---

ANNUAL INFORMATION FORMFOR THE FISCAL YEAR ENDED

OCTOBER 31, 2011



Suite 2300  1177 West Hastings Street Vancouver, British
Columbia V6E 2K3

January 26, 2012

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ITEM 2 - TABLE OF CONTENTS

|                                                                 |                                                | Page
|---------------------------------------------------------------- | ---------------------------------------------- | ----
|                                                                 |                                                |     
|PRELIMINARY
      NOTES                                          | 3                                             
|Documents
      Incorporated by Reference                        | 3                                             
|Date
      of Information                                        | 3                                             
|Currency
      and Exchange Rates                                | 3                                             
|Metric
      Equivalents                                         | 4                                             
|Forward-Looking
      Statements                                 | 4                                             
|Caution
      Regarding Adjacent or Similar Mineral Properties   | 6                                             
|Caution
      Regarding Reference to Resources and Reserves      | 6                                             
|Caution
      Regarding Historical Results                       | 7                                             
|Glossary
      of Terms                                          | 7                                             
|                                                                 |                                                |     
|ITEM
      3:                                                    | CORPORATE
      STRUCTURE                      | 15  
|Name,
      Address and Incorporation                            | 15                                            
|Intercorporate
      Relationships                               | 15                                            
|                                                                 |                                                |     
|ITEM
      4:                                                    | GENERAL
      DEVELOPMENT OF THE BUSINESS      | 16  
|Three
      Year History                                         | 16                                            
|Significant
      Acquisitions                                   | 19                                            
|                                                                 |                                                |     
|ITEM
      5:                                                    | NARRATIVE
      DESCRIPTION OF THE BUSINESS    | 19  
|General                                                          | 19                                            
|Risk
      Factors                                               | 22                                            
|Material
      Mineral Projects                                  | 29                                            
|                                                                 |                                                |     
|ITEM
      6:                                                    | DIVIDENDS                                      | 56  
|                                                                 |                                                |     
|ITEM
      7:                                                    | DESCRIPTION
      OF CAPITAL STRUCTURE         | 57  
|General
      Description of Capital Structure                   | 57                                            
|                                                                 |                                                |     
|ITEM
      8:                                                    | MARKET
      FOR SECURITIES                    | 57  
|Trading
      Price and Volume                                   | 57                                            
|                                                                 |                                                |     
|ITEM
      9:                                                    | ESCROWED
      SECURITIES                      | 58  
|                                                                 |                                                |     
|ITEM
      10:                                                   | DIRECTORS
      AND EXECUTIVE OFFICERS         | 58  
|Name,
      Occupation and Security Holding                      | 58                                            
|Cease
      Trade Orders, Bankruptcies, Penalties or Sanctions   | 60                                            
|Conflicts
      of Interest                                      | 61                                            
|                                                                 |                                                |     
|ITEM
      11:                                                   | PROMOTERS                                      | 62  
|                                                                 |                                                |     
|ITEM
      12:                                                   | LEGAL
      PROCEEDINGS AND REGULATORY ACTIONS | 62  
|Legal
      Proceedings                                          | 62                                            
|Regulatory
      Actions                                         | 62                                            
|Interest
      of Management and Others in Material Transactions | 62                                            
|                                                                 |                                                |     
|ITEM
      13:                                                   | TRANSFER
      AGENT AND REGISTRAR             | 63  
|                                                                 |                                                |     
|ITEM
      14:                                                   | MATERIAL
      CONTRACTS                       | 63  

i

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TABLE OF CONTENTS(continued)

|                                                 | Page                          
|------------------------------------------------ | ------------------------------
|                                                 |                               
|ITEM 15:                                         | NAMES AND INTERESTS OF EXPERTS
|Names and Interests
      of Experts             | 63                            
|                                                 |                               
|ITEM 16:                                         | ADDITIONAL INFORMATION        
|Audit Committee Information                      | 64                            
|Additional
      Information                     | 64                            
|                                                 |                               
|SCHEDULE A  AUDIT COMMITTEE
      INFORMATION |                               

ii

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PRELIMINARY NOTES

Documents Incorporated by Reference

Incorporated by reference into
this Annual Information Form (AIF) are the following documents:

| | (a) | Consolidated Audited Financial Statements of the Company
      for the year ended October 31, 2011;                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                            
| | (b) | Management Discussion and Analysis of the Company for the
      year ended October 31, 2011 dated January 26, 2012 (MD&A);                                                                                                               
| |     |                                                                                                                                                                                                                                            
| | (c) | Management Information Circular dated August 11, 2011 in
      respect of the 2011 Annual General Meeting (Information
  Circular);                                                                                                      
| |     |                                                                                                                                                                                                                                            
| | (d) | Technical report dated December 6, 2011 entitled
      Technical Report, Carbon Creek Coal Property, British Columbia, Canada
      prepared by Norwest Corporation (the Carbon Creek Report);                                         
| |     |                                                                                                                                                                                                                                            
| | (e) | Technical report dated January 18, 2012 entitled
      Technical Report, Sheini Hills Iron Project, Ghana, Africa prepared by
      Keith J. Henderson, EurGeol (the Sheini Report);                                                   
| |     |                                                                                                                                                                                                                                            
| | (f) | Technical report dated January 27, 2012, effective
      January 19, 2012, entitled Technical Report on the Longnose Ilmenite
      Project, Minnesota, USA prepared by SRK Consulting (Canada) Inc. (the
      Longnose Report); and  
| |     |                                                                                                                                                                                                                                            
| | (g) | Technical report dated January 27, 2012, effective
      January 19, 2012, entitled Technical Report on the Titac Ilmenite
      Exploration Project, Minnesota, USA prepared by SRK Consulting (Canada)
      Inc. (the Titac Report);

copies of which may be obtained online from SEDAR at
www.sedar.com.

All financial information in this
AIF is prepared in accordance with generally accepted accounting principles in
Canada.

Date of Information

All information in this AIF is as
of October 31, 2011 unless otherwise indicated.

Currency and Exchange Rates

All dollar amounts in this AIF
are expressed in Canadian dollars unless otherwise indicated. The Companys
accounts are maintained in Canadian dollars and the Companys financial
statements are prepared in accordance with generally accepted accounting
principles in Canada. All references to U.S. dollars, USD or to US$ are to
U.S. dollars, to MXP are to Mexican pesos, to ARS are to Argentinean pesos
and to PEN are to Peruvian nuevo soles.

The following table sets forth
the rate of exchange for the Canadian dollar, expressed in United States dollars
in effect at the end of the periods indicated, the average of exchange rates in
effect on the last day of each month during such periods, and the high and low
exchange rates during such periods based on the noon rate of exchange as
reported by the Bank of Canada for conversion of Canadian dollars into United
States dollars.

---

- 4 -

Year Ended
      October 31Canadian Dollars to U.S. Dollars
    2011
    2010
    2009Rate at end of period
    USD 1.0065
    USD 0.9784
    USD 0.9282Average rate for period
    USD 1.0139
    USD 0.9636
    USD 0.8552High for period
    USD 1.0583
    USD 1.0039
    USD 0.9716Low for period
    USD 0.9430
    USD 0.9278
    USD 0.7692


Metric Equivalents

For ease of reference, the
following factors for converting Imperial measurements into metric equivalents
are provided:

To convert from Imperial
    To metric
    Multiply byAcres
    Hectares
    0.404686Feet
    Metres
    0.30480Miles
    Kilometres
    1.609344Tons
    Tonnes
    0.907185Ounces (troy)/ton
    Grams/Tonne
    34.2857


1 mile = 1.609 kilometres
    2000 pounds (1 short ton) = 0.907 tonnes1 acre = 0.405 hectares
    1 ounce (troy) = 31.103 grams2,204.62 pounds = 1 metric ton = 1 tonne
    1 ounce (troy)/ton = 34.2857 grams/tonne


Terms used and not defined in
this AIF that are defined in National Instrument 51-102 Continuous Disclosure
Obligations shall bear that definition. Other definitions are set out in
National Instrument 14-101 Definitions.

Forward-Looking Statements

This AIF contains forward-looking
statements and forward-looking information (collectively, forward-looking
statements) within the meaning of applicable Canadian and US securities
legislation. These statements relate to future events or the future activities
or performance of the Company. All statements, other than statements of
historical fact, are forward-looking statements. Information concerning mineral
resource estimates also may be deemed to be forward-looking statements in that
it reflects a prediction of the mineralization that would be encountered if a
mineral deposit were developed and mined. Forward-looking statements are
typically identified by words such as: believe, expect, anticipate, intend,
estimate, postulate, plans and similar expressions, or which by their nature
refer to future events. These forward-looking statements include, but are not
limited to, statements concerning:

- the Companys strategies and objectives, both generally and specifically in
  respect of the Carbon Creek property, the Sheini iron ore properties, and the
  Minnesota Iron/Titanium properties;
- the ability of the Company to convert portions of the existing resource at
  the Carbon Creek property into the Measured & Indicated categories;
- the ability of the Company to increase the global resource at the Carbon
  Creek property by including additional coal seams in the resource estimation;

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- 5 -

- the timing of decisions regarding the timing and costs of exploration
  programs with respect to, and the issuance of the necessary permits and
  authorizations required for, the Companys ongoing exploration programs on its
  properties;
- the Companys estimates of the quality and quantity of the resources at its
  mineral properties;
- the timing and cost of the planned future exploration programs at the
  Minnesota Iron/Titanium and Carbon Creek properties, and the timing of the
  receipt of results therefrom;
- the Companys future cash requirements;
- general business and economic conditions;
- the Companys ability to meet its financial obligations as they come due,
  and to be able to raise the necessary funds to continue operations; and
- the Companys ability to negotiate acceptable option/joint venture
  agreements for some or all of its non-core properties.

Although the Company believes
that such statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Inherent in forward-looking statements
are risks and uncertainties beyond the Companys ability to predict or control,
including, but not limited to, risks related to the Companys inability to
identify one or more economic deposits on its properties, variations in the
nature, quality and quantity of any mineral deposits that may be located,
variations in the market price of any mineral products the Company may produce
or plan to produce, the Companys inability to obtain any necessary permits,
consents or authorizations required for its activities, to produce minerals from
its properties successfully or profitably, to continue its projected growth, to
raise the necessary capital or to be fully able to implement its business
strategies, and other risks identified herein under Risk Factors. The Company
cautions investors that any forward-looking statements by the Company are not
guarantees of future performance, and that actual results are likely to differ,
and may differ materially, from those expressed or implied by forward-looking
statements contained in this AIF. Such statements are based on a number of
assumptions which may prove incorrect, including, but not limited to,
assumptions about:

- the level and volatility of the price of commodities, and iron ore, coal,
  vanadium and titanium in particular;
- general business and economic conditions;
- the timing of the receipt of regulatory and governmental approvals, permits
  and authorizations necessary to implement and carry on the Companys planned
  exploration programs, particularly at the Minnesota Iron/Titanium and Carbon
  Creek property;
- conditions in the financial markets generally;
- the Companys ability to secure the necessary consulting, drilling and
  related services and supplies on favourable terms in connection with its
  ongoing and planned exploration programs;
- the Companys ability to attract and retain key staff;
- the accuracy of the Companys resource estimates (including with respect to
  size and grade) and the geological, operational and price assumptions on which
  these are based;
- the timing of the ability to commence and complete the planned work at the
  Carbon Creek property;

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- 6 -

- the anticipated terms of the consents, permits and authorizations necessary
  to carry out the planned exploration programs at the Companys properties and
  the Companys ability to comply with such terms on a safe and cost-effective
  basis;
- the ongoing relations of the Company with its underlying optionors/lessors
  and the applicable regulatory agencies;
- that the metallurgy and recovery characteristics of samples from certain of
  the Companys mineral properties are reflective of the deposit as a whole;
- the Companys ability to negotiate and enter into appropriate off-take
  agreements for the potential products from Carbon Creek; and
- the Companys ability to overcome any potential difficulties in adapting
  pilot scale operations and testing to commercial scale operations.

In addition, in carrying out the
resource estimation with respect to the Carbon Creek project, as described under
Narrative Description of the Business - Material Mineral Projects  Carbon
Creek Metallurgical Coal Deposit, British Columbia, Canada, a number of
assumptions have been made, which are more particularly described in that
section.

These forward-looking statements
are made as of the date hereof and the Company does not intend and does not
assume any obligation to update these forward-looking statements, except as
required by applicable law. For the reasons set forth above, investors should
not attribute undue certainty to or place undue reliance on forward-looking
statements.

Caution Regarding Adjacent or Similar Mineral
Properties

This AIF contains information
with respect to adjacent or similar mineral properties in respect of which the
Company has no interest or rights to explore or mine. The Company advises US
investors that the mining guidelines of the US Securities and Exchange
Commission (the SEC) set forth in the SECs Industry Guide 7 (SEC Industry
Guide 7) strictly prohibit information of this type in documents filed with the
SEC. Because Cardero meets the definition of a foreign private issuer under
applicable SEC rules and is preparing this AIF pursuant to Canadian disclosure
requirements under the Canada-U.S. Multi-Jurisdictional Disclosure System, this
AIF is not subject to the requirements of SEC Industry Guide 7. Readers are
cautioned that the Company has no interest in or right to acquire any interest
in any such properties, and that mineral deposits on adjacent or similar
properties are not indicative of mineral deposits on the Companys
properties.

Caution Regarding Reference to Resources and
Reserves

National Instrument 43-101
Standards of Disclosure of Mineral Projects (NI 43-101) is a rule developed by
the Canadian Securities Administrators which establishes standards for all
public disclosure an issuer makes of scientific and technical information
concerning mineral projects. Unless otherwise indicated, all reserve and
resource estimates contained in or incorporated by reference in this AIF have
been prepared in accordance with NI 43-101 and the guidelines set out in the
Canadian Institute of Mining, Metallurgy and Petroleum (the CIM) Standards on
Mineral Resource and Mineral Reserves, adopted by the CIM Council on November
14, 2004 (the CIM Standards) as they may be amended from time to time by the
CIM.

United States investors are
cautioned that the requirements and terminology of NI 43-101 and the CIM
Standards differ significantly from the requirements and terminology set forth
in SEC Industry Guide 7. Accordingly, the Companys disclosures regarding
mineralization may not be comparable to similar information disclosed by
companies subject to SEC Industry Guide 7. Without limiting the foregoing, while
the terms mineral resources, inferred mineral resources, indicated mineral
resources and measured mineral resources are recognized and required by NI
43-101 and the CIM Standards, they are not recognized by the SEC and are not
permitted to be used in documents filed with the SEC by companies subject to SEC
Industry Guide 7. Mineral resources which are not mineral reserves do not have
demonstrated economic viability, and US investors are cautioned not to assume
that all or any part of a mineral resource will ever be converted into reserves.
Further, inferred resources have a great amount of uncertainty as to their
existence and as to whether they can be mined legally or economically. It cannot
be assumed that all or any part of the inferred resources will ever be upgraded
to a higher resource category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of a feasibility study or
prefeasibility study, except in rare cases. The SEC normally only permits
issuers to report mineralization that does not constitute SEC Industry Guide 7
compliant reserves as in-place tonnage and grade without reference to unit
amounts. The term contained ounces is not permitted under the rules of SEC
Industry Guide 7. In addition, the NI 43-101 and CIM Standards definition of a
reserve differs from the definition in SEC Industry Guide 7. In SEC Industry
Guide 7, a mineral reserve is defined as a part of a mineral deposit which could
be economically and legally extracted or produced at the time the mineral
reserve determination is made. The SEC has taken the position that mineral
reserves for a mineral property may not be designated unless: (i) competent
professional engineers conduct a detailed engineering and economic study, and
the bankable or final feasibility study demonstrates that a mineral deposit
can be mined profitably at a commercial rate; (ii) a historic three-year average
commodity price is used in any reserve or cash flow analysis used to designate
reserves; and (iii) the company has demonstrated that the mineral property will
receive its governmental permits, and the primary environmental document has
been filed with the appropriate governmental authorities. See Glossary of
Terms.

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- 7 -

Caution Regarding Historical Results

Historical results of operations
and trends that may be inferred from the discussion and analysis in this AIF may
not necessarily indicate future results from operations. In particular, the
current state of the global securities markets may cause significant reductions
in the price of the Companys securities and render it difficult or impossible
for the Company to raise the funds necessary to continue operations. See Risk
Factors  Share Price Volatility.

Glossary of Terms

The following is a glossary of
certain mining and other terms used in this AIF:

|aeolian    | Caused or carried by the wind                                                                                                                                                                                                 
|------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             |                                                                                                                                                                                                                               
|Ag         | Silver                                                                                                                                                                                                                        
|             |                                                                                                                                                                                                                               
|alteration | Changes in the chemical or mineralogical composition of a
      rock, generally produced by weathering or hydrothermal solutions                                                                                              
|             |                                                                                                                                                                                                                               
|anomalous  | Departing from the expected or normal                                                                                                                                                                                         
|             |                                                                                                                                                                                                                               
|anomaly    | A geological feature, especially in the subsurface,
      distinguished by geological, geophysical or geochemical means, which is
      different from the general surroundings and is often of potential economic
      value
|             |                                                                                                                                                                                                                               
|As         | Arsenic                                                                                                                                                                                                                       
|             |                                                                                                                                                                                                                               
|Au         | Gold                                                                                                                                                                                                                          
|             |                                                                                                                                                                                                                               
|breccia    | Angular broken rock fragments held together by a mineral
      cement or a fine- grained matrix                                                                                                                               

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- 8 -

|Cardero Argentina      | Cardero Argentina, S.A., a wholly owned Argentinean
      subsidiary of Cardero                                                                                                                                                                                                                                                                                                                     
|------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Chile          | Compania Minera Cardero Chile Limitada, a wholly owned
      Chilean subsidiary of Cardero                                                                                                                                                                                                                                                                                                          
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Coal           | Cardero Coal Ltd., a wholly owned British Columbia
      subsidiary of Cardero                                                                                                                                                                                                                                                                                                                      
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Ghana          | Cardero Ghana Ltd., a wholly owned Ghana subisidary of
      Cardero Iron Ghana BVI                                                                                                                                                                                                                                                                                                                 
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Hierro BVI     | Cardero Hierro Peru (BVI) Ltd., a wholly owned British
      Virgin Islands subsidiary of Cardero Iron BVI                                                                                                                                                                                                                                                                                          
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Hierro Peru    | Cardero Hierro del Peru, S.A.C., a wholly owned Peruvian
      subsidiary of Cardero Hierro BVI                                                                                                                                                                                                                                                                                                     
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Iron           | Cardero Iron Ore Company Ltd., a wholly owned British
      Columbia subsidiary of Cardero                                                                                                                                                                                                                                                                                                          
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Iron BVI       | Cardero Iron Ore Company (BVI) Ltd., a wholly owned
      British Virgin Islands subsidiary of Cardero Iron                                                                                                                                                                                                                                                                                         
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Iron Ghana     | Cardero Iron Ore Ghana (BVI) Ltd., a wholly owned British
      Virgin Islands subsidiary of Cardero Iron BVI                                                                                                                                                                                                                                                                                       
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Iron USA       | Cardero Iron Ore (USA) Inc., a wholly owned Delaware
      subsidiary of Cardero Iron                                                                                                                                                                                                                                                                                                               
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Management USA | Cardero Iron Ore Management (USA) Inc., a wholly owned
      Delaware subsidiary of Cardero Iron                                                                                                                                                                                                                                                                                                    
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Cardero Peru           | Cardero Peru, S.A.C., a wholly owned Peruvian subsidiary
      of Cardero                                                                                                                                                                                                                                                                                                                           
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|cateo                  | A cateo is an exploration concession, granted under
      Argentine mining law, which does not permit mining but gives the owner a
      preferential right to apply for a mining concession (mina) for the some or
      all of the area of the cateo following a discovery. Cateos are measured in
      500 hectare unit areas, and a single cateo cannot exceed 20 units (10,000
      hectares)
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|CCDL                   | Cerro Colorado Development Ltd., a wholly owned British
      Columbia subsidiary of Cardero                                                                                                                                                                                                                                                                                                        
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|clastic                | Pertaining to a rock or sediment composed principally of
      fragments derived from pre-existing rocks or minerals and transported some
      distance from their places of origin; also said of the texture of such a
      rock                                                                                                                                                                 
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|cm                     | Centimetres                                                                                                                                                                                                                                                                                                                                                                                         
|                         |                                                                                                                                                                                                                                                                                                                                                                                                     
|Co                     | Cobalt                                                                                                                                                                                                                                                                                                                                                                                              

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- 9 -

|Common Shares    | The common shares without par value in the capital stock
      of Cardero as the same are constituted on the date hereof                                                                                                                                                                                                                                                                                                                                  
|------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|conglomerate     | A coarse grained clastic sedimentary rock, composed of
      rounded to sub-angular fragments larger than 2mm in diameter set in a
      fine-grained matrix of sand or silt, and commonly cemented by calcium
      carbonate, iron oxide, silica or hardened clay                                                                                                                                                                                       
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cu               | Copper                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|deposit          | A mineralized body which has been physically delineated
      by sufficient drilling, trenching, and/or underground work, and found to
      contain a sufficient average grade of metal or metals to warrant further
      exploration and/or development expenditures. Such a deposit does not
      qualify as a commercially mineable ore body or as containing reserves or
      ore, unless final legal, technical and economic factors are resolved
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|diamond drill    | A type of rotary drill in which the cutting is done by
      abrasion rather than percussion. The cutting bit is set with diamonds and
      is attached to the end of the long hollow rods through which water is
      pumped to the cutting face. The drill cuts a core of rock which is
      recovered in long cylindrical sections, an inch or more in diameter                                                                                     
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|dike             | A tabular body of igneous rock that cuts across the
      structure of adjacent rocks or cuts massive rocks (cf: Sill)                                                                                                                                                                                                                                                                                                                                  
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|dip              | The angle that a stratum or any planar feature makes with
      the horizontal, measured perpendicular to the strike and in the vertical
      plane                                                                                                                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|direct reduction | In a direct reduction process, lump iron oxide pellets
      and/or lump iron ore are reduced (oxygen removed) by a reducing gas,
      producing direct reduced iron (DRI). If the cooling stage is omitted, the
      DRI can be immediately briquetted into hot briquetted iron (HBI)                                                                                                                                                                  
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Director         | A member of the Board of Directors of Cardero                                                                                                                                                                                                                                                                                                                                                                                                             
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|disseminated     | Fine particles of mineral dispersed throughout the
      enclosing rock                                                                                                                                                                                                                                                                                                                                                                                   
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|distal           | Said of an ore deposit formed at a considerable distance
      (e.g. tens of kilometres) from the volcanic source from which its
      constituents have been derived                                                                                                                                                                                                                                                                                     
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|DRI              | Direct reduced iron is a virgin iron source that is
      relatively uniform in composition, and virtually free from tramp or
      deleterious elements. It is used increasingly in electric furnace
      steelmaking to dilute the contaminants present in the scrap used in these
      processes. It has an associated energy value in the form of combined
      carbon, which has a tendency to increase furnace efficiency                        
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|dune             | A mound, ridge or hill of wind-blown sand, either bare or
      covered with vegetation                                                                                                                                                                                                                                                                                                                                                                   

