanes-Oxley Act of 2002 for Kaare G. Foy.                                                                                                                                                                                                                                                                                        

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- 102 -

|13.   | 906 Certification                                                                                                                                                                              
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                
|13.1* | Section
      906 Certification under Sarbanes-Oxley Act of 2002 for Robert A. Archer.                                                                                                         
|      |                                                                                                                                                                                                
|13.2* | Section
      906 Certification under Sarbanes-Oxley Act of 2002 for Kaare G. Foy.                                                                                                             
|      |                                                                                                                                                                                                
|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).                

|* | Filed herewith.
|- | ---------------

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- 103 -

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

Per: /s/ Kaare G. Foy

Kaare G. Foy Chairman and Chief Financial Officer
(Principal Financial Officer)



Dated : May 8, 2007



__________________________________________



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.

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