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- 10 -

|epithermal        | Said of a hydrothermal mineral deposit formed within
      about 1 kilometre of the earths surface and in the temperature range of
      50-200° C, occurring mainly as veins
|------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                               
|executive officer | When used in relation to any issuer (including Cardero)
      means an individual who is:                                                                                     

| | (a) | a chair, vice chair or president;                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                              
| | (b) | a vice-president in charge of a principal business unit,
      division or function, including sales, finance or production; 
| |     |                                                                                                                              
| | (c) | an officer of the issuer or any of its subsidiaries that
      performs a policy-making function in respect of the issuer; or
| |     |                                                                                                                              
| | (d) | performing a policy-making function in respect of the
      issuer                                                           

|exsolved    | Said of a substance that has undergone exsolution,
      being the process of the separation of an initially homogenous solution
      into at least two different crystalline minerals without the addition or
      removal of any materials  usually occurs upon cooling
|------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                                                                                                               
|Fe          | Iron                                                                                                                                                                                                                                                                          
|              |                                                                                                                                                                                                                                                                               
|felsic      | An igneous rock having abundant light coloured minerals,
      also, applied to those minerals (quartz, feldspars, feldspathoids,
      muscovite) as a group                                                                                                                 
|              |                                                                                                                                                                                                                                                                               
|footwall    | The mass of rock beneath a fault, orebody or mine
      working; especially the wall rock beneath an inclined vein or fault                                                                                                                                                   
|              |                                                                                                                                                                                                                                                                               
|gangue      | The valueless rock or mineral aggregates in an ore; that
      part of the ore that is not economically desirable but cannot be avoided
      in mining. It is separated from the ore minerals during concentration                                                           
|              |                                                                                                                                                                                                                                                                               
|gneiss      | A foliated rock formed by regional metamorphism, in which
      bands or lenticles of granular minerals alternate with bands or lenticles
      of minerals with flaky or elongate prismatic habit. Mineral composition is
      not an essential factor in its definition    
|              |                                                                                                                                                                                                                                                                               
|g/t         | Grams per metric tonne                                                                                                                                                                                                                                                        
|              |                                                                                                                                                                                                                                                                               
|grab sample | A sample composed of one or more pieces of rock,
      collected from a mineralized zone that, when analyzed, do not represent a
      particular width of mineralization nor necessarily the true mineral
      concentration of any larger portion of a mineralized zone    
|              |                                                                                                                                                                                                                                                                               
|grade       | To contain a particular quantity of ore or mineral,
      relative to other constituents, in a specified quantity of rock                                                                                                                                                     
|              |                                                                                                                                                                                                                                                                               
|hematite    | A common iron mineral found in igneous, sedimentary and
      metamorphic rocks  a principal ore of iron                                                                                                                                                                     

---

- 11 -

|hydrothermal        | A term pertaining to hot aqueous solutions of magmatic
      origin which may transport metals and minerals in solution                                                                                                                                                                                                                                                                                                      
|--------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|hypabyssal          | A general adjective applied to minor intrusions such as
      sills and dikes, and to the rocks that compose them, which have
      crystallized under conditions intermediate between plutonic and extrusive                                                                                                                                                                                                                
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|ilmenite            | An iron black opaque rhombohedral mineral (FeTiO3)  the principal ore of titanium                                                                                                                                                                                                                                                                                                                                           
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|intrusion           | The process of the emplacement of magma in pre-existing
      rock, magmatic activity. Also, the igneous rock mass so formed                                                                                                                                                                                                                                                                                                 
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|intrusive           | Of or pertaining to intrusion, both the process and the
      rock so formed                                                                                                                                                                                                                                                                                                                                                 
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|IOCG                | iron oxide copper-gold                                                                                                                                                                                                                                                                                                                                                                                                       
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|Iron Sands Project  | The Pampa el Toro iron sands project in Peru                                                                                                                                                                                                                                                                                                                                                                                 
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|km                  | Kilometres                                                                                                                                                                                                                                                                                                                                                                                                                   
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|lens                | A body of ore or rock that is thick in the middle and
      thin at the edges, like a doubly convex lens (adj: lenticular)                                                                                                                                                                                                                                                                                                 
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|m                   | Metres                                                                                                                                                                                                                                                                                                                                                                                                                       
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|mm                  | Millimetres                                                                                                                                                                                                                                                                                                                                                                                                                  
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|mafic               | Said of an igneous rock composed chiefly of dark,
      ferromagnesian minerals, also, said of those minerals                                                                                                                                                                                                                                                                                                                
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|magmatic            | Of, or pertaining to, or derived from, magma                                                                                                                                                                                                                                                                                                                                                                                 
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|magnetic separation | A process in which a magnetically susceptible mineral is
      separated from gangue minerals by applying a strong magnetic field; ores
      of iron are commonly treated in this way. It can be either dry(the
      matter to undergo separation does not have any added fluids, such as
      water) or wet (the matter to undergo separation has a fluid, such as
      water, added prior to undergoing separation)
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|magnetite           | A black, isometric, strongly magnetic, opaque mineral of
      the spinel group which constitutes an important ore of iron and is a very
      common and widely distributed accessory mineral in rock of all kinds                                                                                                                                                                                                          
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|massive             | Said of a mineral deposit, especially of sulphides,
      characterized by a great concentration of ore in one place, as opposed to
      a disseminated or veinlike deposit                                                                                                                                                                                                                                                 
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                              
|metallogeny         | The study of the genesis of mineral deposits, with
      emphasis on their relationship in space and time to regional petrographic
      and tectonic features of the earths crust                                                                                                                                                                                                                                          

---

- 12 -

|metasomatism     | The process of practically simultaneous capillary
      solution and deposition by which a new mineral may grow in the body of an
      old mineral or mineral aggregate (syn: replacement)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|migmatites       | A rock composed of igneous or of igneous appearing and/or
      metamorphic materials, which are generally distinguishable megascopically                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mina             | A mina is a mining concession, granted under Argentine
      mining law, which permits mining within the area of the concession on a
      commercial basis. The area of a mina is measured in pertenencias. A mina
      may be applied for following a formal declaration of a discovery within
      the area of the mina. Each mina may consist of two or more pertenencias.
      Common pertenencias are six hectares and disseminated pertenencias are
      100 hectares (relating to disseminated deposits of metals rather than
      discrete veins). The applicable mining authority may determine the number
      of pertenencias required to cover the geologic extent of the mineral
      deposit in question. Once granted, minas have an indefinite term assuming
      exploration development or mining is in progress                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineral reserve  | 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 and processed                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineral resource | 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. The term mineral resource covers mineralization and natural
      material of intrinsic economic interest which has been identified and
      estimated through exploration and sampling and within which mineral
      reserves may subsequently be defined by the consideration and application
      of technical, economic, legal, environmental, socio-economic and
      governmental factors. The phrase reasonable prospects for economic
      extraction implies a judgement by a qualified person (as that term is
      defined in NI 43-101) in respect of the technical and economic factors
      likely to influence the prospect of economic extraction. A mineral
      resource is an inventory of mineralization that, under realistically
      assumed and justifiable technical and economic conditions, might become
      economically extractable
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineralization   | The concentration of metals and their chemical compounds
      within a body of rock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|MMC              | Minerales Y Metales California, S.A. de C.V., a wholly
      owned Mexican subsidiary of Cardero                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

---

- 13 -

|National Instrument
      43-101/ NI 43-101 | National Instrument 43-101 of the Canadian Securities
      Administrators entitled Standards of Disclosure for Mineral Projects                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NSR                                           | Net smelter return                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|NYSE-A                                        | NYSE - Amex LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|open pit                                      | A surface mine, open to daylight, such as a quarry. Also
      referred to as open-cut or open-cast mine                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|pelite                                        | A mudstone or lutite                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|pelitic                                       | Pertaining to or derived from pelite; esp. said of a
      sedimentary rock composed of a clay or a metamorphic rock derived from a
      pelite                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|pig iron                                      | Semi-finished metal produced from iron ore in blast
      furnace, containing 92 percent iron, high amounts of carbon (typically up
      to 3.5 percent), and balance largely manganese and silicone plus small
      amounts of phosphorus, sulphur, and other impurities. Pig iron is further
      refined in a furnace for conversion into steel. The term was derived from
      the 19thcentury method of casting the bars of the pig iron in
      depressions or moulds formed in the sand floor adjacent to the furnace.
      These were connected to a runner (known as a sow) and when filled with
      metal the runner and the numerous smaller moulds were supposed to resemble
      a litter of suckling pigs, hence the term pig iron
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|porphyry                                      | An igneous rock of any composition that contains
      conspicuous phenocrysts (relatively large crystals) in a fine-grained
      groundmass                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|PPB or ppb                                  | Parts per billion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|PPM or ppm                                   | Parts per million                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|pseudomorph                                   | A mineral whose outward crystal form is that of another
      mineral; it is described as being after the mineral whose outward form
      it has. Adj: pseudomorphous                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|SHV                                           | Sediment Hosted Vein, a reference to a family of gold
      deposits that consist of gold in quartz veins hosted by shale and
      siltstone sedimentary rocks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|sill                                          | A tabular igneous intrusion that parallels the planar
      structure of the surrounding rock (cf: dike)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|slag                                          | A product of smelting, containing, mostly as silicates,
      the substances not sought to be produced as matte or metal, and having a
      lower specific gravity than the latter; - called also, esp. in iron
      smelting, cinder. The slag of iron blast furnaces is essentially silicate
      of calcium, magnesium, and aluminum; that of lead and copper smelting
      furnaces contains iron                                                                                                                                                                                                                                                                                                                                                
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|strike                                        | The direction taken by a structural surface                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---

- 14 -

|sulfide  | A mineral compound characterized by the linkage of
      sulphur with a metal, such as galena (lead sulphide) or pyrite (iron
      sulphide)
|---------- | ---------------------------------------------------------------------------------------------------------------------------------------------
|           |                                                                                                                                              
|TiO2     | Titanium dioxide, also known as titanium oxide or
      titania, a naturally occurring oxide of titanium                                 
|           |                                                                                                                                              
|tailings | The material that remains after all metals considered
      economic have been removed from ore during milling                               
|           |                                                                                                                                              
|TSE      | Toronto Stock Exchange                                                                                                                       
|           |                                                                                                                                              
|V2O5     | Vanadium pentoxide, an important compound of vanadium,
      used primarily for the production of sulphuric acid and ferrovanadium           

---

- 15 -

**ITEM
3:**               **CORPORATE
STRUCTURE**

Name, Address and Incorporation

Cardero Resource Corp.
(Cardero) was incorporated under the Company Act(British Columbia) on
December 31, 1985 under the name Halley Resources Ltd.. The name was
subsequently changed to Rugby Resources Limited on September 6, 1991, to
Euro-Ad Systems Inc. on April 30, 1993, to Sun Devil Gold Corp. on July 3,
1997, and to Cardero Resource Corp. on May 18, 1999. Cardero was transitioned
under the Business Corporations Act(British Columbia) (BCBCA) on
January 13, 2005, and is now governed by that statute. On April 22, 2005,
Cardero filed a new Notice of Articles, reflecting the adoption by the
shareholders, on April 15, 2005, of a new form of Articles to govern the affairs
of the Company in substitution for the original articles adopted under the old
Company Act(B.C.) and reflecting the increased flexibility available to
companies under the BCBCA. A copy of the new Articles is available on SEDAR at
www.sedar.com.

The head office and principal
business address of Cardero is located at Suite 2300  1177 West Hastings
Street, Vancouver, British Columbia, Canada V6E 2K3, and its registered and
records office is located at 550 Burrard Street, Suite 2300, P.O. Box 30,
Bentall 5, Vancouver, British Columbia, Canada V6C 2B5.

Intercorporate Relationships

The following corporate chart
sets forth all of Carderos subsidiaries and their respective jurisdictions of
incorporation. Each of these subsidiaries is wholly owned, directly or
indirectly, by Cardero:



Throughout this document
references made to the Company refer to Cardero and its consolidated
subsidiaries, Cardero Coal, Cardero Iron, Cardero Argentina, Cardero Peru,
Cardero Chile, CCDL, MMC, Cardero Iron USA, Cardero Management USA, Cardero Iron
BVI, Cardero Hierro BVI, Cardero Hierro Peru, Cardero Iron Ghana and Cardero
Ghana, while reference to Cardero refer to the Canadian parent company
only.

---

- 16 -

**ITEM
4:**               **GENERAL
DEVELOPMENT OF THE BUSINESS**

Three Year History

The Company is a mineral
exploration company engaged in the acquisition, exploration and development of
mineral properties. The Company currently holds or has the right to acquire
interests in a number of mineral properties in Argentina, Mexico, Peru, the
United States of America, Ghana and Canada. The Company is in the exploration
stage as its properties have not yet reached commercial production and none of
its properties is beyond the preliminary exploration stage. All work presently
planned by the Company is directed at defining mineralization and increasing
understanding of the characteristics of, and economics of, that mineralization.
There are currently no identified mineral reserves and, other than on the
Carbon Creek property and the Longnose and Titac properties, there are currently
no identified mineral resources, on any of the Companys mineral
properties.

Over the past three financial
years, the Company has focused on the acquisition and exploration of mineral
properties primarily in Argentina, Mexico, Peru, the United States and, more
recently, Ghana and Canada. During the 2009, 2010 and 2011 financial years, the
Company entered into a number of option agreements to acquire properties in
these countries that it believes have the potential to host large gold, silver,
copper-gold, iron ore/titanium/vanadium and/or coal deposits. Some of these,
such as the Huachi, Cerro Juncal, Cerro Atajo, La Poma and Mina Azules
properties in Argentina, the La Zorra and Ludivina properties in Mexico, the
Amable Maria and Bocana properties in Peru, the Pedernales property in Chile and
the properties acquired as part of its SHV Project in Argentina, have since been
returned to the respective vendors or abandoned, and the associated costs
written off, in light of disappointing exploration results. In this regard,
during the 2010 fiscal year, the Company wrote off $8,498,083 in acquisition and
exploration costs due to disappointing exploration results; during the 2011
fiscal year the Company wrote off $12,206,614 in acquisition and exploration
costs. However, the Company has retained the most strategic concessions and
continues to look for a joint venture partner to carry out additional
exploration. The Organullo property in Argentina was the subject of an extensive
work program in the fall of 2010, and in September 2011, the Company entered
into an option/joint venture agreement with Artha Resources Corporation
(Artha), whereby an Argentinean subsidiary of Artha can earn a 55% working
interest in the Organullo property, and thereafter form a joint venture with
Cardero Argentina S.A. The Company continued active discussions towards a joint
venture or outright sale of the Iron Sands Project with a number of companies
which continued to express an interest in this project. The Titac and Longnose
properties in Minnesota were the subject of an initial drill program in 2010 and
the Company completed follow-up work programs in 2011. Final drill results were
received on these properties (see Narrative Description of the Business -
Material Mineral Projects - Longnose Titanium Project, Minnesota, USA and
Titac Titanium Project, Minnesota, USA).

During fiscal 2010, the Company
optioned out its Corrales and Santa Teresa properties in Mexico and its
Pirquitas property in Argentina, and will continue to seek joint venture
partners for its Los Manantiales (Mina Angela) property in Argentina.

Pursuant to a Memorandum of
Understanding dated August 8, 2008 (but effective as and from April 25, 2008)
between the Company and International Minerals and Mines Ltd., a private
Gibraltar company (IMM), the Company had the right to acquire up to a 30%
interest in IMM Gold Limited (IMMG), a subsidiary of IMM which is engaged in
reconnaissance exploration programs in the Caucasian Region. The Company is the
manager of the exploration programs on behalf of IMMG. A director of Cardero is
a director and significant shareholder of a private company which is the major
shareholder (67%) of IMM. The Company acquired an initial 15% interest in IMMG
by issuing to IMM an initial 500,000 Common Shares in November 2008, at which
time the Company received 123,530 ordinary shares of IMMG, representing a 15%
interest. While prospective areas were identified, no properties had been
acquired by IMMG. Accordingly the Company determined not to acquire the additional 15% interest in IMMG before December 31, 2009.
However, the Company has continued to work with IMMG in reviewing potential
acquisitions.

---

- 17 -

Having identified iron ore as a
commodity for which there was a significant demand, the Company has, on an
ongoing basis, continued to evaluate a number of prospective iron ore
properties, some of which have been acquired. The Pampa de Pongo Iron property
(which sold for USD 100 million in January, 2010) and the Iron Sands Project,
both in Peru, are examples of this. The Company has also focused on iron ore
properties that contain significant titanium and vanadium, both of which are
important industrial metals, and is pursuing ongoing metallurgical testwork to
determine the optimum way to separate out the titanium and/or vanadium from the
slag produced by treating the iron ore in a melter to produce titanium/vanadium
rich slag.

The primary focus of the
Companys activities in fiscal 2008 and 2009 was the completion of a preliminary
economic assessment at the Iron Sands Project in Peru, as well as ongoing
metallurgical work relevant to the production of iron ore and pig iron from
Pampa de Pongo material. Due to the significant costs associated with moving the
project forward to commercial production, management determined that the sale of
the Pampa de Pongo project was appropriate and, to this end, on October 24,
2008, the Company entered into an agreement with Nanjinzhao Group Co., Ltd.,
(Nanjinzhao), a private Chinese enterprise located in Zibo City, Shandong
Province, Peoples Republic of China, for the sale of the property. The sale was
ultimately completed in January, 2010 and the total sale price of USD 100
million was received by the Company. The Company paid a finders fee to an arms
length private company in consideration of the finder introducing Cardero to
Nanjinzhao and providing ongoing advice in the negotiations.

During fiscal 2008 and fiscal
2009, the Company also carried out a pilot plant separation test at the Iron
Sands Project, with a view to producing an iron concentrate and carrying out
metallurgical testing of such concentrate, allowing for the Company to optimize
the separation parameters and determine potential production parameters. The
Company successfully produced a 40 tonne magnetic concentrate, significantly
increased the pilot plant through-put (from 2.8 to 18 tonnes/hour) and increased
the anticipated magnetic concentrate grade (to 55.5% iron). The concentrate was
shipped to the United States, where extensive commercial scale melting tests,
targeting the production of a premium-quality pig iron were carried out. In
addition, bench scale testing of the concentrate indicates that a simple
screening process resulted in an upgrade to 62.8% iron, and additional work is
underway, targeting an increase to 64% iron through additional screening and
other mineral separation techniques. The Company commissioned SRK Consulting
(Johannesburg) to prepare a resource estimate for the Iron Sands Project
utilizing the information from the 120 existing resource definition drillholes,
and the resource estimate was delivered on, and effective as at, July 21,
2009.

In keeping with bulk-commodity
focus, in June, 2010, Cardero acquired an initial interest of 49.9% in
Coalhunter Mining Corporation (Coalhunter). Pursuant to private placements
completed on September 27, 2010 and December 21, 2010, Carderos interest in
Coalhunter increased to 45.5% . On June 1, 2011, Cardero acquired all of the
issued and outstanding common shares of Coalhunter and Coalhunter subsequently
changed its name to Cardero Coal Ltd. (see Significant Acquisitions). Upon
completion of the acquisition, Michael Hunter was appointed President of Cardero
and, subsequent to fiscal 2011, also assumed the position of Chief Executive
Officer with Hendrik Van Alphen stepping down as CEO and assuming the position
of Managing Director.

During fiscal 2011, Cardero
acquired an aggregate of 8,634,007 common shares, representing 16.32%, of Abzu
Gold Ltd. ("Abzu"), together with warrants to purchase an additional 3,782,000
common shares of Abzu. Abzu operates as a gold exploration and discovery company
in Ghana, West Africa.

Cardero also completed an
additional $1,175,000 investment in Kria Resources Ltd. ("Kria") through the
exercise of warrants acquired by way of private placement. The investment
resulted in Cardero holding an aggregate of 20,875,000 common shares of
Kria, representing approximately 19.97% of the issued and outstanding common
shares of Kria.

---

- 18 -

The Company optioned its
Organullo Gold Project, Northwest Argentina, to Artha Resources Corporation
("Artha"), whereby Artha can earn an undivided fifty-five (55%) percent working
interest in the Organullo Project, and thereafter form a Joint Venture with
Cardero Argentina. Joint venturing of the Organullo Project is part of Cardero's
strategy to option-out all non-core assets, allowing the Company to focus on
development of its coal and iron ore projects.

The 2011 field program was
completed at the Carbon Creek Metallurgical Coal deposit ("Carbon Creek")
located in the Peace River Coal Field of northeastern British Columbia.
Additionally, the Company received a Preliminary Economic Assessment (see
Narrative Description of the Business -Material Mineral Projects  Carbon Creek
Metallurgical Coal Deposit, British Columbia, Canada).

Subsequent to fiscal 2011,
Cardero entered into a Letter of Intent ("LOI") with Anglo Pacific Group PLC
("Anglo Pacific") to acquire 100% of Trefi Coal Corporation ("Trefi"), a wholly
owned subsidiary of Anglo Pacific which owns the Trefi Metallurgical Coal
deposit in the Peace River Coalfield, northeast British Columbia, Canada. The
Trefi Metallurgical Coal deposit comprises 15 coal licenses and 3 license
application areas, totaling 9,437 hectares, located approximately 30 kilometres
southeast of the town of Chetwynd in northeastern BC. The deposit has been
explored previously by Gulf Canada (27 drillholes for 6,332 metres) and by Anglo
Pacific (5 drillholes for 1,006 metres). The deposit is located within 60
kilometres of the Company's flagship metallurgical coal deposit at Carbon
Creek.

Cardero closed its non-brokered
private placement (the "Offering") announced on November 2, 2011 and increased
on November 7, 2011. A total of 8,029,750 units ("Cardero Units") was sold at a
price of CAD 0.95 per Cardero Unit for aggregate gross proceeds of CAD
7,628,262.50. Each Cardero Unit consisted of one Common Share and one-half of
one common share purchase warrant (each whole warrant, a "Cardero Warrant").
Each Cardero Warrant is exercisable into one additional Common Share for a
period of 12 months from the closing of the Offering at an exercise price of CAD
1.25. If, at any time from 4 months after the closing of the Offering until the
expiry of the Cardero Warrants, the daily volume-weighted average trading price
of the Common Shares on the TSX exceeds CAD 1.75 for at least 10 consecutive
trading days, the Company may, within 30 days, give an expiry acceleration
notice to the holders of Cardero Warrants and, if it does so, the Cardero
Warrants will, unless exercised, expire on the 30thday after the
expiry acceleration notice is given.

Cardero received repayment of the
USD 8 million loan originally made to Kria Resources Inc. ("Kria") (now a wholly
owned subsidiary of Trevali Mining Corporation ("Trevali")). The Company, Kria
and Trevali agreed that the loan, plus interest of USD 645,260, was to be repaid
as follows: (i) Kria has paid Cardero USD 5,000,000 in cash; and (ii) the
balance of USD 3,645,260 (equivalent to CAD 3,734,569) has been satisfied by
Trevali issuing to Cardero 4,149,521 units ("Trevali Units"), with each Trevali
Unit being comprised of one common share of Trevali ("Trevali Common Share") and
one-half of one transferrable common share purchase warrant (a "Trevali
Warrant"), at a deemed price of CAD 0.90 per Trevali Unit. Each whole Trevali
Warrant will entitle the holder thereof to purchase one Trevali Common Share
("Trevali Warrant Share") at a price of CAD 1.10 per share until January 16,
2014. The Trevali Common Shares, Trevali Warrants and any Trevali Warrant Shares
issued are subject to a hold period in Canada expiring on May 17, 2012.

Carderos Ghanaian joint venture
partner, Emmaland Resources Limited ("Emmaland"), received from the Government
of the Republic of Ghana, through The Minister for Lands and Natural Resources
(Ghana) ("Minister"), three prospecting licenses covering lands located in the
Zabzugu-Tatale District in the Northern Region of the Republic of Ghana and
referred to as the Sheini Hills Iron Project (approximately 400 square
kilometres in aggregate). Cardero Ghana has signed joint venture agreements with
Emmaland pursuant to which Cardero Ghana can acquire a 100% joint venture
interest in each of the three licenses. Exploration has been initiated over Sheini
Hills Iron Deposits, Ghana (see Narrative Description of the Business -
Material Mineral Projects  Sheini Hills Iron Project, Ghana).

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Significant Acquisitions

Since November 1, 2010, being the
commencement of the Companys last completed fiscal year, Cardero completed the
acquisition of Coalhunter by acquiring all of the issued and outstanding shares
of Coalhunter that it did not own, as set out in the Form 51-102F4 filed by the
Company. Immediately prior to the acquisition, Cardero held 17,808,143 common
shares of Coalhunter (representing approximately 47.48% of Coalhunters issued
and outstanding shares).

Pursuant to an Arrangement
Agreement dated April 18, 2011 between Cardero and Coalhunter, on June 1, 2011
each Coalhunter shareholder (other than Cardero) received 0.8 of a common share
of Cardero for each common share of Coalhunter held, resulting in the issuance
of 23,397,002 Common Shares. A further 5,885,543 Common Shares are reserved upon
the exercise of options held by former Coalhunter optionees, the exercise of
Coalhunter warrants and pursuant to Coalhunter property acquisition
agreements.

Coalhunter is a private British
Columbia company that has entered into various agreements to explore and, if
warranted, develop, certain coal deposits in the Peace River Coal Field located
in the northeast region of British Columbia. The property consists of a lease of
freehold coal and certain coal licenses issued, or to be issued, by the British
Columbia government. Coalhunter will hold a 75% interest in the joint venture
and its co-venturer will hold a 25% carried interest. Coalhunter will be
required to fund all exploration, development and mining costs, and the
co-venturer will receive 25% of the net proceeds (after recovery by Coalhunter
of its capital expenditures and ongoing operating costs). See Narrative
Description of the Business - Material Mineral Projects  Carbon Creek
Metallurgical Coal Deposit, British Columbia, Canada.

Coalhunter changed its name to Cardero Coal Ltd. on September
14, 2011.

**ITEM
5:**               **NARRATIVE DESCRIPTION OF THE BUSINESS**

**General**

***Summary***

The Company currently holds, or
has rights to acquire, interests (ranging from 75% to 100%) in several mineral
properties (subject, in certain cases, to net smelter return royalties payable
to the original property vendors) in Argentina, Mexico, Peru, the United States,
Ghana and Canada. The Company is in the process of evaluating such properties
through exploration programs or, in some cases, mineralogical and metallurgical
studies and materials processing tests. In all cases, the objective is to
evaluate the potential of the subject property and to determine if spending
additional funds is warranted (in which case, an appropriate program to advance
the property to the next decision point will be formulated and, depending upon
available funds, implemented) or not (in which case the property may be offered
for option/joint venture or returned to the vendor or abandoned, as applicable).
At the present time, the Company is primarily interested in properties that are
prospective for precious metals, copper, iron ore, titanium, vanadium and
coal.

With the completion of the sale
of the Pampa de Pongo Iron Project in January, 2010, the Company considers that
the Carbon Creek property in British Columbia, Canada, the Longnose and Titac
Iron Titanium properties in Minnesota, USA and the Sheini Hills property in
Ghana, Africa, are its material mineral properties at the present time. However,
ongoing work on other properties may produce results that would cause the
Company to consider them as material mineral properties in the future.
Information with respect to the Companys material mineral properties is set out
in the Material Mineral Projects section of this AIF.

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- 20 -

The Company is in the exploration
stage and does not mine, produce or sell any mineral products at this time, nor
do any of its current properties have any known or identified mineral resources
(with the exception of the Carbon Creek property and the Longnose and Titac
properties), or mineral reserves. The Company does not propose any method of
production at this time, although it is conducting extensive work on the Carbon
Creek property in order to ascertain the appropriate production methods to
employ should the property go into commercial production.

All aspects of the Companys
business require specialized skills and knowledge. Such skills and knowledge
include the areas of geology, drilling, logistical planning, geophysics,
metallurgy and mineral processing, implementation of exploration programs and
accounting. While recent increased activity in the resource mining industry has
made it more difficult to locate competent employees and consultants in such
fields, the Company has found that it can locate and retain such employees and
consultants and believes it will continue to be able to do so.

All of the raw materials the
Company requires to carry on its business are readily available through normal
supply or business contracting channels in Canada, Ghana, Argentina, Mexico,
Peru and the United States. The Company has secured, or reasonably believes that
it will be able to secure, personnel to conduct its contemplated programs.

The mining business is subject to
mineral price cycles. The marketability of minerals and mineral concentrates is
also affected by worldwide economic cycles. In recent years, the significant
demand for minerals in some countries (notably China and India) has driven
increased commodity prices to historic highs. While the downturn in the world
economy in 2008 and 2009 significantly moderated the record high prices, and
temporarily reduced the upward price pressures, for many commodities (including
several that the Company is in the business of exploring for), the upward price
movements have recently become re-established, primarily as a result of Chinese
demand for commodities such as copper, coal and iron ore. It is difficult to
assess if the apparent upward momentum in several commodity prices are long-term
trends, and there is great uncertainty as to the recovery, or otherwise, of the
world, and particularly, the Chinese, economy. If the economic recovery stalls
and commodity prices decline as a consequence, a continuing period of lower
prices could significantly affect the economic potential of many of the
Companys current properties and result in the Company determining to cease work
on, or drop its interest in, some or all of such properties. The one exception
to this is gold. Fear of potential inflation as a consequence of the stimulus
packages implemented by many countries (notably the United States) and the
potential negative influence on the US dollar (among other currencies), have led
to significant increases in the price of gold to record highs.

The Companys business is not
substantially dependent on any contract such as a contract to sell the major
part of its products or services or to purchase the major part of its
requirements for goods, services or raw materials, or on any franchise or
licence or other agreement to use a patent, formula, trade secret, process or
trade name upon which its business depends.

It is not expected that the
Companys business will be affected in the current financial year by the
renegotiation or termination of contracts or sub-contracts.

As of October 31, 2011, Cardero
had 16 full-time employees, Cardero Coal had 14 full-time employees and Cardero
Management USA had three full-time employees. The Company relies to a large
degree upon consultants and contractors to carry on many of its activities and,
in particular, to supervise and carry out the work programs on its mineral
properties. However, should the Company expand its activities, it is likely that
it will choose to hire additional employees.

***Bankruptcy and
Similar Procedures***

There are no bankruptcy,
receivership or similar proceedings against Cardero, nor is Cardero aware of any
such pending or threatened proceedings. There have not been any voluntary
bankruptcy, receivership or similar proceedings by Cardero within the three
most recently completed financial years or completed or currently proposed for
the current financial year.

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- 21 -

***Reorganizations***

There have been no
reorganizations of or involving Cardero within the three most recently completed
financial years and no reorganizations are currently proposed for the current
financial year.

***Social or
Environmental Policies***

Cardero has created a Sustainable
Development Committee (SDC), which has adopted a formal charter. The overall
purpose of the SDC is to assist the Board in fulfilling its oversight
responsibilities with respect to the Boards and the Companys continuing
commitment to improving the environment and ensuring that the Companys
activities are carried out, and that its facilities are operated and maintained,
in a safe, sustainable and environmentally sound manner. The primary function of
the SDC is to monitor, review and provide oversight with respect to the
Companys policies, standards, accountabilities and programs relative to health,
safety, community relations and environmental-related matters. Further, the SDC
is to advise the Board and make recommendations for the Boards consideration
regarding health, safety, community relations and environmental-related issues.
In particular, the SDC is to consider and advise the Board with respect to
current standards of sustainable development for projects and activities such as
those of the Company, particularly with a view to ensuring that the Companys
business is run in a manner, and its projects are operated and developed, so as
to achieve the ideals and reflect the following principles of sustainable
development:

| | (a) | living within environmental limits,         
| | --- | --------------------------------------------
| | (b) | ensuring a strong, healthy and just society,
| | (c) | achieving a sustainable economy,            
| | (d) | using sound science responsibly, and        
| | (e) | promoting good governance.                  

The SDC is also responsible for
monitoring the activities of the Company in connection with the initial and
ongoing interaction between the Companys activities, operations and personnel
and the communities in which the Companys projects and related activities are
located, with a view to ensuring that management develops and follows
appropriate policies and activities to enhance the relationship between the
Company and its personnel and the communities in which it operates and reflect
the principles of sustainable development in that regard.

Although not set out in a
specific policy, the Company strives to be a positive influence in the local
communities where its mineral projects are located, not only by contributing to
the welfare of such communities through donations of money and supplies, as
appropriate, but also through hiring, when appropriate, local workers to assist
in ongoing exploration programs as well as contributing to and improving local
infrastructure. The Company considers that building and maintaining strong
relationships with such communities is fundamental to its ability to continue to
operate in such regions and to assist in the eventual development (if any) of
mining operations in such regions, and it attaches considerable importance to
commencing and fostering them from the beginning of its involvement in any
particular area.

Cardero has also adopted a Code
of Business Conduct and Ethics, which provides, among other things, that the
Company is committed to complying with all laws and governmental regulations
applicable to its activities and, specifically, to maintaining a safe and
healthy work environment and conducting its activities in full compliance with
all applicable environmental laws.

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- 22 -

Risk Factors

In addition to those risk
factors discussed elsewhere in this AIF, the Company is subject to the following
risk factors:

Resource Exploration and
Development is Generally a Speculative Business: Resource exploration and
development is a speculative business and involves a high degree of risk,
including, among other things, unprofitable efforts resulting both from the
failure to discover mineral deposits and from finding mineral deposits which,
though present, are insufficient in size and grade at the then prevailing market
conditions to return a profit from production. The marketability of natural
resources which may be acquired or discovered by the Company will be affected by
numerous factors beyond the control of the Company. These factors include market
fluctuations, the proximity and capacity of natural resource markets, government
regulations, including regulations relating to prices, taxes, royalties, land
use, importing and exporting of minerals and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in the Company not receiving an adequate return on
invested capital.

There are no known reserves
and, other than on the Carbon Creek property and the Longnose and Titac
properties, there are no known resources, on any of the Companys properties.
The majority of exploration projects do not result in the discovery of
commercially mineable deposits of ore.Substantial expenditures are required
to establish ore reserves through drilling and metallurgical and other testing
techniques, determine metal content and metallurgical recovery processes to
extract metal from the ore, and construct, renovate or expand mining and
processing facilities. No assurance can be given that any level of recovery of
ore reserves will be realized or that any identified mineral deposit, even it is
established to contain an estimated resource, will ever qualify as a commercial
mineable ore body which can be legally and economically exploited. Mineral
resources are not mineral reserves and there is no assurance that any mineral
resources will ultimately be reclassified as proven or probable reserves.
Mineral resources which are not mineral reserves do not have demonstrated
economic viability.

Fluctuation of Commodity
Prices: Even if commercial quantities of mineral deposits are discovered by
the Company, there is no guarantee that a profitable market will exist for the
sale of the minerals produced. The Companys long-term viability and
profitability depend, in large part, upon the market price of minerals which
have experienced significant movement over short periods of time, and are
affected by numerous factors beyond the control of the Company, 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 recent price fluctuations in the price of all
commodities for which the Company is presently exploring is an example of a
situation over which the Company has no control and may materially adversely
affect the Company in a manner that it may not be able to compensate for. The
supply of and demand for minerals are affected by various factors, including
political events, economic conditions and production costs in major producing
regions. There can be no assurance that the price of any minerals produced from
the Companys properties will be such that any such deposits can be mined at a
profit.

Recent market events and
conditions: Since 2008, the U.S. credit markets have experienced serious
disruption due to a deterioration in residential property values, defaults and
delinquencies in the residential mortgage market (particularly, sub-prime and
non-prime mortgages) and a decline in the credit quality of mortgage backed
securities. These problems have led to a slow-down in residential housing market
transactions, declining housing prices, delinquencies in non-mortgage consumer
credit and a general decline in consumer confidence. These conditions caused a
loss of confidence in the broader U.S. and global credit and financial markets
and resulting in the collapse of, and government intervention in, major banks,
financial institutions and insurers and creating a climate of greater
volatility, less liquidity, widening of credit spreads, a lack of price transparency,
increased credit losses and tighter credit conditions. Notwithstanding various
actions by the U.S. and foreign governments, concerns about the general
condition of the capital markets, financial instruments, banks, investment
banks, insurers and other financial institutions caused the broader credit
markets to further deteriorate and stock markets to decline substantially. In
addition, general economic indicators have deteriorated, including declining
consumer sentiment, increased unemployment and declining economic growth and
uncertainty about corporate earnings.

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- 23 -

While these conditions appear to
have improved slightly in 2010/11, unprecedented disruptions in the credit and
financial markets have had a significant material adverse impact on a number of
financial institutions and have limited access to capital and credit for many
companies. These disruptions could, among other things, make it more difficult
for the Company to obtain, or increase its cost of obtaining, capital and
financing for its operations. The Companys access to additional capital may not
be available on terms acceptable to it or at all.

General Economic Conditions:The recent unprecedented events in global financial markets have had a
profound impact on the global economy. Many industries, including the gold and
base metal mining industry, are impacted by these market conditions. Some of the
key impacts of the current financial market turmoil include contraction in
credit markets resulting in a widening of credit risk, devaluations and high
volatility in global equity, commodity, foreign exchange and precious metal
markets, and a lack of market liquidity. A continued or worsened slowdown in the
financial markets or other economic conditions, including but not limited to,
consumer spending, employment rates, business conditions, inflation, fuel and
energy costs, consumer debt levels, lack of available credit, the state of the
financial markets, interest rates, and tax rates may adversely affect the
Companys growth and profitability. Specifically:

- The global credit/liquidity crisis could impact the cost and availability
  of financing and the Companys overall liquidity
- the volatility of gold and other base metal prices may impact the Companys
  future revenues, profits and cash flow
- volatile energy prices, commodity and consumables prices and currency
  exchange rates impact potential production costs
- the devaluation and volatility of global stock markets impacts the
  valuation of the Common Shares, which may impact the Companys ability to
  raise funds through the issuance of Common Shares

These factors could have a material adverse effect on the
Companys financial condition and results of operations.

Share Price Volatility:In 2010/11, worldwide securities
markets, particularly those in the United States and Canada, have experienced a
high level of price and volume volatility, and the market price of securities of
many companies, particularly those considered exploration or development stage
companies, have experienced unprecedented fluctuations in price which have not
necessarily been related to the operating performance, underlying asset values
or prospects of such companies. Most significantly, the share prices of junior
natural resource companies have experienced an unprecedented decline in value
and there has been a significant decline in the number of buyers willing to
purchase such securities. In addition, significantly higher redemptions by
holders of mutual funds has forced many of such funds (including those holding
the Companys securities) to sell such securities at any price. As a
consequence, despite the Companys past success in securing significant equity
financing, market forces may render it difficult or impossible for the Company
to secure placees to purchase newshare issues at a price which will not lead to severe
dilution to existing shareholders, or at all. Therefore, there can be no assurance that significant
fluctuations in the Common Shares will not occur, or that such fluctuations will
not materially adversely impact on the Companys ability to raise equity funding
without significant dilution to its existing shareholders, or at all.

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- 24 -

Permits and Licenses: The
operations of the Company will require licenses and permits from various
governmental authorities. There can be no assurance that the Company will be
able to obtain all necessary licenses and permits that may be required to carry
out exploration, development and mining operations at its projects, on
reasonable terms or at all. Delays or a failure to obtain such licenses and
permits, or a failure to comply with the terms of any such licenses and permits
that the Company does obtain, could have a material adverse effect on the
Company.

Acquisition of Mineral
Properties under Agreements: The agreements pursuant to which the Company
has the right to acquire a number of its properties provide that the Company
must make a series of cash payments and/or share issuances over certain time
periods, expend certain minimum amounts on the exploration of the properties or
contribute its share of ongoing expenditures. Failure by the Company to make
such payments, issue such shares or make such expenditures in a timely fashion
may result in the Company losing its interest in such properties. There can be
no assurance that the Company will have, or be able to obtain, the necessary
financial resources to be able to maintain all of its property agreements in
good standing, or to be able to comply with all of its obligations thereunder,
with the result that the Company could forfeit its interest in one or more of
its mineral properties.

Title Matters: The
acquisition of title to mineral properties in Mexico, Peru, Argentina and Ghana
is a very detailed and time-consuming process. Title to, and the area of,
mineral concessions may be disputed. While the Company has diligently
investigated title to all mineral properties in which it has an interest and, to
the best of its knowledge, title to all such properties is in good standing or,
where not yet granted, the application process appears to be proceeding normally
in all the circumstances, this should not be construed as a guarantee of title
or that any such applications for concessions will be granted. Title to mineral
properties may be affected by undetected defects such as aboriginal or
indigenous peoples land claims, or unregistered agreements or transfers. The
Company has not obtained title opinions for the majority of its mineral
properties. Not all the mineral properties in which the Company has an interest
have been surveyed, and their actual extent and location may be in doubt.

Surface Rights and Access:
Although the Company acquires the rights to some or all of the minerals in the
ground subject to the mineral tenures that it acquires, or has a right to
acquire, in most cases it does not thereby acquire any rights to, or ownership
of, the surface to the areas covered by its mineral tenures. In such cases,
applicable mining laws usually provide for rights of access to the surface for
the purpose of carrying on mining activities, however, the enforcement of such
rights through the courts can be costly and time consuming. It is necessary to
negotiate surface access or to purchase the surface rights if long-term access
is required. There can be no guarantee that, despite having the right at law to
access the surface and carry on mining activities, the Company will be able to
negotiate satisfactory agreements with any such existing landowners/occupiers
for such access or purchase of such surface rights, and therefore it may be
unable to carry out planned mining activities. In addition, in circumstances
where such access is denied, or no agreement can be reached, the Company may
need to rely on the assistance of local officials or the courts in the
applicable jurisdiction, the outcomes of which cannot be predicted with any
certainty. The inability of the Company to secure surface access or purchase
required surface rights could materially and adversely affect the timing, cost
or overall ability of the Company to develop any mineral deposits it may locate.
This is a particular problem in many areas of Mexico, Argentina, Peru and Ghana,
where blockades of access to the Companys properties, hostile actions by local
communities and the potential unwillingness of local police or governmental
officials to assist a foreign company against its own citizens can result in the
Company being unable to carry out any exploration activities despite being
legally authorized to do so and having complied with all applicable local laws
and requirements.

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- 25 -

No Assurance of
Profitability: The Company has no history of production or earnings and due
to the nature of its business there can be no assurance that the Company will be
profitable. The Company has not paid dividends on its shares since incorporation
and does not anticipate doing so in the foreseeable future. All of the Companys
properties are in the exploration stage and the Company has not defined or
delineated any proven or probable reserves on any of its properties. None of the
Companys properties are currently under development. Continued exploration of
its existing properties and the future development of any properties found to be
economically feasible, will require significant funds. The only present source
of funds available to the Company is through the sale of its equity securities
or the sale or optioning of a portion of its interest in its mineral properties.
Even if the results of exploration are encouraging, the Company may not have
sufficient funds to conduct the further exploration that may be necessary to
determine whether or not a commercially mineable deposit exists. While the
Company may generate additional working capital through further equity offerings
or through the sale or possible syndication of its properties, there is no
assurance that any such funds will be available on favourable terms, or at all.
At present, it is impossible to determine what amounts of additional funds, if
any, may be required. Failure to raise such additional capital could put the
continued viability of the Company at risk.

Uninsured or Uninsurable
Risks: Exploration, development and mining operations involve various
hazards, including environmental hazards, industrial accidents, metallurgical
and other processing problems, unusual or unexpected rock formations, structural
cave-ins or slides, flooding, fires, metal losses and periodic interruptions due
to inclement or hazardous weather conditions. These risks could result in damage
to or destruction of mineral properties, facilities or other property, personal
injury, environmental damage, delays in operations, increased cost of
operations, monetary losses and possible legal liability. The Company may not be
able to obtain insurance to cover these risks at economically feasible premiums
or at all. The Company may elect not to insure where premium costs are
disproportionate to the Companys perception of the relevant risks. The payment
of such insurance premiums and of such liabilities would reduce the funds
available for exploration and production activities.

Government Regulation: Any
exploration, development or mining operations carried on by the Company will be
subject to government legislation, policies and controls relating to
prospecting, development, production, environmental protection, mining taxes and
labour standards. The Company cannot predict whether or not such legislation,
policies or controls, as presently in effect, will remain so, and any changes
therein (for example, significant new royalties or taxes), which are completely
outside the control of the Company, may materially adversely affect to ability
of the Company to continue its planned business within any such
jurisdictions.

Foreign Countries and
Political Risk: The Company has mineral properties located in Peru,
Argentina, Mexico, the United States and Ghana. In such countries, mineral
exploration and mining activities may be affected in varying degrees by
political or economic instability, expropriation of property and changes in
government regulations such as tax laws, business laws, environmental laws and
mining laws. Any changes in regulations or shifts in political conditions are
beyond the control of the Company and may materially adversely affect it
business, or if significant enough, may make it impossible to continue to
operate in certain countries. Operations may be affected in varying degrees by
government regulations with respect to restrictions on production, price
controls, foreign exchange restrictions, export controls, income taxes,
expropriation of property, environmental legislation and mine safety.

Dependence Upon Others and Key
Personnel: The success of the Companys operations will depend upon numerous
factors, many of which are beyond the Companys control, including (i) the
ability of the Company to enter into strategic alliances through a combination
of one or more joint ventures, mergers or acquisition transactions; and (ii) the
ability to attract and retain additional key personnel in exploration, mine
development, sales, marketing, technical support and finance. These and other
factors will require the use of outside suppliers as well as the talents and
efforts of the Company.

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- 26 -

There can be no assurance of success with any or all of these
factors on which the Companys operations will depend. The Company has relied
and may continue to rely, upon consultants and others for operating
expertise.

Exploration and Mining
Risks: Fires, power outages, labour disruptions, flooding, explosions,
cave-ins, landslides and the inability to obtain suitable or adequate machinery,
equipment or labour are other risks involved in the operation of mines and the
conduct of exploration programs. Substantial expenditures are required to
establish reserves through drilling, to develop metallurgical processes, to
develop the mining and processing facilities and infrastructure at any site
chosen for mining. Although substantial benefits may be derived from the
discovery of a major mineralized deposit, no assurance can be given that
minerals will be discovered in sufficient quantities to justify commercial
operations or that funds required for development can be obtained on a timely
basis. The economics of developing mineral properties is affected by many
factors including the cost of operations, variations of the grade of ore mined,
fluctuations in the price of gold or other minerals produced, costs of
processing equipment and such other factors as government regulations, including
regulations relating to royalties, allowable production, importing and exporting
of minerals and environmental protection. In addition, the grade of
mineralization ultimately mined may differ from that indicated by drilling
results and such differences could be material. Short term factors, such as the
need for orderly development of ore bodies or the processing of new or different
grades, may have an adverse effect on mining operations and on the results of
operations. There can be no assurance that minerals recovered in small scale
laboratory tests will be duplicated in large scale tests under on-site
conditions or in production scale operations. Material changes in geological
resources, grades, stripping ratios or recovery rates may affect the economic
viability of projects.

Currency Fluctuations: The
Company presently maintains its accounts in Canadian dollars. Due to the nature
of its operations in such countries, the Company also maintains accounts in U.S.
dollars, Mexican and Argentinean pesos, Peruvian nuevo soles and Ghanaian Cedi.
The Companys operations in the United States, Mexico, Argentina, Peru and Ghana
and its proposed payment commitments and exploration expenditures under many of
the agreements pursuant to which it holds, or has a right to acquire, an
interest in its mineral properties are denominated in U.S. dollars, making it
subject to foreign currency fluctuations. Such fluctuations are out of its
control and may materially adversely affect the Companys financial position and
results. The Company does not engage in any hedging programs with respect to
currencies.

Environmental
Restrictions: The activities of the Company are subject to environmental
regulations promulgated by government agencies in different countries from time
to time. Environmental legislation generally provides for restrictions and
prohibitions on spills, releases or emissions into the air, discharges into
water, management of waste, management of hazardous substances, protection of
natural resources, antiquities and endangered species and reclamation of lands
disturbed by mining operations. Certain types of operations require the
submission and approval of environmental impact assessments. Environmental
legislation is evolving in a manner which means stricter standards, and
enforcement, fines and penalties for non-compliance are more stringent.
Environmental assessments of proposed projects carry a heightened degree of
responsibility for companies and directors, officers and employees. The cost of
compliance with changes in governmental regulations has a potential to reduce
the profitability of operations.

Regulatory Requirements:
The activities of the Company are subject to extensive regulations governing
various matters, including environmental protection, management and use of toxic
substances and explosives, management of natural resources, exploration,
development of mines, production and post-closure reclamation, exports, price
controls, taxation, regulations concerning business dealings with indigenous
peoples, labour standards on occupational health and safety, including mine
safety, and historic and cultural preservation. Failure to comply with
applicable laws and regulations may result in civil or criminal fines or
penalties, enforcement actions thereunder, including orders issued by regulatory
or judicial authorities causing operations to cease or be
curtailed, and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions, any of which could
result in the Company incurring significant expenditures. The Company may also
be required to compensate those suffering loss or damage by reason of a breach
of such laws, regulations or permitting requirements. It is also possible that
future laws and regulations, or more stringent enforcement of current laws and
regulations by governmental authorities, could cause additional expense, capital
expenditures, restrictions on or suspension of the Companys operations and
delays in the exploration and development of the Companys properties.

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- 27 -

Limited Experience with
Development-Stage Mining Operations: The Company has limited experience in
placing resource properties into production, and its ability to do so will be
dependent upon using the services of appropriately experienced personnel or
entering into agreements with other major resource companies that can provide
such expertise. There can be no assurance that the Company will have available
to it the necessary expertise when and if it places its resource properties into
production.

Estimates of Mineral Reserves
and Resources and Production Risks: The mineral resource estimates presented
in the Companys filings with securities regulatory authorities, press releases
and other public statements that may be made from time to time are based upon
estimates made by Company personnel and independent geologists, and no assurance
can be given that any particular level of recovery of minerals will in fact be
realized or that an identified reserve or resource will ever qualify as a
commercially mineable (or viable) deposit which can be legally and economically
exploited. The estimating of mineral resources and mineral reserves is a
subjective process and the accuracy of mineral resource and mineral reserve
estimates is a function of the quantity and quality of available data, the
accuracy of statistical computations, and the assumptions used and judgments
made in interpreting available engineering and geological information. There is
significant uncertainty in any mineral resource or mineral reserve estimate and
the actual deposits encountered and the economic viability of a deposit may
differ materially from the Companys estimates. Accordingly, there can be no
assurance that:

- these estimates will be accurate;
- reserves, resource or other mineralization figures will be accurate; or
- this mineralization could be mined or processed profitably.

Because the Company has not commenced production at any of its
properties, and has not defined or delineated any proven or probable reserves on
any of its properties, mineralization estimates for the Companys properties may
require adjustments or downward revisions based upon further exploration or
development work or actual production experience. In addition, the grade of
mineralization ultimately mined may differ from that indicated by drilling
results and such differences could be material. There can be no assurance that
minerals recovered in small-scale tests will be duplicated in large-scale tests
under on-site conditions or in production scale. Production can be affected by
such factors as permitting regulations and requirements, weather, environmental
factors, unforeseen technical difficulties, unusual or unexpected geological
formations and work interruptions. Short term factors, such as the need for
orderly development of deposits or the processing of new or different grades,
may have a material adverse effect on mining operations and on the results of
operations. There can be no assurance that minerals recovered in small scale
laboratory tests will be duplicated in large scale tests under on-site
conditions or in production scale operations. Material changes in reserves or
resources, grades, stripping ratios or recovery rates may affect the economic
viability of projects. The estimated resources described in the Companys
filings with securities regulatory authorities, press releases and other public
statements that may be made from time to time should not be interpreted as
assurances of mine life or of the profitability of future operations. Estimated
mineral resources and mineral reserves may have to be re-estimated based on
changes in applicable commodity prices, further exploration or development
activity or actual production experience. This could materially and adversely
affect estimates of the volume or grade of mineralization, estimated recovery
rates or other important factors that influence mineral resource or mineral
reserve estimates. Market price fluctuations for gold, silver or base
metals, increased production costs or reduced recovery rates or other factors
may render any particular reserves uneconomical or unprofitable to develop at a
particular site or sites. A reduction in estimated reserves could require
material write downs in investment in the affected mining property and increased
amortization, reclamation and closure charges.

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- 28 -

Mineral resources are not
mineral reserves and there is no assurance that any mineral resources will
ultimately be reclassified as proven or probable reserves. Mineral resources
which are not mineral reserves do not have demonstrated economic viability. The
failure to establish proven and probable reserves could restrict the Companys
ability to successfully implement its strategies for long-term growth.

Enforcement of Civil
Liabilities: As many of the assets of the Company are located outside of
Canada and the United States, and certain of the directors and officers of
Cardero are resident outside of Canada and/or the United States, it may be
difficult or impossible to enforce judgements granted by a court in Canada or
the United States against the assets of the Company or the directors and
officers of Cardero residing outside of such country.

Mining Industry is Intensely
Competitive: The Companys business of the acquisition, exploration and
development of mineral properties is intensely competitive. The Company may be
at a competitive disadvantage in acquiring additional mining properties because
it must compete with other individuals and companies, many of which have greater
financial resources, operational experience and technical capabilities than the
Company. The Company may also encounter increasing competition from other mining
companies in efforts to hire experienced mining professionals. Competition for
exploration resources at all levels is currently very intense, particularly
affecting the availability of manpower, drill rigs and helicopters. Increased
competition could adversely affect the Companys ability to attract necessary
capital funding or acquire suitable producing properties or prospects for
mineral exploration in the future.

The Company may be a passive
foreign investment company under the U.S. Internal Revenue Code, which may
result in material adverse U.S. federal income tax consequences to investors in
Common Shares that are U.S. taxpayers: Investors in Common Shares that are
U.S. taxpayers should be aware that Cardero believes that it has been in one or
more prior tax years, and may be in current and future tax years, a passive
foreign investment company under Section 1297(a) of the U.S. Internal Revenue
Code (a PFIC). However, no determination has been made regarding Carderos
PFIC status for any particular tax year. If Cardero is or becomes a PFIC,
generally any gain recognized on the sale of the Common Shares and any excess
distributions (as specifically defined) paid on the Common Shares must be
rateably allocated to each day in a U.S. taxpayers holding period for the
Common Shares. The amount of any such gain or excess distribution allocated to
prior years of such U.S. taxpayers holding period for the Common Shares
generally will be subject to U.S. federal income tax at the highest tax
applicable to ordinary income in each such prior year, and the U.S. taxpayer
will be required to pay interest on the resulting tax liability for each such
prior year, calculated as if such tax liability had been due in each such prior
year. The amount of any such gain or excess distribution allocated to the tax
year of disposition or distribution of the excess distribution and to years
before the entity became a PFIC, if any, would be taxed as ordinary income.

Alternatively, a U.S. taxpayer
that makes a qualified electing fund (a QEF) election with respect to
Cardero generally will be subject to U.S. federal income tax on such U.S.
taxpayers pro rata share of Carderos net capital gain and ordinary
earnings (as specifically defined and calculated under U.S. federal income tax
rules), regardless of whether such amounts are actually distributed by Cardero.
U.S. taxpayers should be aware, however, that there can be no assurance that
Cardero will satisfy record keeping requirements under the QEF rules or that
Cardero will supply U.S. taxpayers with required information under the QEF
rules, if Cardero is a PFIC and a U.S. taxpayer wishes to make a QEF election. As a second alternative, a U.S. taxpayer may make a
mark-to-market election if Cardero is a PFIC and the Common Shares are
marketable stock (as specifically defined). A U.S. taxpayer that makes a
mark-to-market election generally will include in gross income, for each taxable
year in which Cardero is a PFIC, an amount equal to the excess, if any, of (a)
the fair market value of the Common Shares as of the close of such taxable year
over (b) such U.S. taxpayers adjusted tax basis in the Common Shares.

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- 29 -

The above paragraphs contain only
a brief summary of certain U.S. federal income tax considerations. Investors
should consult their own tax advisor regarding the PFIC rules and other U.S.
federal income tax consequences of the acquisition, ownership, and disposition
of Common Shares.

Material Mineral Projects

Carbon Creek Metallurgical Coal Deposit, British
Columbia, Canada

Information in this AIF regarding
the Carbon Creek property is based on information provided by the Carbon Creek
Report. The following summary is from the Carbon Creek Report and the detailed
disclosure in the Carbon Creek Report is incorporated into this AIF by
reference. Readers are encouraged to review the entire Carbon Creek Report,
which is filed on SEDAR at www.sedar.com.

Location

The Carbon Creek property lies approximately 60km northwest of
the town of Chetwynd, BC and 40km west of the town of Hudsons Hope. Improved
forest service roads connect the property with British Columbia Highway 29
between the towns of Chetwynd and Hudson Hope. The CN Rail line connecting Fort
St John and Tumbler Ridge areas with Prince George passes 40km south of the
property. The CN Rail line provides direct access to the ports of Vancouver and
Ridley Terminals in Prince Rupert, BC.

Tenure and Joint Venture

The Carbon Creek property is in the Peace River Coalfield and
consists of twelve Coal License Applications (and any coal licenses issued
pursuant to such applications) and ten Crown Granted District Lots (CGDL),
comprising a contiguous tenure parcel of 17,200ha.

Ten of the Coal License Applications have been submitted by P.
Burns Resources Ltd. (Burns) of Calgary, Alberta and, upon the issuance of any
coal licenses thereunder, such licenses are to be transferred to the Carbon
Creek Partnership (CCP), an Alberta partnership. One Coal License Application
has been submitted by Alan A. Johnson (Johnson), and one has been submitted by
Cardero Coal.

The CGDLs, totalling approximately 2,600ha, are controlled by
Peace River Partnership (PRP), an Alberta partnership. Cardero Coal has entered
into an option to acquire a coal lease over the CGDL from PRP.

Cardero Coal has entered into an agreement with Johnson to
purchase the one coal license to be issued pursuant to the Coal License
Application submitted by Johnson (subject to the issuance of the applicable coal
license).

Cardero Coal has entered into a joint venture agreement with
CCP, in which Cardero Coal will have a 75% interest and CCP will have a 25%
interest. Pursuant to the joint venture agreement, each joint venture partner is
contributing its interest in the Carbon Creek property, being the coal lease
over the CGDL (when acquired by Cardero Coal), and all coal licenses (if and
when issued to Burns and transferred to CCP and if as and when issued to Cardero
Coal pursuant to the applicable Coal License Applications and, in the case of
the coal license which may be issued to Johnson pursuant to his Coal License
Application, upon its acquisition from him by Cardero Coal). The joint venture,
known as the Carbon Creek Joint Venture, will control and operate the Carbon
Creek property described above. The joint venture agreement provides that the
CCP interest is a carried net profits interest which requires Cardero Coal to fund the exploration, development, construction
and operation of the mine and that the CCP receives no profits until Cardero
Coal has recovered its investment. At that point, the CCP is entitled to 25% of
the net profits of the Carbon Creek Joint Venture.

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- 30 -

Cardero Coal is the manager of the Carbon Creek Joint
Venture.

Cardero completed the acquisition of the balance of the
outstanding shares of Coalhunter through a plan of arrangement that was
completed on June 1, 2011.

Geology

The local geology of the Carbon Creek Property consists of a
doubly-plunging syncline which lies between two anticlinal belts that straddle
the western and eastern boundaries of the property. The synclinal axis roughly
parallels the course of Carbon Creek, and plunges gently (less than 5°) to the
south-southeast through the main project area. Dips in the central portion of
the property are nearly flat, ranging from 0o to 15o, increasing to up to 30o
along the synclinal flanks in the east and west portions of the property. Dips
through the east and central portions of the initial development area are very
mild due to their proximity to the syncline axis. Dips increase to the west
moving up the western limb of the syncline.

Four north-south trending faults were identified in early
exploration programs and were thought to die out in these directions. According
to Utah Mines Ltd. (Utah) dips of strata in proximity to these faults increase
to the point where they effectively separate the property into discreet mining
blocks. The three westernmost faults were interpreted to be high-angle reverse
faults with displacements estimated to range from between 50m to 70m. The
easternmost Carbon Creek fault was speculated to be a high-angle thrust and
having significant displacement, in the range of hundreds of meters, based on
the interpretation of a coal-barren portion of the upper Gething being exposed
on its eastern side.

Recent field work conducted by Cardero Coal has shown that the
severity of the faulting may be less than estimated by Utah during their
evaluations in the late 1970s and early 1980s. Definitive data that would
permit accurate, detailed mine planning in the areas proximal to suspected
faults has yet to be collected and/or evaluated. The most notable change in
interpretation is the intersection of what is believed to be the lower coal
seams of the propertys stratigraphic sequence on the east side of the Carbon
Creek Fault. This fault was formerly thought to have had sufficient uplift to
expose the barren zone of the Gething Formation lying below the coal horizons.
Although not sufficiently defined as a resource for inclusion in the Carbon
Creek Report, it does present an exploration target for establishing additional
resource tonnage in the future.

Mineralization

The mineralized zones encountered on the property are
predominantly medium volatile bituminous coal seams, with minor increase or
decrease in rank depending on structural or stratigraphic variations and depth
of burial. Historic coal quality reports indicate that the coals will, with
beneficiation (washing) to remove impurities, produce a product with coking
properties suitable for metallurgic applications. Thermal coal suitable for
electric power generation could be produced with or without further processing
in addition to, or as an alternative to, a coking coal product.

Coal Occurrence

Over thirty coal seams occur in the middle and upper portions
of the Gething Formation. Sixteen seams are present through the northern half of
the property. Twelve main seams have figured prominently in historic coal
tonnage calculations.

Coal deposition is typical of the Gething Formation, consisting
of abundant coal seams, some showing favorable metallurgical properties. The
twelve seams listed in Table 1.1 are developed sufficiently to be of economic
significance. These seams range from 1.14m to 2.17m in average thickness. Raw
coal qualities are presented for each of these seams. Values shown represent
coal without out-of-seam dilution (OSD). Processing coal mixed with OSD using size specific
density and froth flotation separating processes (coal washing) is widely used
to improve coal quality by reducing ash content and raising its calorific value.
Coking properties such as free swelling index (FSI) and dilation are typically
improved as well, through washing.

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- 31 -

Table 1.1 Raw Coal Quality

SEAM
    AVERAGE THICKNESS(M)
    COALQUALITY(AIR DRIED BASIS)**MOISTURE** (%)
    ASH(%)
    SULPHUR(%)
    **VOLATILE** MATTER
      (%)
    FIXED
      CARBON %
    CALORIFIC
      VALUE BTU/LB
    FSI58
    1.14
    2.60
    12.56
    0.92
    28.92
    55.93
    12,663
    2.055
    1.57
    2.74
    12.42
    0.68
    28.59
    56.26
    12,893
    2.554
    1.39
    2.78
    5.66
    0.83
    27.36
    64.20
    13,926
    1.552
    1.63
    2.18
    17.14
    1.88
    28.33
    52.35
    12,178
    4.051A
    1.29
    2.74
    6.25
    0.80
    28.01
    63.00
    13,902
    2.051
    1.51
    2.73
    9.63
    0.73
    26.42
    61.23
    13,228
    2.047
    1.14
    2.53
    15.49
    0.91
    24.00
    57.98
    12,441
    1.546
    1.70
    2.60
    6.50
    0.83
    26.92
    63.99
    13,907
    2.040
    1.95
    2.02
    13.99
    1.17
    27.16
    56.83
    12,892
    5.531
    1.99
    1.50
    25.74
    1.42
    24.33
    48.43
    10,906
    6.015
    2.17
    1.08
    17.11
    0.57
    21.14
    60.67
    12,602
    2.514
    1.91
    0.95
    19.03
    0.57
    19.20
    60.83
    12,362
    3.0


Raw coal qualities indicate good coking coal potential in seams
31, 40 and 52 based on average FSI values. In-place raw ash contents are
generally low and all seams will be improved with washing which would reduce ash
content further and typically increase the FSI by a few points. With careful
blending, the other seams would likely be saleable in the coking coal
market.

Exploration

The periods and types of coal exploration undertaken on the
property are summarised in Table 1.2. The coal exploration methods can be
separated into four types: regional mapping and field sampling, aerial surveys,
coring and open-hole (rotary) drilling, and bulk sampling. Types by era are
summarized below.

Table 1.2 Exploration Methods

Year
    Company/
      Individual
    Drill Holes
    Exploration Activity1908 to 1942
    Various*
    
    Surface mapping, and sampling,
      trenching1943
    Stines
    
    Surface mapping,
      and sampling, trenching1945
    Mathews
    
    Surface mapping,
      and sampling, trenching1970
    Trend Exploration
    
    Aerial
      reconnaissance mapping1971
    Utah
    9
    Surface mapping
      and drilling1972
    Utah
    14
    Surface mapping
      and drilling


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- 32 -

Year
    Company/
      Individual
    Drill Holes
    Exploration Activity1973
    Utah
    16
    Surface mapping and drilling1975
    Utah
    36
    Surface mapping,
      drilling, and 2D seismic program1976
    Utah
    181
    Surface mapping,
      drilling and bulk sampling from adits1981
    Utah
    45
    Surface mapping
      and drilling2010
    Coalhunter
    8
    Validation drilling (coring)


All drilling was vertically orientated, targeting coal seams
that were mostly dipping between 5oand 20ofrom vertical.
Approximately one third of the 309 holes drilled on the property were sampled
core holes. The rotary holes were completed for the purposes of coal seam
correlations and mapping depth of surface weathering.

Cardero Coal has been conducting a sizable exploration and
development drilling project within the CGDL area of the property since August
of 2011. Drilling data from this program has not been used to define resources
in the Carbon Creek Report but will be assimilated into an updated geologic
model for planned feasibility work during 2012.

Coal Resources

A resource estimation of the Carbon Creek property was
completed in accordance with the procedures and criteria of Geological Survey of
Canada (GSC) Paper 88-21 as required by NI 43-101. The mineral resource
estimates for surface and underground moderate geology-type coal reported from
the current Carbon Creek geologic model are outlined in Table 1.2. The resource
statement is current as of October 1, 2011. Surface mineable resources are based
on mining to a maximum strip ratio (waste volume to tonne of in-place coal) of
20 to 1.

Carbon Creek has an estimated 166.7Mt of in-place coal
resources in the measured and indicated categories. Table 1.3 breaks these
resources into surface and underground tonnes.

Table 1.3 Classification of Resource  Carbon Creek Property
 October 1, 2011

Deposit Type
    ASTM Coal
      Rank
    Measured
      (Mt)
    Indicated
      (Mt)
    Inferred
      (Mt)Surface
    mvB
    33.1
    20.1
    19.6Underground
    mvB
    42.4
    71.1
    147.5Total
    mvB
    166.7
    167.1


The accuracy of resource estimates is, in part, a function of
the quality and quantity of available data and of engineering and geological
interpretation and judgment. Given the data available at the time the Carbon
Creek Report was prepared, the estimates presented herein are considered
reasonable. However, they should be accepted with the understanding that
additional data and analysis available subsequent to the date of the estimates
may necessitate revision. These revisions may be material. There is no
guarantee that all or any part of the estimated resources will be recoverable.
Mineral resources are not mineral reserves and there is no assurance that any
mineral resources will ultimately be reclassified as proven or probable
reserves. Mineral resources which are not mineral reserves do not have
demonstrated economic viability.

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- 33 -

Mineable Coal

Based on the geological model developed in the Carbon Creek
Report a general mining layout was prepared for both surface and underground
mining areas. Applying mining parameters, as discussed in Section 16 of the
Carbon Creek Report, a potentially mineable tonnage estimate was developed for
each mining method as shown in Table 1.4.

Table 1.4 Potentially Mineable Coal Tonnes Through Year
30

**Mining Method**
    Mineable Tonnes
      (millions)
    Resource Tonnes
      (Measured & Indicated)Surface
    21.8
    53.2Underground
    115.2
    113.5Combined Total
    137.0
    166.7


The Run of Mine (ROM) surface potentially mineable tonnes are
significantly lower than the surface resource identified above. This difference
is explained by the fact that much of this resource is higher strip ratio and
higher cost relative to underground mining methods. The ROM underground tonnes
exceed the geological resource estimate because the mining layout includes a
small amount (1.7Mt) of Inferred tonnes.

Coal Processing

ROM coal will be crushed and sent to a coal washery where ash
will be removed through heavy media separation of the coarse fractions and
floatation for the fines fractions. Wash plant yields have been estimated on
average at 68% for surface mined coal and 62% for underground mined coal.
Individual yield and indicative clean coal specifications are presented in more
detail in Section 13 of the Carbon Creek Report. The clean coal will be dried in
a fluidized bed dryer to approximately 6% moisture and stored in covered storage
to keep it dry until shipment.

Production Volume and Schedule

Annual production is based on the mine plans described in
Section 16 of the Carbon Creek Report. The surface mine will begin operations
first, with the underground mine beginning operations two years after the
surface mine. This allows time to develop an area to access the underground
mineable coal seams. The combined mining operation is planned for 30 years
excluding pre-production development and construction time.

The surface mine is projected to begin production at 3.1M ROM
tonnes per annum (tpa) and maintain this level for 7 years. The expected wash
plant yield of 68% results in 2.1Mtpa (Million tonnes per annum) saleable coal
from the surface mine. This production from surface mining is expected to yield
14.8Mt saleable over the seven year period (years 1  7).

The underground mine is expected to begin production in the
third year of mine operations at .59Mtpa ROM increasing to the steady state
level of 4.7Mtpa ROM by the beginning of the eighth year of mining operations.
The expected wash plant yield of 62% results in 2.9Mtpa saleable from the
underground mine. The underground mine is assumed to operate 28 years producing
115.2M ROM tonnes and 71.4M saleable tonnes. This production schedule depletes
the measured and indicated underground mineable coal tonnes shown above in Table
1.4.

Transportation

Clean coal will be loaded into highway type coal haulers
operated by a trucking contractor and hauled approximately 69km to a rail
loadout on the CN railway. The coal will be offloaded into a bottom-dump hopper and conveyed to a twin dome covered storage structure.
Clean coal will be drawn from beneath the storage piles onto a reclaim conveyor
and loaded through a batch weighing system into unit trains. The coal will be
transported to the ports of Vancouver and/or Prince Rupert for loading onto
ships for transport to the Pacific Rim markets. The clean coal will be exposed
to the elements during train transport and while stockpiled temporarily at the
port and is expected to increase in moisture content to about 8%m, which is the
preferred maximum for ocean shipping.

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- 34 -

Capital Costs

Assumptions regarding capital expenditures are detailed in
Section 21 of the Carbon Creek Report. All dollar values throughout the Carbon
Creek Report are in US$. Pre-production capital requirements total $301M and
include coal handling, coal preparation, train loadout facilities, surface
facilities, site access and power, and mine development and contingency. All
major surface and underground mining equipment is assumed to be leased with a
seven year lease term at 4.5% and a 20% residual. The total value of the mining
equipment being leased is $151M. Annual lease payments at full production for
surface mining total $12.3M and $9.6M for underground.

Total capital excluding leased equipment is $504M over the LOM.
Lease payments for mining equipment total $321M over the LOM.

Manpower

Manpower requirements to operate and maintain the surface and
underground mines and coal processing plant are shown in Tables 1.5 and 1.6.

Table 1.5 Manpower Requirements Surface Mine and
Four Underground Units (through year 7)

Area
    Hourly Workers
    Management
    TotalsSurface Mine
    190
    28
    218Underground Mine
    220
    61
    281Prep Plant
    62
    11
    73Totals
    472
    100
    572


Table 1.6 Manpower Requirements
Eight Underground Units (Year 8 through Year 30)

Area
    Hourly Workers
    Management
    TotalsUnderground Mine
    432
    98
    530Prep Plant
    62
    11
    73Totals
    494
    109
    603


Operating Costs

Operating costs have been estimated for the surface and
underground mines based on required equipment hours, labour hours and materials
and supplies. These costs are shown in Table 1.7 on a unit basis for each mine
and the coal handling and preparation plant (CHPP).

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- 35 -

Table 1.7 Cash Operating Costs

Cost
      Area
    $/ROM tonne
    $/Clean tonneSurface Mining
    30.62
    50.77Underground Mining
    31.86
    57.68Coal Handling & Prep
    3.90Sub-Total ( Includes
      equipment lease payments)
    
    60.76Indirect Costs
    
    10.51Total Cash Costs
    
    71.27


Economic Results

Norwest prepared an economic model in US$ that captures direct
costs, including labor, equipment, materials, production taxes and royalties.
Indirect costs including corporate overhead, mineral tax and property tax were
added to the model along with depreciation of purchased equipment and
facilities. A cash flow calculation was prepared on an after tax basis using an
average FOB price of $185 per saleable tonne and an average clean coal
production of 2.9Mtpa. Clean coal production increases from 2.1Mtpa to 3.2Mtpa
over the first seven years of production and then averages 2.9Mtpa for the
remaining mine life of 23 years. The first seven years includes surface mine
production and the ramp up of underground mining. After seven years, the
property is mined by underground methods only.

Pre-production cash outflows total $301M over the estimated
three year development and construction period. Cash flow is positive once
production begins and payback occurs by the end of the third year of production
or six years after the initial cash outflow. After payback and providing for the
net profits interest, cash flow averages $115M per year for a total net cash
flow of $3.1B over the life of the mine for Carderos 75% interest.

The internal rate of return for Carderos 75% interest in the
Carbon Creek Joint Venture is approximately 29%. Net present values at 8%, 10%
and 12% are shown in the Table 1.8.

Table 1.8 NPV Results Carderos 75% Interest
($millions)

Interest Rate
    8%
    10%
    12%NPV
    $752
    $551
    $408


The internal rate of return for the entire property is
approximately 35.1% . Net present values at 8%, 10% and 12% are shown in Table
1.9.

Table 1.9 NPV Results 100% Interest ($ Millions)

Interest Rate
    8%
    10%
    12%NPV
    $1,070
    $800
    $605


The Carbon Creek Report is preliminary in nature, and
includes inferred mineral resources. Inferred mineral resources are considered
too speculative geologically to have technical and economic considerations
applied to them that would enable them to be categorized as mineral reserves.
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. Accordingly, there can be no certainty that the results
estimated in the Carbon Creek Report will be realized.

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- 36 -

Sensitivity Analysis

Sensitivity of the economics regarding coal sales price, direct
mining costs and capital expenditures were evaluated. The results are summarized
in Table 1.10.

Table 1.10 Sensitivity Analysis ($millions)

IRR
    NPV at 8%
    NPV at 10%
    NPV at 12%Base Case at $185
    29.3%
    $752
    $551
    $408Coal Sales at $270
    46.3%
    $1,755
    $1,335
    $1,033Coal Sales at $141
    16.1%
    $229
    $142
    $7910% Increase in Direct Mining
      Costs
    28.6%
    $696
    $510
    $37710% Increase in Capital Costs
    28.6%
    $753
    $551
    $407


Given the high margins, the project is more sensitive to
changes in coal prices than it is to changes in direct mining costs and capital
costs. The 10% increase in capital cost does not result in any significant
change in NPV because it delays the effect of the net profits interest.

Table 1.11 summarizes the key results of the Carbon Creek
Report.

Table 1.11 Carbon Creek Project Summary

Resource Measured & Indicated
    Mt
    166.7Resource Inferred
    Mt
    167.1Underground Potentially Mineable Tonnes
    Mt
    115.1Mean Plant Recovery
    %
    62%Underground Clean Coal Tonnes
    Mt
    71.4Surface Potentially Mineable Tonnes
    Mt
    21.8Mean Plant Recovery
    %
    68%Surface Clean Coal Tonnes
    Mt
    14.8Total Clean Coal Tonnes Produced
    Mt
    86.2Surface Mining Minimum Seam Thickness
    M
    0.6Surface Mining Maximum strip ratio
    Ratio
    12.5:1Underground Mining Minimum Seam Thickness
    M
    1.2Full Production Rate Clean Coal per Year
    Mt/yr
    2.9Pre-production Capital Costs
    M$
    301Sustaining Capital LOM
    M$
    203Value of Leased Equipment LOM
    M$
    151Surface Mine OPEX ROM Basis
    $/t
    30.62Underground Mine OPEX ROM Basis
    $/t
    31.86Surface Mine OPEX Clean Coal Basis
    $/t
    50.77Underground Mine OPEX Clean Coal Basis
    $/t
    57.68Processing OPEX
    $/t
    3.90Average direct mine costs (incl. equipment lease) Clean
      Coal Basis
    $/t
    60.76Haul, Rail & Port Costs
    $/t
    42.42


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- 37 -

FOB Price Long-Term Base Case
    $/t
    185Gross Revenue LOM
    M$
    15,952Operating Costs LOM
    M$
    6,145Pre-Tax Operating Cash Flow LOM
    M$
    6,149Post-Tax NPV 8 (75% Basis)
    M$
    752Internal Rate of Return (75% Basis)
    %
    29.3Post-Tax NPV 8 (100% Basis)
    M$
    1,070Internal Rate of Return (100% Basis)
    %
    35.1Total Undiscounted Post-Tax Cash Flow (75% Basis)
    M$
    3,113


Conclusions

Based on the results of the Carbon Creek Report, Norwest has
reached the following conclusions:

| | 1. | There are sufficient potentially mineable tonnes of
      metallurgical grade coal in the Carbon Creek resource area to produce
      approximately 2.9Mtpa saleable coal for a 30 year period.                                                          
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                          
| | 2. | No fatal flaws have been identified at this stage of
      project development.                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                          
| | 3. | Pre-production capital costs, estimated at $301M will be
      required to bring this project into production. Additional capital,
      including replacement of $203M will be required to sustain operations over
      the remaining life of the mine.
| |    |                                                                                                                                                                                                                                                          
| | 4. | Operating costs per tonne of clean coal average
      $71.27.                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                          
| | 5. | At a conservative price for metallurgical grade coal of
      $185, this Project will generate positive cash flows and achieve an
      internal rate of return (IRR) on investment of
29.3%.                                                            

Recommendations

Development Drilling

The results of the 2011 drilling program should be included in
the geological database and a new geological model produced. This will provide a
better mine planning base as well as indicate where future development drilling
is needed to increase confidence in the resource estimates.

Mine Planning Refinement

Additional refinement of the geologic model along with a
detailed mine plan is recommended and will yield a revised and more accurate
recoverable reserve base if reserves are defined in the future. This work should
be completed at the Prefeasibility level of project evaluation. Optimum
production plans and methods should be analyzed. One example for further study
is to examine surface mineable coal extractable by contour and highwall mining
methods. Highwall mining generally has proven prudent in resource recovery and
cost efficiency. Further evaluation can provide insight into the applicability
of highwall mining at this property.

CHPP Design and Construction

Prior to proceeding with the project for detailed design and
construction, Norwest recommends that additional studies be performed to better
characterize the coals to ensure proper equipment design. The best available
information and best practices were implemented in the design of the system,
although additional information will supplement the database for final
design.

Additional studies and recommended data include:

- Washability study with large diameter cores collected during 2011 field
  program.

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- 38 -

- Further metallurgical characterization of main seams and potential blends.
- Materials characteristics tests for the projected refuse materials.
- Environmental loads including temperature ranges, wind load, and expected
  snow and rain precipitation can be collected during a site data collection
  campaign. For the purposes of this study, regional data was used to estimate
  the effective loading.

Geotechnical Studies

Geotechnical sampling and detailed core logging should be
conducted in conjunction with any drillcore activities in order to build a
current rock mechanics database. Most of this work is already underway in the
2011 drilling program.

A full investigation of the foundation material around the
plant and surface facilities area as well as the waste impoundment area is
required. Anecdotal information was used in this design study using best
practices and information from similar projects in the area, although site
construction will require further studies. Detailed geotechnical data is being
collected as part of the 2011 field program.

Water Supply  Hydrology

Additional work on the property should include well completions
and pump tests for defining groundwater characteristics and establishing monitor
wells for baseline permitting data.

A water recovery and aquifer study will be required prior to
project implementation. For this study, it was assumed that a sufficient supply
will be available.

Thermal Dryer

Research Turbo dryer as a possible lower cost option to the
fluidized bed coal dryer.

The Company cautions that the foregoing economic analysis
(PEA) is only preliminary in nature, and is based on technical and economic
assumptions which will be evaluated in further studies. The PEA is based on the
current (as at October 1, 2011) Carbon Creek estimated resource model, which
consists of material in both the measured/indicated and inferred
classifications. Inferred mineral resources are considered too speculative
geologically to have technical and economic considerations applied to them. The
current basis of project information is not sufficient to convert the mineral
resources to mineral reserves, and mineral resources that are not mineral
reserves do not have demonstrated economic viability. Accordingly, there can be
no certainty that the results estimated in the PEA will be realized.

Planned Activities

The Company is proceeding with
the preparation of a pre-feasibility study on the Carbon Creek project, which it
anticipates will be complete in Q3 of 2012. In connection with the
prefeasibility study work, the Company will carry out the recommendation set out
in the Carbon Creek Report which are applicable to the CGDL portion of the
Carbon Creek project. All necessary permits are in place for this portion of the
program, and the Company has the funds to complete the proposed program.

Sheini Hills Iron Project, Ghana

Information in this AIF regarding
the Sheini Project is based on information provided by the Sheini Report. The
following summary is from the Sheini Report and the detailed disclosure in the
Sheini Report is incorporated into this AIF by reference. Readers are encouraged
to review the entire Sheini Report, which is filed on SEDAR at
www.sedar.com.

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- 39 -

Property Description and Location

The Project is located in the Zabzugu-Tatale District in the
Northern Region of the Republic of Ghana. The Project area (Project Area)
consists of three contiguous prospecting licences (Prospecting Licenses)
covering a cumulative licence area of 397.5 square kilometres. The Government of
the Republic of Ghana acting by the Ministry of Lands and Natural Resources has
issued a licence document dated December 8, 2011 for each of the three
Prospecting Licences (Sheini North, Sheini and Sheini South).

The Prospecting Licences were issued to Emmaland Resources
Limited (Emmaland), a local Ghanaian company. Cardero Ghana Ltd. (Cardero
Ghana), an indirect wholly owned Ghanaian subsidiary of Cardero, has entered
into three separate joint ventures (one for each Prospecting License) with
Emmaland. The object of each joint venture is to explore and, if warranted,
develop the lands subject to the relevant Prospecting Licence. The effective
date for each of the joint venture agreements is December 12, 2011.

Under the three joint ventures, Cardero Ghana will have the
right to earn a 100% working interest in each Prospecting Licence, subject to
(a) a 10% NPI (net profit interest) in favour of Emmaland and (b) a 10% fully
carried interest, in favour of the Government of Ghana, in the portions of the
licence areas that become the subject of one or more mining licences
subsequently issued to Emmaland. Cardero Ghana will have the right to purchase
the 10% NPI held by Emmaland in a joint venture at any time for an amount
representing the net present value thereof, as calculated by an independent
engineering firm, or such other amount as is acceptable to Emmaland. There are
no other royalties or back-in rights to which the Project is subject.

In order to earn its interest, Cardero Ghana is required to
fund all expenditures under each of the particular joint ventures and make cash
payments to Emmaland totalling USD 16,600,000. To date, USD 6,450,000 million
has been paid in scheduled payments and advances.

Each Prospecting License outlines a required work program and
an expenditure commitment based on this work program. The expenditure
commitments relate to the initial two-year licence period, ending December 8,
2013, and total USD 9,180,966 for all three Prospecting Licenses.

Accessibility, Climate, Infrastructure, and
Physiography

The Project is situated in the eastern part of Ghanas Northern
Region, close to the border with Togo and approximately 400 kilometres north of
Ghanas capital city, Accra. Tamale, Ghanas second largest city is the regional
capital and an administrative centre, as well as the regional transportation
hub. Sheini Village lies approximately at the centre of the concession, 20
kilometres southeast of Zabzugu.

Transportation between the main centres of
  population in the region is mostly by road, although there are reasonable air
  connections between the regional centres. Tamale is the main population centre
  in the region with approximately 360,000 people. Sheini Village has a population
  of between 400 and 500. There are a number of smaller communities south of
  Sheini with populations of between 100 and 200 people.

The closest railway line in Ghana to the Sheini area is the
AccraKumasi rail line located approximately 350 kilometres south. The Ghana
government has long-term plans to extend the existing railway line to Tamale and
Yendi. A rail line exists closer to the Sheini area at Blita in Togo, located
approximately 100 kilometres southeast of the Sheini Village. This railway line
extends south to the port at Lomé, Togos capital, and is used primarily for the
transport of limestone and phosphates.

In Ghana, the Tema sea port, the largest in the country, is
located approximately 390 kilometres south-southwest of the Sheini area and
approximately 30 kilometres east of Accra.

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- 40 -

A major power line follows the TamaleYendiZabzuguTatale
road, which brings power to the towns and villages along this route. Zabzugu,
the closest town with electrical power, is located 20 kilometres northwest of
the Sheini area.

The Oti River represents the major water source and is located
20 kilometres west of the Sheini area. The river rises in Burkina Faso and forms
part of the international boundaries between Benin and Burkina Faso and between
Togo and Ghana.

The Northern Region of Ghana is located in the savannah belt
with a typical hot, sub-Saharan climate. There are two major seasonsdry and
wet. Climatic conditions are not expected to adversely impact exploration
activities in the area.

The physical geography of Ghanas Northern Region reflects the
geological setting of the area. The landscape surrounding Tamale is generally
flat due to the soft sedimentary rocks of the Volta Basin. The landscape becomes
more undulating east of Tamale and of the Oti River, suggesting the presence of
more resistive rock formations.

The Oti River produces a broad valley with elevations of 8090
metres above sea level in the vicinity of the Sheini area. Toward the Togo
border, ridges standing several hundred metres above the surrounding savannah
are elongated in a northsouth direction.

Project History

The first detailed exploration work that focused on the iron
occurrences around Sheini Village was by E. H. Jacques in the 1950s. His report
(1958) summarizing the exploration work was re-printed by Ghanas Geological
Survey Department (GGSD) in 2003 (Archive Report No. 85).

According to this report, Jacques and his team carried out
geological mapping, technical work, trenching (10 trenches), and diamond core
drilling (nine boreholes) along the ridges with iron mineralization from Kandin
in the north to the Kubalem area in the south, comprising approximately 35
kilometres of strike length. Jacques describes eight groups of iron-mineralized
bodies from this large area.

All of the samples taken during this phase of exploration were
assayed for iron and silica only. A small number of samples were also assayed
for phosphorous. The results, presented in Jacques report as tables, show iron
grades in the range of 30%50% iron, with silica content of usually more than
15% SiO2. The content of phosphorous is usually below
0.2%P2O5.

In the early 1960s, geoscientists from the Soviet Union were
invited to Ghana to assist with geological mapping, with prospecting, and with
performing numerous specific studies in northern Ghana. The iron occurrences
around Sheini Village were studied as part of one of the projects managed by the
Soviets. The work included detailed geological mapping, trenching, and drilling.
The results were summarized in several reports and some of them have been
re-printed by the GGSD. The reports indicate that the exploration was focused
mainly on the area northwest, west, and southwest of Sheini Village.

No significant exploration work was done in the Sheini area
after the Soviet geologists left Ghana. According to the GGSD, small-scale
exploration work has been done by St. Jude Resources Ltd. (Vancouver, BC) in the
Sheini North area during 20042006. The exploration was testing the concept that
the iron occurrences may be of epigenetic origin, similar to Olympic Damtype
Iron Oxide Copper Gold (IOCG) deposits. The St. Jude Resources exploration
concession expired in 2006.

In 2008, the Minerals Commission of Ghana granted non-exclusive
exploration permits to twelve companies. The size of the non-exclusive
exploration permit granted was 178.81 square kilometres, coincident with
Emmalands current Sheini Prospecting Licence and part of the Sheini North
Prospecting License. The Minerals Commission of Ghana ran a competitive bidding
process, with the Prospecting Licences being awarded to the company submitting
the winning bid. A report was submitted by each company, including due diligence
sampling results (where such work had been done), together with recommendations for multi-phase exploration and ultimate
exploitation of the iron mineralization in the Sheini area.

---

- 41 -

The results of the work together with recommendations for a
further exploration program were summarized in the report submitted to the
Minerals Commission of Ghana. In December 2011, the Minerals Commission of Ghana
granted three Prospecting Licenses to Emmaland covering the Project Area.

Geological Setting

At the regional scale, the Project is located within the
eastern part of the West African Craton called the Eastern Pan African Domain.
The Project Area is located in the Togo Belt, starting in southeast Niger and
running south-southwest to southeastern Ghana, comprising supracrustal sediments
and volcanics of probable late Precambrian to early Phanerozoic age. The Togo
Belt consists of Buem Formation and Togo Formation. The rocks of the Buem
Formation are dominated by east- to southeast-dipping clastic sediments, mainly
sandstones, siltstones, shales, and mudstones. Massive chert (silexites),
limestones, and dolomites are known from Togo.

The Iron Formation is located mainly within the Ghanaian part
of the Buem Formation, but some of the bodies also cross the border into Togo.
The iron mineralization is associated with tillites situated near the base of
the Buem Formation.

The Iron Formation forms a folded sedimentary unit several
hundred metres thick and outcropping along wide ridges (or sets of parallel
ridges) running for more than 35 kilometres in a northsouth direction. They are
composed of a number of horizons varying in lithology, grain size, and mineral
composition. The individual horizons of the Iron Formation have a thickness
between 20 and more than 100 metres and are inter-bedded with sandstones,
siltstones, and probably quartzites. The iron bearing horizons dip 10°45°,
mainly to the east-southeast (in the Sheini south and Kubalem area) and also to
the west in the area west of Sheini Village.

Deposit Type

The observed geological, mineralogical, and geochemical
features indicate that the Sheini mineralization fits a Banded Iron Formation
(BIF) model. The wide scale presence of hematite and rarity of magnetite may
indicate Hematite-rich Banded Iron Formation (H-BIF). More likely however, the
low amount of magnetite at surface is probably due to surface alteration
(oxidation) of magnetite to hematite (martite).

The relationship between
  hematite and magnetite will be clarified by the planned drilling. Based on
  similarities to other West African BIFs, the upper, oxidized layer is likely to
  be 70120 metres in thickness. The oxidized layer is likely to be underlain by a
  magnetite-facies, primary BIF.

Exploration

The initial exploration work in the Sheini area, completed by
Emmaland with input from Cardero, was carried out during late 2010 and
throughout 2011. The initial phase of work, from late 2010 to mid-2011, was
focused on obtaining sufficient data to meet the requirements of the Minerals
Commission of Ghana and to successfully win the tender to obtain prospecting
licenses over the Sheini area. The second phase of exploration, subsequent to
the issue of the three Prospecting Licences to Emmaland in late 2011, has
consisted of reconnaissance mapping over new areas to the north and south of the
original, non-exclusive exploration licence.

According to the available historical reports, there was
extensive exploration carried out in the Sheini area between 1945 and 1980. No
maps or tables showing the exact location of the historical workings (trenches
and boreholes) remain. For this reason, prospecting was focused on locating
these old workings to obtain an overview of the scale of the historical
exploration work.

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- 42 -

A total of 35 historical trenches, mainly trending east-west
with total length of around 2,076 metres, have been located to date. The
trenches are situated primarily along the ridges and steep slopes exposing the
iron mineralization where access for drilling was difficult. Most of the
trenches are oriented in an eastwest direction, which is perpendicular to the
trend of the iron mineralization.

In addition to the trenches, 18 historical boreholes have been
located during prospecting. According to the historical reports, 23 boreholes
were drilled between the 1950s and 1970s. It is not clear which of the located
collars were drilled by Jacques team in the 1950s or by the Soviet team in the
1960s. As with the historical trenches, there appears to be very limited data
remaining in the archives of the GGSD related to the drilling program.

In total, 29 trenches with an approximate length of 1,552
metres have been cleaned and prepared for sampling to date. One-meter-channel
sampling was used to collect samples from the cleaned historical trenches. In
total, 656 metres of channel sampling were carried out in 29 cleaned trenches
with approximate total trench length of 1,552 metres. These 656 metres of
channel sampling represent 659 channel samples. A total of 307 samples were
prepared and assayed by ALS laboratory in Kumasi. The rest of the samples (449)
are stored securely ready for transport in the future.

The results of the 269 trench samples (excluding blanks and
duplicates) adequately confirm the findings presented by historical explorers.
The results also confirm the field geological and mineralogical observations
that BIF, due to its composition, grain size, and texture, is typically higher
grade than Fragmental Iron Formation (Fragmental) (BIF and Fragmental are
collectively referred to as the Iron Formations).

Table 2.1: Iron Results for Major Iron Formation
Lithologies

Lithology
    Fe total. (%)Min.
    Max.
    Median
    MeanBanded Iron Formation (n=105)
    30.98
    60.08
    48.05
    47.50Fragmental Iron Formation (n=155)
    29.03
    55.04
    38.33
    38.84Fragmental Iron Formation (weathered)
      (n=9)
    16.51
    25.46
    20.07
    20.55


Sample Analysis & QA/QC

The primary laboratory used for preparation and analysis of
samples was the ALS laboratory at Kumasi, Ghana. Dr. Karel Maly of Aurum
Exploration Services, Ireland (who was retained by Emmaland), visited the
laboratory in 2011 to ensure that all aspects of sample preparation and analysis
were satisfactory. The ALS is a global network of laboratories that operates to
the highest international standards.

At the laboratory, the samples were crushed, pulverized, and
assayed. Lithogeochemical analysis using the Lithium Borate Fusion and ICP-AES
was used by ALS (code ME-ICP06) to determine the major elements oxides
(SiO2, Al2O3, Fe2O3, CaO,
MgO, Na2O, K2O, Cr2O3,
TiO2, MnO, P2O5, SrO, BaO, and LOI).

No Certified Reference Material (CRM) was acquired and no CRMs
were inserted into the batches of samples sent to ALS for preparation and
analysis. The QA/QC procedure required the insertion of field duplicated
material (inserted every 11thsample) and field blank material
(inserted every 35thsample). The field blank material consisted of
white barren quartzite collected from quartzite outcrops northwest of Sheini
Village (coordinates 223156E 1015989N).

Prepared pulps for 10% of the assayed samples (29 samples) were
sent to OMAC Laboratories in Ireland (OMAC) for analysis and comparison with
the ALS laboratory in Ghana. At OMAC, the same analytical method as used by ALS
(lithogeochemical analysis using the Lithium Borate Fusion and ICP-AES (code
BF/ES)) was chosen to obtain comparable results. Results indicate good
correlation of the iron data between the ALS (original) and OMAC (check)
laboratories for the samples, with a slight high bias (~2%) in the OMAC results. Five check samples, however, exhibit
more than 10% relative difference, and all have lower Fe2O3results in the check assays (OMAC). These samples are currently being
re-run by OMAC in order to discern whether this may have been an intra-batch
analytical error at the laboratory. This issue notwithstanding, the overall
quality of the analytical data is considered to be good.

---

- 43 -

Recommendations

Cardero Ghana, as operator of the Sheini Hills Joint Venture,
has exploration expenditure commitments of $9.18 million to be incurred by
December 8, 2013. This minimum expenditure commitment is a sum of three separate
$3.6 million commitments, relating to each of the three Prospecting Licences.

A $19.3 million exploration program, which excludes joint
venture payments, is recommended for the upcoming period ending December 8,
2013. A preliminary budget of $5.79 million is recommended to move the project
through Phase I drilling and metallurgical testing in 2012.

Cardero Ghana has already signed contracts with independent and
reputable consultants to:

- Process and interpret satellite imagery covering the Project Area. The
  results of this work are expected in Q1 2012. Their interpretation will help
  identify surface alteration of rocks associated with the oxidation and upgrade
  of primary BIF. Additionally, the study will provide a preliminary structural
  understanding of the Project Area.
- Perform an airborne geophysical survey in Q1 2012. The interpreted data,
  expected to be available in Q2 2012, will help define the extent of BIF and
  Fragmental at surface and under cover (along strike to the north and south).
  This survey will also assist in outlining and interpreting the geological
  setting of the belt by highlighting resistivity and compositional changes.
- Carry out a diamond drill program over the Project Area to identify DSO
  (direct shipping ore) and to reveal more about the geological setting of the
  Project Area and about the relationship between iron grade, oxidation state,
  and depth.

Future exploration should include:

- Additional geological mapping to provide geological context to the
  iron-dominant ridges.
- Conducting a detailed infrastructure and transport study to help with
  future project planning.
- Monitoring of early-stage exploration planning and procedures, ultimately
  producing a 43-101 resource estimate for the Sheini Project.
- Initiating an environmental baseline study across the entire area of the
  Prospecting Licences.

Planned Activities

The Company intends to proceed
with Phase I of the recommended program, and work has already commenced in this
regard. Subject to the results of Phase I being satisfactory and the Company
securing the required funding, the Company intends to proceed with Phase II of
the recommended work program upon the completion of Phase I. In any case, the
Company intends to meet the required expenditures under each of the Prospecting
Licenses.

Longnose Titanium Project, Minnesota,
USA

Information in this AIF regarding
the Longnose Titanium Project is based on information provided by the Longnose
Report. The following summary is from the Longnose Report and the detailed
disclosure in the Longnose Report is incorporated into this AIF by reference.
Readers are encouraged to review the entire Longnose Report, which is filed on
SEDAR at www.sedar.com.

---

- 44 -

Property Description and Location

The lands making up the Project (Project Area) are located in
northeastern Minnesota in St. Louis County, Township 59N, Range 13W, Section 30
and is centered at: (Coordinate system: Universal Trans Mercator, Zone 15 North,
North American 1983 Datum) 572200 metres East, 5268300 metres North.

Carderos
  indirect wholly owned subsidiary, Cardero Iron Ore (USA) Inc. (CIOUS), holds
  an option to acquire up to an 85% interest in the Project by incurring USD
  1,850,000 in expenditures (to acquire 70%) and delivering a feasibility study
  (to acquire an additional 15%). Upon CIOUS earning its 70% or 85% interest, the
  optionor of the Project has the option to maintain its 30% or 15% interest and
  enter into a joint venture with CIOUS, or to convert its working interest to
  either a 10% or 5% net profits interest. Advance royalties and production
  royalties are payable to the underlying property lessors.

CIOUS has all required licenses, permits and registrations in
place to carry out exploration and resource definition drilling. Additional
permits will be required in the future to advance to the next stage.

Accessibility, Climate, Local Resources, Infrastructure
and Physiography

Topographic relief is generally low, and the surface is
flat-laying. Elevations range between 465 and 490 metres (m) above mean sea
level. The ground cover at the Project Area is a mixture of Palustrine, forested
wetlands (Cowardin classification system), and higher dry forested ground.
Overburden, consisting of glacial till, is present and the depth to bedrock is
approximately 3 m to 30 m from surface.

Accessibility is excellent, with the
  Project located off of a paved county highway via a well maintained gravel
  road.

The climate in northeastern Minnesota is mid-continental.
Winter conditions usually begin in mid-December and last until mid-March, with
frozen ground beginning in late December to early January. The spring thaw
usually begins in mid-March to late April, with stable, dry spring-summer-fall
conditions occurring from late April to mid-December.

The population of Aurora, Minnesota (the nearest major
population centre) is approximately 1,850, and the nearby city of Hoyt Lakes (8
km, 5 miles, east of Aurora), Minnesota has a population of approximately 2,000
people.

The infrastructure in northeastern Minnesota related to mining
activities is excellent, with low cost electricity, railroads, paved state and
county highways, international shipping ports, mining professionals, mining
vendors, and trained labor all readily available. International shipping ports
are located along the north shore of Lake Superior, including Duluth/Superior,
Silver Bay, Taconite Harbor, and Two Harbors, with linked rail systems to
all.

History

The Project Area was the subject of historical exploration
processes between 1950 and 2008. The deposit was initially discovered by Bear
Creek Mining, while exploring for copper-nickel (Cu-Ni) deposits.

Twelve (12) drill holes were completed by American Shield
Corp., Bear Creek Mining, and Nicor during the 1980s and 1990s.

The Project Area was held by a series of mining companies
including American Shield and BHP Minerals International Inc. (BHP). BHP held
the Project Area for some time in the 1990s. Most of the work completed by BHP
centered on metallurgy, and TiO2recovery. Initial metallurgical
testing focussed on the production of an ilmenite concentrate. Further upgrading
analysis was completed as well, the first of which involved a smelting and
sulfation-leaching process developed by the US Bureau of Mines. Their second
investigation involved an oxidation-reduction roast followed by chemical
leaching, using a process called the Murso process.

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- 45 -

Several large (1.5 tonne to 60 tonne) bulk samples were
utilized to complete the metallurgical testwork. The larger samples were
collected from out crop of the Longnose deposit, while smaller test samples were
taken from core. The University of Minnesota, Natural Resources Research
Institute, Coleraine Minerals Research Laboratory houses what remains of both
bulk samples.

Geological Setting and Mineralization

The Project Area is located within the Superior Province of the
Canadian Shield, and is underlain by intrusive rocks generated during the
formation of the Midcontinent Rift. Mineralization is hosted by Oxide-bearing
Ultramafic Intrusions (OUI or OUIs) that intruded into layered series
intrusions of the Duluth Complex. OUIs are dominantly composed of coarse-grained
to pegmatitic pyroxenite, peridotite, and dunite that contain approximately
10-40% titanium-iron oxide mineralization, dominantly as ilmenite with lesser
titaniferous magnetite. Typically, zones of massive and semi-massive oxide are
also present throughout the stratigraphy. Locally, some OUIs also contain
abundant copper-nickel sulfide mineralization as well; however, this style of
mineralization has not been intersected within the Project Area. Most OUIs occur
along the western margin of the southern portion of the Duluth Complex, and
display numerous shapes (sheet-, funnel-, dike- and pipe-like geometries) and
inclinations (flat-lying, moderately-dipping, and sub-vertical).

The Longnose OUI is geologically interpreted to be a late-stage
intrusion that cut early Duluth Complex stratigraphy, and is associated with
magmatism generated by the 1.1 billion year old Midcontinent Rift system.

The Longnose OUl contains disseminated, semi-massive, and
massive ilmenite and titaniferous-magnetite mineralization. The Project Area
hosts a single intrusion which is at least 150 m thick, dipping shallowly to the
southeast.

Mineralization at the Project Area dominantly consists of
disseminated to net-textured, medium to coarse-grained, Ilmenite, titaniferous
magnetite and magnetite. Olivine-rich ultramafic rocks (peridotite, feldspathic
peridotite & dunite) host the majority of the titanium-iron oxide
mineralization found in the Longnose OUI, and will often be net-textured with
oxide minerals interstitial to silicates. Visual modal mineral calculations
generally estimate that titanium-iron oxide minerals compose 15-35% of the
peridotitic and dunitic rocks at the Project. Numerous massive and semi-massive
titanium-iron oxide horizons or zones (45-100% titanium-iron oxide) have been
intersected in drill core. These massive and semi-massive oxides seem to be
dominantly hosted by peridotite and dunite, though they have been intersected
within zones of pyroxenite as well. It is clear that the main mineralized
intrusion at the Project is a thick, laterally and vertically continuous
intrusion dominantly composed of a mixture of oxide-bearing peridotite,
oxide-bearing dunite, massive oxide, and semi-massive oxide with between 15% and
100% titanium-iron oxide mineralization.

Exploration

Exploration at the Project has included surface sampling,
geophysics and diamond drilling.

Twenty-seven diamond drill core holes have been
  drilled on the Project Area, including six holes drilled by CIOUS in 2010, and
  nine holes drilled by CIOUS in 2011. Historic drilling includes 12 drill holes
  completed by a variety of operators in the 1980s and 1990s. The historic drill
  core has been re-sampled by CIOUS during 2009 and 2010, where such material was
  available. In total, the twenty-seven holes totalled 5,217 m, with 1,979 m from
  historic holes and 3,238 m from CIOUS drill holes.

Drill hole spacing for the Project is variable (drill holes are
not on a regular grid) between 50 m and 100 m. Drill core has been sampled in 1
m to 6 m intervals.

Exploration data has focussed on the geology and titanium
(Ti) and iron (Fe) analytical sample data; however, other elements should be
reviewed and potentially estimated in future analysis. Titanium was measured as
TiO2and iron was measured as
Fe2O3.

---

- 46 -

Sample Preparation, Analyses and Security

CIOUS has utilized a thorough and robust procedure for
sampling, sample preparation, analysis and security.

Procedures for core handling, logging, sampling and sample
shipping were well thought out and well implemented. Analysis was completed by
ALS, one of the largest commercial laboratories in the world. A robust program
of quality assurance and quality control samples was implemented and met or
exceeded industry standard procedures. Sample security and chain of custody
documentation was maintained throughout the process and was thoroughly reviewed
by SRK.

Data Verifications

Exploration data verification for the Project has included a
site visit by SRK, enforced database structures, analytical quality assurance
and quality control (QA/QC) samples, independent sampling and assay
checking.

SRKs Wayne Barnett, Pr.Sci.Nat visited the site in July 2009
and Mike Johnson, P. Geo, visited the site in March 2010. During these site
visits, SRK verified drill hole locations, drilling, logging and sampling
procedures, security and documentation. SRK also collected independent sampling
during these site visits and confirmed the TiO2and
Fe2O3values for five Longnose samples.

CIOUS utilized an onsite database which validated the data
entry process as it was being completed and reduced clerical errors. As well,
Carderos head office checked the data upon import into their main exploration
database in order to minimize data errors.

SRK verified 92% of the assay database by downloading these
records directly from the commercial laboratory and checking them against the
Mineral Resource database.

CIOUS completed QA/QC sampling (blanks, standards, duplicates)
totalling 393 samples, equal to 23% of the total samples. SRK has reviewed the
QA/QC sample insertion rate and results, and concluded that the analytical data
should be reliable.

Mineral Processing and Metallurgical Testing

Most processing and metallurgical testwork at the Project was
completed prior to CIOUS involvement in the property.

Historical metallurgical testwork indicated that there is a
reasonable chance that a saleable ilmenite and magnetite concentrate could be
created from the Longnose deposit. Metallurgical testing regarding the Longnose
deposit has focussed primarily on optimizing ilmenite recovery and creation of
the ilmenite concentrate.

The historic metallurgical testwork indicates a relatively
simple processing flow sheet. It would include crushing the material to a
selected size and processing the ore by density and then by magnetic properties.
The density separation would remove the silicates from the much more dense
oxides. The oxides would then be split into a non-magnetic / paramagnetic
fraction as well as a magnetic fraction. Magnetite would partition into the
magnetic fraction, while the ilmenite would partition into the non-magnetic /
paramagnetic fraction. The magnetic fraction could be further upgraded to
recover some ilmenite that would partition into that fraction. The ilmenite
concentrate could then be sold to an external processing site, or could be
processed at a newly created process facility as part of a further
beneficiation/added value processing project; however, a potential upgrading
facility would have very significant capital costs.

Historical testwork has shown that the concentrates created
from the Longnose rock can be processed into a potentially saleable concentrate;
however, the quality of the concentrate may be adversely affected by the high
magnesium content of the ilmenite.

---

- 47 -

CIOUS has completed very limited metallurgical testing at this
stage. Recent work includes only Davis Tube tests, which are used to determine
the proportion of material which is magnetic and which is commonly associated
with magnetite.

CIOUS will have to complete further metallurgical work for the
Project if further economic analysis is contemplated.

Mineral Resource Estimates

In 2011, SRK was retained by Cardero to complete a Mineral
Resource for the Longnose OUI deposit, as well as update the technical report
for the Project.

SRK utilized Gemcoms Surpac®version 6.2 and
several other software packages to complete the estimation. A comprehensive and
validated drill hole database was utilized to complete the analysis. The
database includes twenty-seven drill holes; however, only twenty-four were
utilized in the estimation process due to issues with resampling of some
historic drill holes. All 2010-11 drill hole data included multi-shot downhole
surveys; however, historic holes did not have downhole surveys. The estimation
process utilized 1681 samples out of the databases 1956 samples. A total of 855
specific gravity measurements were utilized to estimate bulk densities.
Estimation of metal grades utilized regularized 2 m composites.

Two geological domains were defined for the estimation process.
The domains were defined by the presence of peridotite or pyroxenite oxide
bearing rocks. The peridotite domain has higher olivine content and encompasses
higher TiO2grades near the core of the deposit. The pyroxenite
domain includes higher pyroxene content, has lower TiO2grades and is
generally found at the periphery of the deposit. The geological domains are
generalized, with some instances of other rock types within each domain.

The estimations were made into a threedimensional block model
with 20 m by 20 m by 10 m block size, with sub-blocking to 5 m by 5 m by 2.5m.
Estimated parameters included specific gravity, TiO2and
Fe2O3grades. Metal grade interpolation was completed
through three passes using increasingly larger search ellipses and lower
restrictions on sample inclusion in each pass. Search ellipses were generally
flat pancakes with the shortest direction of continuity sub-vertically and the
longest in the northwest-southeast direction. The search ellipse orientations,
which dip 20 degrees to the east, were based upon variography completed on the 2
m composite data. Ordinary kriging (OK) was used to estimate TiO2and Fe2O3, while inverse distance squared (ID2)
was used to estimate the specific gravity data. Mineral resources were
classified in accordance with definitions provided by the Canadian Institute of
Mining (CIM) as stipulated in NI 43-101.

In order to quantify the Mineral Resources requirement of
reasonable prospects of economic extraction, the block model was subjected to
conceptual mining limits using an open pit optimization program. The process
uses reasonable mining and processing parameters to define a conceptual pit
within which the material with reasonable economic prospects should be
contained. For the Project optimization runs, it was assumed that all TiO2is contained in the mineral Ilmenite. Fe2O3values
were modified to reflect the amount of iron taken up by ilmenite as well as the
component estimated to be within silicates. However, more detailed testing is
required in order to properly quantify the magnetite content of the resource, so
iron was not given any value in the resource pit optimization limits. Historic
metallurgical data indicates that a very high percentage of the TiO2is contained within ilmenite, with a relatively small component in
titaniferous magnetite and silicates.

The Mineral Resource Statement for the Project is presented in
Table 3.1 below.

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- 48 -

Table 3.1: Mineral Resource Statement*, Longnose Project,
Minnesota, USA, SRK Consulting (Canada) Inc, effective date, January 19,
2012.

Category(Open
      Pit**)
    Estimated Quantity
    Estimated GradeTiO2
    Adjusted
      Fe2O3***Mt
    %
    %Indicated
    58.1
    16.6
    18.8Inferred
    65.3
    16.4
    19.4* Mineral resources are reported in relation to a
      conceptual pit shell. Mineral resources are not mineralreserves
      and do not have demonstrated economic viability.All figures are
      rounded to reflect the relative accuracy of the estimate. All composites
      have been capped where appropriate.** Open pit (near surface) Mineral Resources are reported
      at a cut-off grade of 8% TiO2. Cut-off grades are based on a
      price of US$170 per tonne of Ilmenite back calculated to TiO2and recoveries of 70 percent, without considering revenues from
      other metals including Fe.*** Reported Fe2O3has been lowered
      to reflect the amount of Fe estimated contained within ilmenite and
      silicates, based upon Davis Tube testing. At this time, accurately
      quantifying the amount of magnetite contained within this estimate is not
      possible.


As stated above, the Mineral Resource has been quantified in
terms of TiO2and Fe2O3, the
analyticalcomponents captured for assays of titanium and iron. The
Fe2O3values have been reduced to reflect Fe found within
silicates and within the ilmenite associated with the TiO2, however
accurately quantifying magnetite is not possible at this time as further
mineralogical work will be needed. In any potential mining scenario, the Project
would produce ilmenite (FeTiO3) and may produce titaniferous
magnetite (TiFe2O4) and magnetite (Fe3O4) as a by-product.
Using CIOUSs Davis Tube test results, historic mineralogy and metallurgy
reports, reasonable assumptions regarding mineralogy of the deposit, estimates
of the quantity of ilmenite was made. The contained ilmenite in the Mineral
Resource is summarized in Table 3.2.

Table 3.2: Summary of Longnose Project ilmenite content
within the Mineral Resource

Category
    Quantity
    Ilmenite Grade
    Contained Ilmenite(FeTiO3)Mt
    %
    Mt.Indicated
    58.1
    31.5
    18.30Inferred
    65.3
    31.2
  20.40


Interpretation and Conclusions

The Longnose deposit is an ultramafic intrusion significantly
enriched in ilmenite and magnetite oxides. The deposit is flat lying and
provides a geometry that should be amicable to open pit mining. The Longnose
deposit is approximately 700 m long in the north-south direction, 600 m wide in
the east-west direction and 150 m thick.

The Longnose OUI is geologically interpreted to be late-stage
intrusion that cuts early Duluth Complex intrusives, and is associated with
magmatism generated by the 1.1 billion year old Midcontinent Rift system. The
drilling program conducted in 2010 and 2011 by CIOUS confirmed strong
titanium-iron-oxide mineralization at the Project Area, hosted within
troctolitic rocks of the Partridge River intrusion.

The Longnose intrusion is
  stratigraphically simple, consisting of a core of olivine-rich dunitic and
  peridotitic rocks containing disseminated titanium-iron oxide mineralization
  with horizons of massive and semi-massive oxide throughout, that is enveloped by
  pyroxenitic rocks, which contain much less mineralization. Disseminated
  titanium-iron oxide mineralization is continuous, and the horizons of massive
  and semi-massive oxide may link up to form layers that dip moderately coincident
  with dip of the overall intrusion.

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- 49 -

The exploration data for the Project is robust; viable to
support the Mineral Resource defined within this document. The data has been
well validated and the analyses have been found to be repeatable. Overall,
correlation of the mineralization between drill holes is reasonable and it is
expected that the Mineral Resource accurately represents the TiO2 and Fe2O3 mineralization. Based on the
TiO2 estimates, the mineralogy of the deposit and the
Davis Tube test results, the amount of ilmenite and magnetite has been
quantified.

Ilmenite and, to a lesser extent, titaniferous magnetite is
used as a source material for titanium which is used to make paint pigment and
as a metal alloy. Rutile is the ideal source material for titanium as it
contains nearly twice as much Ti as ilmenite; however, ilmenite is by far the
more common source. Most ilmenite is processed from ilmenite sands (secondary
ilmenite) however several primary ilmenite mines have been successfully
exploited. Processing plants capable of handling ilmenite concentrates are found
in Canada, the US and throughout the world.

Ilmenite is an industrial mineral and there are risks and
uncertainties associated with this ilmenite resource, many of which are common
to industrial mineral deposits. Industrial minerals have special risks that are
not typically associated with precious or base metal mines. Special concerns
include mineralogy of material, deleterious elements (such as silica, calcium,
magnesium and manganese), and special market factors such as market size or
proprietary technology. Because of these and other issues, industrial mineral
deposits carry additional risk compared to more common metal products. Historic
testwork has indicated that the Longnose deposit produces concentrate with less
favourable magnesium levels, which may adversely affect the potential value of
the concentrate.

Historic tests have indicated that a viable ilmenite
concentrate could be created from processing of Longnose material, although
higher than ideal magnesium levels may reduce the product price somewhat. The
ilmenite could potentially be sold as a concentrate to an existing ilmenite
processing plant, as the deposit is amicable to shipping due to its proximity to
rail and a short haul to bulk ports on the western shore of Lake Superior. As
well, local added-value beneficiation is under consideration by Cardero. This goal of further beneficiation would be to
produce a high TiO2synthetic rutile slag amicable for processing into the paint pigments; however, such
processing facilities are capital intensive and further work is required to
determine if such a process is viable.

Based upon the significant amount of historical research
completed on the Project, a relatively simple processing flow sheet for ilmenite
concentrate, a recent increase in demand for ilmenite and the projects close
proximity to other bulk mines and inexpensive shipping routes, SRK believes that
the Project meets the criteria for having reasonable prospects of economic
extraction.

Recommendations

In order to begin to better understand the potential economics
of the Project, further work is required. At this stage of the exploration, SRK
recommends the following work and expenditures:

- a comprehensive mineralogical study of the oxide and sulfide mineralization
  should be conducted to confirm the specific oxide minerals present throughout
  the defined mineralization;
- metallurgical testwork in conjunction with the mineralogical studies, to
  assist with better understanding of ilmenite and magnetite recovery, project
  economic analysis and provide an update to the work completed in the 1990s;
- completion of a preliminary economic assessment to assist with further
  exploration and provide project specific economic criteria;
- further study of the other elements, such as vanadium, magnesium and silica
  contents and how they are distributed through the deposit;
- a relatively small infill drilling program consisting of 3-5 drill holes;
  and,

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- 50 -

- a small step-out drilling program targeting the southern part of the
  intrusion consisting of 3-5 drill holes.

A budget to complete the recommended work program is presented
in Table 3.3.

Table 3.3: Estimated Cost for the Exploration Program
Proposed for the Longnose Project.

Recommendation
    Estimated Cost (US$)Mineralogical studies and analytical data
    50,000Metallurgical analysis and testwork
    150,000Preliminary economic assessment analysis
    150,000Geophysical Survey
    30,000Longnose step-out drilling (3-5
      holes/900-1500m @ $165/m*)
    200,000Longnose infill drilling (3-5
      holes/600-1000m @ $165/m*)
    130,000Acquisition of additional mineral
      leases/property boundary survey
    40,000TOTAL
    750,000* Drilling cost per meter includes: Site and
      Trail preparation, drilling, sampling, facility/vehicle lease, and
      staffing


Planned Activities

The Company does not intend to
proceed with further work on the Longnose Property at this time, and will be
seeking a joint venture partner to further advance the property.

Titac Titanium Project, Minnesota, USA

Information in this AIF regarding
the Titac Titanium Project is based on information provided by the Titac Report.
The following summary is from the Titac Report and the detailed disclosure in
the Titac Report is incorporated into this AIF by reference. Readers are
encouraged to review the entire Titac Report, which is filed on SEDAR at
www.sedar.com.

Property Description and Location

The land making up the Project (Project Area) is located in
northeastern Minnesota in St. Louis County, Township 55N, Range 14W, Section 34,
and Township 54N, Range 14W, Section 3. The property is approximately centered
at: (Coordinate system: Universal Trans Mercator, Zone 15 North, North American
1983 Datum) 568000 m East, 5228000 m North.

The Project Area interests are held by Cardero Iron Ore (USA)
Inc. (CIOUS), a wholly owned indirect subsidiary of Cardero, and work on the
property is carried on through Cardero Iron Ore Management (USA) Inc., an
indirectly wholly owned subsidiary of Cardero. Cardero holds a 100% leasehold
interest in the Project Area under a mining lease dated July 1, 2009. The lease
is for an initial term of 20 years, subject to extension for up to 20 additional
years, and requires annual rental payments until commercial production and
thereafter production royalty payments (minimum $200,000/year).

CIOUS has all required licenses, permits and registrations in
place to carry out exploration and resource definition drilling. Additional
permits will be required in the future to advance to the next stage.

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- 51 -

Accessibility, Climate, Local Resources, Infrastructure
and Physiography

Topographic relief on the Titac property is generally low, and
the surface is flat-laying. Elevations range between 470 m and 490 m above mean
sea level. The ground cover is a mixture of Palustrine, forested wetlands
(Cowardin classification system), and higher dry forested ground. Overburden,
consisting of glacial till, is present and the depth to bedrock is approximately
20 to 30 m (m) from surface.

Accessibility is excellent, with the Project Area
  located along a paved county highway.

The climate in northeastern Minnesota is mid-continental.
Winter conditions usually begin in mid-December and last until mid-March, with
frozen ground beginning in late-December to early-January. The spring thaw
usually begins in mid-March to late-April, with stable, dry spring-summer-fall
conditions occurring from late-April to mid-December.

The population of Aurora, Minnesota (the nearest major
population centre) is approximately 1,850, and the nearby city of Hoyt Lakes (5
miles east of Aurora), Minnesota has a population of approximately 2,000
people.

The infrastructure in northeastern Minnesota related to mining
activities is excellent, with low cost electricity, railroads, paved state and
county highways, international shipping ports, mining professionals, mining
vendors, and trained labor all readily available. International shipping ports
are located along the north shore of Lake Superior, including Duluth/Superior,
Silver Bay, Taconite Harbor, and Two Harbors, with linked rail systems to
all.

History

Exploration of the Project Area, historically known as Section
34, has been limited, though several exploratory bore holes and geophysical
surveys have been completed. Six holes were drilled historically (by United
States Steel Corp.), and Cardero completed 30 holes in 2010 and 2 holes in 2011.
A ground magnetic survey was conducted in the mid-1960s by United States Steel
Corp. A small amount of metallurgical testwork was completed by United States
Steel Corp. in 1971.

Geological Setting and Mineralization

The Project Area is located within the Superior Province of the
Canadian Shield, and is underlain by intrusive rocks generated during the
formation of the Midcontinent Rift. Mineralization is hosted by Oxide-bearing
Ultramafic Intrusions (OUIs) that intruded into layered series intrusions of
the Duluth Complex. OUIs are dominantly composed of coarse-grained to pegmatitic
pyroxenite, peridotite, and dunite that contain approximately 15-40%
titanium-iron oxide mineralization. Typically, zones of massive and semi-massive
oxide are also present throughout the stratigraphy. Locally, some OUIs also
contain abundant copper-nickel sulfide mineralization. Most OUIs occur along the
western margin of the southern portion of the Duluth Complex, and display
numerous shapes (sheet-, funnel-, dike- and pipe-like geometries), and
inclinations (flat-lying, moderately-dipping, and sub-vertical).

The Titac OUIs are geologically interpreted to be late-stage
intrusions that cut early Duluth Complex stratigraphy, and are associated with
magmatism generated by the 1.1 billion year old Midcontinent Rift system.

The Titac OUls contain disseminated, semi-massive, and massive
titanium-iron oxide mineralization, dominantly ilmenite (TiFeO3) and
magnetite and titaniferous magnetite (Fe3O4,
Fe2TiO4). The Project

Area contains at least two mineralized OUIs (Titac North and
Titac South). Titac North is at least 450 m thick (open at depth) and has a
vertical pipe-like geometry. Titac South is at least 490 m thick, and also has a
pipe-like geometry.

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- 52 -

Exploration and Drilling

Exploration of the Project Area by CIOUS began in 2010.
Reinterpretation of the ground magnetic survey conducted by United States Steel
Corp. confirmed the presence of multiple titaniferous-iron oxide-bearing
intrusions at the Project Area including two large intrusions referred to as
Titac North and Titac South. No bedrock is exposed on the Project Area with the
result that bedrock mapping has not been undertaken.

Drilling at the Project
  Area is complex because of the stratigraphy of the Titac intrusions.

During 2010 and 2011, a total of 11,034.4 m were completed for
32 drill-holes, 8 (2685.3 m) of which were drilled at Titac North and 24 (8349.1
m) at Titac South. The drilling confirmed titanium-iron-oxide mineralization at
the Project Area and determined that the Titac property contains at least two
intrusions with large zones of titanium-iron-oxide mineralization (Titac North
and Titac South). All assay results from the 2010 and 2011 drilling campaigns
have been received and are included in the Titac Report.

Sample Preparation, Analyses and Security

Cardero has utilized a thorough and robust procedure for
sampling, sample preparation, analysis and security.

Procedures for core handling, logging, sampling, and sample
shipping were well thought out and well implemented. Analysis was completed by
ALS, one of the largest commercial laboratories in the world. A robust program
of quality assurance and quality control samples was implemented and met or
exceeded industry standard procedures. Sample security and chain of custody
documentation was maintained throughout the process and was thoroughly reviewed
by SRK.

Data Verifications

Exploration data verification for the Project Area has included
a site visit by SRK, enforced database structures, analytical quality assurance
and quality control samples, independent sampling and assay checking.

SRKs Wayne Barnett, Pri. Sci. Nat. visited the site in July
2009 and Mike Johnson, P. Geo, visited the site in March 2010. During these site
visits, SRK verified drill hole locations, drilling, logging and sampling
procedures, security and documentation. SRK also collected independent sampling
during these site visits and confirmed the TiO2and
Fe2O3values for two Titac samples.

Cardero utilized an onsite database which validated the data
entry process as it was being completed and reduced clerical errors. In
addition, Carderos head office checked the data upon import into their main
exploration database in order to minimize data errors.

SRK verified 100% of the assay database by downloading these
records directly from the commercial laboratory and checking them against the
Mineral Resource database.

Cardero completed QA/QC sampling (blanks, standards,
duplicates) totalling 1075 samples, equal to 22% of the total samples. SRK has
reviewed the QA/QC sample insertion rate and results and found that they
indicate that the analytical data should be reliable. However, analytical
standards selection and certain standard results should be more carefully
scrutinized for future programs.

Mineral Processing and Metallurgical Testing

Metallurgical test work (Davies Tube tests) was completed on
two samples from one of the historical drill holes (26002) on the Project Area
in 1972.

The historic metallurgical test work indicates a relatively
simple processing flow sheet. It would include crushing the material to a
selected size and processing the ore by density and then by magnetic properties.
The density separation would remove the silicates from the much more dense
oxides. The oxides would then be split into a non-magnetic / paramagnetic
fraction as well as a magnetic fraction. Magnetite would partition into the
magnetic fraction, while the ilmenite would partition into the non-magnetic /
paramagnetic fraction. The magnetic fraction could be further
upgraded to recover some ilmenite that would partition into that fraction. The
ilmenite concentrate could then be sold to an external processing site, or could
be processed at a newly created process facility as part of a further
beneficiation/added value processing project; however, a potential upgrading
facility would have very significant capital costs.

---

- 53 -

Cardero has completed very limited metallurgical testing at
this stage. Recent work includes only Davies Tube tests, used to determine the
proportion of magnetic iron commonly associated with magnetite. Significant
further metallurgical work is required for the Project if further economic
analysis is contemplated.

Mineral Resource Estimates

In July 2009, SRK was retained by Cardero to complete a Mineral
Resource for the Titac OUI deposits, as well as update the technical report for
the project.

SRK utilized Gemcoms Gems version 6.3.1 to complete the
Mineral Resource estimation. A comprehensive and validated drill hole database
was utilized to complete the analysis. The database includes 32 drill holes, 8
of which were drilled in Titac North and 24 of which were drilled in Titac
South. Drilling in Titac North was insufficient for the delineation of
mineralized domains and resource estimation. The Mineral Resource presented here
only includes Titac South. The estimation process utilized 2837 samples out of
the databases 3929 samples for Titac South. A total of 855 specific gravity
measurements were utilized to estimate bulk densities.

Three geological domains were modelled for the estimation
process. The domains were defined by peridotite or pyroxenite dominated oxide
bearing ultramafic rocks. A marginal zone of mixed perdidotite, pyroxenite and
country rock was also modelled.

The Titac South resources were estimated using GemsTM(a Gemcom software product) block modeling software in multiple passes in
10 x 10 x 10 m blocks. Grade estimates were based on 1.8 m composited samples.
Capping of TiO2and Fe2O3assays was not
applied in any of the three domains. Ordinary kriging was used to estimate
TiO2and Fe2O3.Inverse distance squared was
used to estimate the specific gravity data. Mineral resources were classified in
accordance with definitions provided by the Canadian Institute of Mining (CIM)
as stipulated in NI43-101. All interpolated blocks were classified as Inferred
Mineral Resource.

In order to quantify the Mineral Resources requirement of
reasonable prospects of economic extraction, the block model was subjected to
conceptual mining limits using an open pit optimization program. The process
uses reasonable mining and processing parameters to define a conceptual pit
within which the material with reasonable economic prospects should be
contained. For the Titac Project optimization runs, it was assumed that all
TiO2is contained in the mineral Ilmenite and no value was associated
with the Fe2O3material in order to avoid double counting
of the value associated with iron. Historic metallurgical data indicates that a
very high percentage of the TiO2is contained within ilmenite, with a
small component in titaniferous magnetite and silicates.

The Mineral Resource Statement for the Project is presented in
Table 4.1 below.

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- 54 -

Table 4.1: Mineral Resource Statement*, Titac Project,
Minnesota, USA, SRK Consulting (Canada) Inc, effective date, January 19,
2012

Category
    **Estimated Quantity**
    Estimated GradeTiO2
    Adjusted Fe2O3***Mt
    %
    %Open
      Pit**Inferred
    45.1
    15.0
    14.74


| | *   | Mineral resources are reported in relation to a
      conceptual pit shell. Mineral resources are not mineralreserves
      and do not have demonstrated economic viability.All figures are
      rounded to reflect the relative accuracy of the estimate. All composites
      have been capped where appropriate.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | **  | Open pit mineral resources are reported at a cut-off
      grade of 8% TiO2. Cut-off grades are based on a price of
      US$170 per tonne of Ilmenite back calculated to TiO2and
      recoveries of 70 percent, without considering revenues from other metals.                                                   
| | *** | Reported Fe2O3has been lowered to
      reflect the amount of Fe estimated to be contained in ilmenite based on
      the assumption that all Ti has been assigned to ilmenite. At this time,
      accurately quantifying the amount of magnetite contained within this
      estimate is not possible.            

As stated above, the Mineral Resource has been quantified in
terms of TiO2and Fe2O3, the
analyticalcomponents captured for assays of titanium and iron. In any potential
mining scenario, the Project would produce ilmenite (FeTiO3) and
potentially titaniferous magnetite (TiFe2O4) and magnetite
(Fe3O4) as a byproduct. The Fe2O3values have been reduced to reflect Fe found within the ilmenite
associated with the TiO2, however accurately quantifying magnetite is
not possible at this time as further mineralogical work will be needed.

Based on the assumption that all Ti is found within ilmenite,
the contained ilmenite metal in the Mineral Resource is summarized in Table
4.2.

Table 4.2: Summary of Titac Project ilmenite content within
the Mineral Resource

Category
    **Quantity**
    Ilmenite Grade
    Contained Ilmenite(FeTiO3)Mt
    %
    Mt.Inferred
    45.1
    28.5
    12.9


Interpretation and Conclusions

Ilmenite and to a lesser extent titaniferous magnetite is used
as a source material for titanium used as pigments and as a metal alloy. Rutile
is the ideal source material for titanium as it contains nearly twice as much Ti
as ilmenite; however, ilmenite is by far the more common source.

Ilmenite is an industrial mineral and there are risks and
uncertainties associated with this ilmenite resource, many of which are common
to industrial mineral deposits. Industrial minerals have special risks that are
not typically associated with precious or base metal mines. Special concerns
include mineralogy of material, deleterious elements (such as silica, calcium,
magnesium and manganese), and special market factors such as market size or
proprietary technology. Because of these and other issues, industrial mineral
deposits carry additional risk compared to more common metal products.

Historic metallurgical tests of the Titac material are very
limited. Small scale testing indicates that a viable ilmenite concentrate could
be created from processing of Titac material, although higher than ideal
deleterious element values, such as magnesium, may reduce the potential ilmenite
product price. The ilmenite may be sold as a concentrate to an existing ilmenite
processor as the deposit is amicable to shipping due to its proximity to rail
and a short haul to bulk ports on the western shore of Lake Superior. As well,
local beneficiation could be considered, particularly when other nearby OUI
bodies are considered for increased scale. The main hurdle to overcome with
future exploitation of the Titac deposit revolves around metallurgical
optimization to create the highest grade concentrate while reducing potential
deleterious element contamination of the concentrate. Further economic analysis
of this project is anticipated and should include resolution of the
mineralogical, metallurgical and processing issues.

---

- 55 -

Based upon a relatively
simple processing flow sheet for ilmenite concentrate, a recent increase in
demand for ilmenite and the projects close proximity to other bulk mines and
inexpensive shipping routes, SRK believes that the Project meets the criteria
for having reasonable prospects of economic extraction.

The mineral resources for Titac South presented in the Titac
Report represent the first time disclosure of Mineral Resource for the Project
Area. Drilling on the Titac North deposit is insufficient for delineation of the
deposit and evaluation of a resource for Titac North has not been
undertaken.

The Mineral Resource for the Titac South deposit at a cut-off
grade of 8% TiO2includes 45.1 million tonnes at an average grade of
15.0% TiO2.Based on the assumption that all Ti is found
within ilmenite, the contained ilmenite in the Mineral Resource includes 12.8
million tonnes at an average grade of 28.5% ilmenite. While not quantified here,
the potential for extraction of iron from magnetite exists and would provide an
upside to the project. As well, vanadium may be of economic interest, although
it has not been significantly analyzed by SRK.

Recommendations

The Project Area is at an early exploration stage and merits
additional work. The drilling program conducted in 2010 and 2011 by CIOUS has
confirmed strong titanium-iron-oxide mineralization at the Project Area, and
determined that the Project Area contains at least two OUIs with large zones of
titanium-iron-oxide mineralization (Titac North and Titac South). The Titac
South intrusion was extensively drilled by CIOUS in 2010 and 2011, and has been
fairly well defined by this drilling. A modest in-fill drilling program is
recommended at Titac South to further define contacts with country rock, and to
fill-in local gaps within the intrusion. Ore mineral speciation and
metallurgical/beneficiation studies, as well as a preliminary economic
assessment, should also be conducted

SRK recommends the following work and
  expenditures:

- An in-fill drilling program consisting of 6 diamond drill holes and ~1,800
  m of core is recommended;
- A petrographic and mineral chemistry study of typical oxide and sulfide
  mineralization present at Titac should be conducted to identify the specific
  oxide and sulfide minerals present, and their elemental make-up;
- Metallurgical test work in conjunction with the mineralogical studies, to
  assist with better understanding of ilmenite and magnetite recovery, project
  economic analysis: 100 kg composite from sample coarse rejects should be
  collected that represents average TiO2grades; and
- A preliminary economic assessment should be conducted.

A 2011 budget is presented to complete the recommended work
program:

---

- 56 -

Table 4.3: Estimated Cost for the Exploration Program
Proposed for the Titac Project

Recommendation
    Estimated Cost
      (US$)Titac South in-fill drilling (6 holes/1,800 m @ $180/m*)
    324,000Petrographic and mineral chemistry study
    20,000Metallurgical testing
    50,000Preliminary economic assessment study
    100,000TOTAL
    494,000


*Drilling cost per metre includes: Site
and Trail preparation, drilling, sampling, facility/vehicle-lease, and staffing

Planned Activities

The Company does not intend to
proceed with further work on the Longnose Property at this time, and will be
seeking a joint venture partner to further advance the property.

Qualified Person(s) and Quality Control/Quality
Assurance

Keith Henderson, EurGeol,
Carderos Vice President-Exploration and a qualified person as defined by
National Instrument 43-101, has supervised the preparation of the scientific and
technical information that forms the basis for the mineral property disclosure
in this AIF. Mr. Henderson is not independent of the Company, as he is an
employee and holds incentive stock options.

The work programs on the
Companys non-optioned properties are designed and are supervised by Mr.
Henderson, either alone or in conjunction with independent consultants. Mr.
Henderson and such consultants, as applicable, are responsible for all aspects
of the work, including the quality control/quality assurance program. On-site
personnel at the various projects rigorously collect and track samples which are
then sealed and shipped to ALS Chemex for assay. ALS Chemexs quality system
complies with the requirements for the International Standards ISO 9001:2000 and
ISO 17025: 1999. Analytical accuracy and precision are monitored by the analysis
of reagent blanks, reference material and replicate samples. Quality control is
further assured by the use of international and in-house standards. Blind
certified reference material is inserted at regular intervals into the sample
sequence by Cardero personnel in order to independently assess analytical
accuracy. Finally, representative blind duplicate samples are forwarded to ALS
Chemex and an ISO compliant third party laboratory for additional quality
control.

Gary M. Stubblefield, P.E., of
Norwest Corporation, is a professional engineer (Colorado, Montana and Utah)
and, as such, is acting as the Qualified Person, as defined in NI 43-101 for
certain portions of the Carbon Creek Report. Mr. Stubblefield has a B.Sc. in
Mining Engineering and more than 40 years of relevant experience in engineering
and mine supervision and operations, including 18 years in surface coal mining.
Both Mr. Stubblefield and Norwest are independent of the Company under NI
43-101.

Lawrence D. Henchel, SME, of
Norwest Corporation, is a Registered Member of the Society for Mining,
Metallurgy and Exploration, Inc (SME) and, as such is acting as the Qualified
Person, as defined in NI 43-101 for certain portions of the Carbon Creek Report,
including the October 1, 2011 resource modeling for the Carbon Creek deposit.
Mr. Henchel has a B.Sc. in Geology and 28 years of relevant experience as a geologist specializing in coal and industrial
minerals in both exploration and mining. Both Mr. Henchel and Norwest are
independent of the Company under NI 43-101.

---

- 57 -

Darrell Farrow, Pr.Sci.Nat. of
SRK Consulting (Canada) Inc. is a member of the South African Counsel for
Scientific Natural Professions and, as such is acting as the Qualified Person,
as defined in NI 43-101 for certain portions of the Longnose and Titac Reports.
Mr. Farrow has a BSc. and an MSc. in Geology and 28 years of relevant experience
as a research geochemist for four years, as a geologist at two mining operations
over a period of ten years, as a manager of an exploration laboratory for three
years, and as a consulting geologist for eleven years. Both Mr. Farrow and SRK
Consulting (Canada) Inc. are independent of the Company under NI 43-101.

Michael Johnson, P.Geo of SRK
Consulting (Canada) Inc. is a Professional Geoscientist (BC) and, as such is
acting as the Qualified Person, as defined in NI 43-101 for certain portions of
the Longnose and Titac Reports, including the January 19, 2012 resource modeling
for the Longnose and Titac deposits. Mr. Johnson has a BSc. in Geological
Sciences and 15 years of relevant experience as a geologist, exploration
manager, mine geologist and open pit mine manager. He has extensive experience
in resource estimation within many deposit types and has worked with ultramafic
intrusions and related mineral deposits for more than 10 years. Both Mr. Johnson
and SRK Consulting (Canada) are independent of the Company under NI 43-101.

**ITEM
6:**               **DIVIDENDS**

There are no restrictions which
prevent the Company from paying dividends. The Company has not paid any
dividends in the last three financial years. The Company has no present
intention of paying any dividends, as it anticipates that all available funds
will be invested to finance the growth of its business. The directors of Cardero
will determine if and when dividends should be declared and paid in the future,
based on the Companys financial position at the relevant time.

**ITEM
7:**               **DESCRIPTION
OF CAPITAL STRUCTURE**

General Description of Capital Structure

The authorized capital of Cardero
is an unlimited number of Common Shares, of which 91,517,854 were issued at
January 26, 2012. The holders of Common Shares are entitled to receive notice of
and attend all meetings of shareholders, with each Common Share held entitling
the holder to one vote on any resolution to be passed at such shareholder
meetings. The holders of Common Shares are entitled to dividends if, as and when
declared by the board of directors of Cardero. The Common Shares are entitled,
upon liquidation, dissolution or winding up of Cardero, to receive the remaining
assets of Cardero available for distribution to shareholders.

**ITEM
8:**               **MARKET
FOR SECURITIES**

The Common Shares are listed and
posted for trading on the TSE (symbol CDU), on the NYSE-A (symbol CDY), and
on the Frankfurt Stock Exchange (symbol CR5).

Trading Price and Volume

The following table provides
information as to the high, low and closing prices of the Common Shares on the
TSE during the 12 months of the most recently completed financial year and the 3
months since the most recent financial year end, as well as the volume of shares
traded for each month:

---

- 58 -

Toronto Stock Exchange

Month
    High
      ($)
    Low
      ($)
    Close
      ($)
    VolumeJanuary 1 to 26, 2012
    1.56
    1.02
    1.51
    8,163,017December, 2011
    1.24
    0.89
    1.02
    2,545,519November, 2011
    1.31
    0.96
    1.10
    4,755,469October, 2011
    1.10
    0.75
    1.08
    1,681,353September, 2011
    1.22
    0.90
    0.96
    2,401,852August, 2011
    1.28
    0.98
    1.20
    5,480,767July, 2011
    1.39
    1.17
    1.25
    3,868,518June, 2011
    1.56
    1.13
    1.22
    3,315,811May, 2011
    1.77
    1.51
    1.56
    1,737,496April, 2011
    1.89
    1.69
    1.74
    2,038,320March, 2011
    2.16
    1.59
    1.84
    4,125,718February, 2011
    2.25
    1.73
    1.87
    2,199,321January, 2011
    2.22
    1.68
    1.78
    2,324,008December, 2010
    2.35
    1.37
    2.30
    3,775,184November, 2010
    1.60
    1.20
    1.54
    2,879,008


**ITEM
9:**               **ESCROWED
SECURITIES**

There are no securities of the Company subject to escrow.

**ITEM
10:**               **DIRECTORS
AND EXECUTIVE OFFICERS**

Name, Occupation and Security Holding

The names, positions or offices
held with Cardero, province/state and country of residence, and principal
occupation over the last five years of the Directors and executive officers of
Cardero are as follows:

|Name, Position and                                                                  | Principal Occupation                                                                                                                       | Period of Service as an                                                                                                                              
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Province/State and Country of                                                       | During the Past 5
      Years(1)                                                                                                           | Executive Officer or                                                                                                                                 
|Residence(1)                                                                        |                                                                                                                                            | Director(2)                                                                                                                                          
|                                                                                    |                                                                                                                                            |                                                                                                                                                      
|Michael Hunter President and Chief Executive
      Officer British Columbia, Canada | Businessman; Director, President & CEO of
      Cardero Coal since June 2008; co-founder of First Coal
      Corporation, director to 2008 | President since June 1, 2011 Chief
      Executive Officer since November 9, 2011                                                                    
|                                                                                    |                                                                                                                                            |                                                                                                                                                      
|Hendrik Van Alphen Managing Director
      British Columbia, Canada                 | Businessman; President of Cardero, 2000 to June
      1, 2011; Chief Executive Officer of Cardero, 2001 to November
      9, 2011          | Director since April 19, 1999 President
      from April 10, 2000 to June 1, 2011 Chief Executive Officer
      from May 14, 2001 to November 9, 2011

---

- 59 -

|Name, Position and                                                                             | Principal Occupation                                                                                                                                                                                                                                                                        | Period of Service as an                                                                
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------
|Province/State and Country of                                                                  | During the Past 5
      Years(1)                                                                                                                                                                                                                                                            | Executive Officer or                                                                   
|Residence(1)                                                                                   |                                                                                                                                                                                                                                                                                             | Director(2)                                                                            
|                                                                                               |                                                                                                                                                                                                                                                                                             |                                                                                        
|Leonard Harris(3)(4)(5)(6)
      Director Colorado, USA                                        | Independent consultant to the
      mining industry, 1992 to present.                                                                                                                                                                                                                       | Since February 25, 2000                                                                
|                                                                                               |                                                                                                                                                                                                                                                                                             |                                                                                        
|Lawrence W. Talbot Director, Vice-President and
      General Counsel British Columbia, Canada | Barrister and Solicitor; Owner,
      Lawrence W. Talbot Law Corporation (law firm) since May, 2006;
      previously Partner, Gowling Lafleur Henderson LLP (law firm) since
      April 2000.                                                                                             | Director since April 17, 2003
      Vice-President & General Counsel since July 1, 2006
|                                                                                               |                                                                                                                                                                                                                                                                                             |                                                                                        
|Murray W. Hitzman,
      Ph.D.(3)(4)(5) Director Colorado,
      United States                 | Geologist; Professor of Economic
      Geology at the Colorado School of Mines since June 1996 and Head
      of the Department of Geology and Geological Engineering at the
      Colorado School of Mines, August 2000 to August 2007.                                                    | Since January 4, 2006                                                                  
|                                                                                               |                                                                                                                                                                                                                                                                                             |                                                                                        
|Stephan A. Fitch(3)(4)(6)
      Director London, England                                       | Businessman; Managing Director, IAG Holdings
      Limited (private investment company) 2003 to present; previously
      Partner, International Asset Group Ltd. (private merchant and
      investment banking firm) 1995 to 2003.                                                        | Since May 31, 2006                                                                     
|                                                                                               |                                                                                                                                                                                                                                                                                             |                                                                                        
|Blaine Bailey, CGA Chief Financial Officer
      British Columbia, Canada                      | Businessman, CGA; CFO of Cardero
      Coal since July 2008; Principal of Promaid Services Ltd. from
      September 2002 to January 2011                                                                                                                                                   | Since November 9, 2011                                                                 
|                                                                                               |                                                                                                                                                                                                                                                                                             |                                                                                        
|Keith Henderson, EurGeol Executive Vice
      President British Columbia, Canada               | Geologist; Vice President, Exploration of
      Cardero, April 1, 2007 to November 9, 2011; President, Dorato
      Resources Inc., December 1, 2008 to October, 2011; Senior Project
      Geologist, Anglo American (Exploration) Canada Ltd., 2002 to March
      31, 2007               | Executive Vice President since November
      9, 2011                                  
|                                                                                               |                                                                                                                                                                                                                                                                                             |                                                                                        
|Glenn Hoffman CEO and President of Cardero
      Iron Ore Company Ltd. South Carolina, USA     | Metallurgist; CEO and President
      of Cardero Iron Ore Company Ltd. (subsidiary) since August, 2007;
      previously, several positions, including Manager of Research and
      Development, with Midrex Technologies, Inc. (private process
      engineering and technology company) | Since August 23, 2007                                                                  

Notes:

|1. | The information as to place of residence and principal
      occupation, not being within the knowledge of Cardero, has been furnished
      by the respective Directors and executive officers individually.                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | All directorships expire at the next Annual General
      Meeting of the shareholders of Cardero (which is required to be held on or
      before December 15, 2012). All officers hold office at the pleasure of the
      Board.
|3. | Denotes member of the Audit Committee.                                                                                                                                                                                            
|4. | Denotes member of the Compensation Committee.                                                                                                                                                                                     
|5. | Denotes member of the Sustainable Development
      Committee.                                                                                                                                                                    
|6. | Denotes member of the Corporate Governance and Nominating
      Committee                                                                                                                                                         

---

- 60 -

Cardero does not currently have
any board committees other than the Audit Committee, the Compensation Committee,
the Corporate Governance and Nominating Committee and the Sustainable
Development Committee.

As at January 26, 2012, Carderos
Directors and executive officers, as a group, beneficially hold a total of
3,374,609 Common Shares, directly or indirectly, representing 3.7% of the
91,517,854 issued Common Shares. Carderos Directors and executive officers, as
a group, also hold the following incentive stock options to purchase up to the
following numbers of Common Shares until the dates shown:

Number of Options to
    Exercise Price
    Expiry DatePurchase Common
      Shares
    per
      Common Share500,000
    $1.16
    July 29, 2012875,000
    $1.16
    August 11, 201240,000
    $0.06
    June 1, 201380,000
    $0.16
    June 1, 2013240,000
    $0.31
    June 1, 2013240,000
    $0.06
    June 1, 201380,000
    $0.31
    June 1, 201360,000
    $0.38
    June 1, 2013400,000
    $0.38
    June 1, 2013136,000
    $0.44
    June 1, 201320,000
    $0.16
    June 1, 2013985,000
    $1.10
    November 9, 2013650,000
    $1.51
    January 26, 2014


Cease Trade Orders, Bankruptcies, Penalties or
Sanctions

|1. | No Director or executive officer of Cardero is, as at the
      date of this AIF, or was within ten years before the date of this AIF, a
      director, chief executive officer or chief financial officer of any
      company (including Cardero) that:
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                           
|   | (a)                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                           

---

- 61 -

| | (b) | was subject to an order that was issued after the
      Director or executive officer ceased to be a director, chief executive
      officer or chief financial officer and which resulted from an event that
      occurred while that person was acting in the capacity as director, chief
      executive officer or chief financial officer.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the purposes hereof, the term
order means:

|   | (a)                                                                                                                                                                                              | a cease trade order;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (b)                                                                                                                                                                                              | an order similar to a cease trade order; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (c)                                                                                                                                                                                              | an order that denied the relevant company access to any
      exemption under securities legislation,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | that was in effect for a period of more than 30
      consecutive days.                                                                                                                         
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | No Director or executive officer of Cardero, or a
      shareholder holding a sufficient number of securities of Cardero to affect
      materially the control of Cardero:                     
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (a)                                                                                                                                                                                              | is, as at the date of this AIF, or has been within the
      ten years before the date of this AIF, a director or executive officer of
      any company (including Cardero) that, while such person was acting in such
      capacity, or within a year of that person ceasing to act in that capacity,
      became bankrupt, made a proposal under any legislation relating to
      bankruptcy or insolvency or was subject to or instituted any proceedings,
      arrangement or compromise with creditors or had a receiver,
      receiver-manager or trustee appointed to hold its assets, except as
      follows:
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                  | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (b)                                                                                                                                                                                              | has, within ten years before the date of this AIF, become
      bankrupt, made a proposal under any legislation relating to bankruptcy or
      insolvency, or become subject to or instituted any proceedings,
      arrangement or compromise with creditors, or has a receiver, receiver
      manager or trustee appointed to hold the assets of the Director, executive
      officer or shareholder.                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | No Director or executive officer of Cardero, or a
      shareholder holding a sufficient number of securities of Cardero to affect
      materially the control of Cardero, has been subject to:
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (a)                                                                                                                                                                                              | any penalties or sanctions imposed by a court relating to
      securities legislation or by a securities regulatory authority or has
      entered into a settlement agreement with a securities regulatory
      authority; or                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | (b)                                                                                                                                                                                              | any other penalties or sanctions imposed by a court or
      regulatory body that would likely be considered important to a reasonable
      investor making an investment decision.                                                                                                                                                                                                                                                                                                                                                                                                                                        

Conflicts of Interest

Certain Directors and executive
officers of Cardero are directors, officers and/or shareholders of other private
and publicly listed companies, including companies that engage in mineral
exploration and development (including Wealth Minerals Ltd., International Tower
Hill Mines Ltd., Dorato Resources Inc., Trevali Mining Corporation, Indico
Resources Ltd., Balmoral Resources Ltd., Ethos Capital Corp., Pedro Resources
Ltd., Remstar Resources Ltd. and Minaurum Gold Inc.). To the extent that such
other companies may participate in or be affected by ventures involving Cardero,
these Directors and executive officers of Cardero may have conflicting interests
in negotiating, settling and approving the terms of such ventures. Conflicts of interest affecting the Directors and
executive officers of Cardero will be governed by Carderos Code of Business
Conduct and Ethics, the Articles of Cardero and the provisions of the BCBCA and
other applicable laws. In the event that such a conflict of interest arises at a
meeting of the Directors, a Director affected by the conflict must disclose the
nature and extent of his interest and abstain from voting for or against matters
concerning the matter in respect of which the conflict arises. Directors and
executive officers are required to disclose any conflicts or potential conflicts
to the board of Directors as soon as they become aware of them. In accordance
with the requirements of the NYSE Amex Company Guide, transactions involving a
conflict of interest or related party transactions are required to be approved
by Carderos Audit Committee.

---

- 62 -

**ITEM
11:**               **PROMOTERS**

Cardero does not presently have,
and has not within the last two completed financial years had, any
promoters.

**ITEM
12:**               **LEGAL
PROCEEDINGS AND REGULATORY ACTIONS**

Legal Proceedings

The Company is not currently, and
has not since November 1, 2010 (being the commencement of the Companys last
competed financial year) been, a party to any legal proceedings, nor is any of
the Companys properties presently, or has, since November 1, 2010 (being the
commencement of the Companys last competed financial year), any of the
Companys properties been, subject to any legal proceedings.

Regulatory Actions

|   | There have not been any:                                                                                                                                                                                                                                         
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                  
|1. | penalties or sanctions imposed against Cardero by a court
      relating to securities legislation or by a securities regulatory authority
      during the financial year ended October 31, 2011;                                                               
|   |                                                                                                                                                                                                                                                                  
|2. | other penalties or sanctions imposed against Cardero by a
      court relating to securities legislation or by a securities regulatory
      authority that would likely be considered important to a reasonable
      investor making an investment decision; or
|   |                                                                                                                                                                                                                                                                  
|3. | settlement agreements entered into by Cardero before a
      court relating to securities legislation or with a securities regulatory
      authority during the financial year ended October 31,
  2011.                                                        

Interest of Management and Others in Material
Transactions

|   | No:                                                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                         
|1. | Director or executive officer of the Company;                                                                                                                           
|   |                                                                                                                                                                         
|2. | any person or company that is the direct or indirect
      beneficial owner of, or who exercises control or direction over, more than
      10% of the Common Shares; or
|   |                                                                                                                                                                         
|3. | any associate or affiliate of any of the persons or
      companies referred to in paragraphs 1 or 2,                                                                   

has, during any of the financial years ended October 31, 2009,
2010 or 2011, or during the current financial year, had any material interest,
direct or indirect, in any transaction that has materially affected, or will
materially affect, the Company, other than:

---

- 63 -

| | (a) | On November 29, 2011, Cardero closed a non-brokered
      private placement of 8,029,750 units. The units were sold at $0.95 per
      unit, and each unit consisted of one Common Share and one-half of a share
      purchase warrant, with one whole warrant being exercisable to purchase an
      additional Common Share at a price of $1.25 for 12 months from closing.
      Michael Hunter, the President and CEO, purchased an aggregate of 205,740
      units; Hendrik Van Alphen, the Managing Director, purchased an aggregate
      of 580,000 units; Lawrence Talbot, a Director and the Vice-President and
      General Counsel, purchased an aggregate of 105,000 units; and Keith
      Henderson, the Executive Vice President, purchased an aggregate of 121,000
      units. Such purchases were upon the identical terms and conditions as the
      other subscribers in the placement.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (b) | Stephan Fitch, a Director of Cardero, is a director and
      significant shareholder of a private company which is the major
      shareholder (67%) of International Minerals and Mines Ltd. (IMM). The
      Company acquired from IMM a 15% interest in IMM Gold Ltd. (IMMG), a
      subsidiary of IMM (See General Development of the Business  Three Year
      History for details on this transaction). This transaction was approved
      by Carderos audit committee and board of directors (other than Stephan
      Fitch, who abstained from voting in each case).                                                                                                                                                                                                                                                                                                                       

**ITEM
13:**               **TRANSFER
AGENT AND REGISTRAR**

Carderos transfer agent and
registrar is Computershare Investor Services Inc. Transfers may be effected at,
and registration facilities are maintained at:

|1. | in British Columbia, 3rdFloor, 510 Burrard
      Street, Vancouver, British Columbia, V6C 3B9; and
|-- | --------------------------------------------------------------------------------------------------
|   |                                                                                                   
|2. | in Ontario, 100 University Avenue, 11thFloor,
      Toronto, Ontario M5J 2Y12.                    

**ITEM
14:**               **MATERIAL
CONTRACTS**

Other than as set out in this AIF
under Significant Acquisitions and in the ordinary course of the Companys
business of mineral property evaluation, acquisition and divestiture and
exploration, including raising the funding therefor, there are no material
contracts that have been entered into by the Company since November 1, 2010
(being the commencement of the Companys most recently completed financial year)
that are still in effect and that require filing under Section 12.2 of National
Instrument 51-102.

**ITEM
15:**               **NAMES
AND INTERESTS OF EXPERTS**

Names and Interests of Experts

The following are the persons or companies:

|1. | who were named as having prepared or certified a
      statement, report or valuation described or included in a filing, or
      referred to in a filing, made under National Instrument 51-102 by Cardero
      during, or relating to, the fiscal year ending October 31, 2011, being
      Carderos most recently completed financial year; and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                     
|2. | whose profession or business gives authority to the
      statement, report or valuation made by the person or company:                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                     
|   | (a)                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                     

---

- 64 -

| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                            | provided an auditors report dated January 26, 2012 in
      respect of the Companys consolidated financial statements for the years
      ended October 31, 2011 and 2010 and incorporated by reference into this
      AIF.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Smythe Ratcliffe LLP is independent in accordance with
      the auditors rules of professional conduct in British Columbia;                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                
| | (b) | Each of Gary M. Stubblefield and Lawrence D. Henchel of
      Norwest Corporation is responsible for the preparation of one or more
      sections of the Carbon Creek Report incorporated by reference into this
      AIF. Each of them is independent of the Company and neither holds more
      than 1% of the Common Shares;                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                
| | (c) | Keith J. Henderson, EurGeol, PGeo, of the Company is
      responsible for the preparation of the Sheini Report incorporated by
      reference into this AIF. Mr. Henderson is not independent of the Company,
      as he is the Executive Vice President, and holds Common Shares and
      incentive stock options; and                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                
| | (d) | Each of Michael Johnson, PGeo, and Darrell Farrow, Pr.
      Sci. Nat., on behalf of SRK Consulting (Canada) Inc., is responsible for
      the preparation of one or more sections of the Longnose Report and the
      Titac Report incorporated by reference into this AIF. Each of them is
      independent of the Company and none of them holds more than 1% of the
      Common Shares.

**ITEM
16:**               **ADDITIONAL
INFORMATION**

Audit Committee Information

Under National Instrument 52-110
 Audit Committees (NI 52-110), companies that are required to file an Annual
Information Form are required to provide certain disclosure with respect to
their audit committee, including the text of the audit committees charter, the
composition of the audit committee and the fees paid to the external auditor.
This information with respect to Cardero is provided in Schedule A.

Additional Information

Additional information relating
to Cardero may be found on SEDAR at www.sedar.com. Additional
information, including Directors and officers remuneration and indebtedness,
principal holders of Carderos securities and securities authorized for issuance
under equity compensation plans, if applicable, is contained in the Information
Circular. Additional financial information is available in the Financial
Statements and MD&A.

A copy of this AIF, the
Information Circular, the Financial Statements and the MD&A, together with
any interim financial statements from the past financial year, may be found on
the SEDAR website at www.sedar.comor be obtained upon request from the
Secretary of Cardero. A reasonable fee for copying may be charged if the request
is made by a person who is not a registered security holder of Cardero.

---

Schedule A Audit Committee Information

The Audit Committees Charter

The following is the text of the
current Charter for Carderos Audit Committee:

CARDERO RESOURCE
CORP.AUDIT COMMITTEE
CHARTER(Adopted by the Board of Directors on December 16,
2004)

ARTICLE 1 - PURPOSE

The overall purpose of the Audit
Committee (the Committee) is to:

| | (a) | ensure that the management of Cardero Resource Corp. (the
      Company) has designed and implemented an effective system of internal
      financial controls for reviewing and reporting on the Companys financial
      statements;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                          
| | (b) | oversee, review and report on the integrity of the
      Companys financial disclosure and reporting;                                                                                                                                   
| |     |                                                                                                                                                                                                                                          
| | (c) | review the Company's compliance with regulatory and
      statutory requirements as they relate to financial statements, taxation
      matters and disclosure of material facts; and                                                    
| |     |                                                                                                                                                                                                                                          
| | (d) | be directly responsible for:                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                          
| |     | (i)                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                          
| |     | (ii)                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                          
| |     | (iii)                                                                                                                                                                                                                                    

ARTICLE 2 - COMPOSITION, PROCEDURES AND
ORGANIZATION

|2.1 | The Committee will consist of at least three members of
      the Board of Directors (the Board), all of whom will be independent
      and unrelated directors of the Company within the meaning of all
      applicable legal and regulatory requirements (except in the circumstances,
      and only to the extent, permitted by all applicable legal and regulatory
      requirements).                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2.2 | All of the members of the Committee will be financially
      literate, at least one member of the Committee will have accounting or
      related financial expertise (i.e. able to analyze and interpret a full set
      of financial statements, including the notes thereto, in accordance with
      generally accepted accounting principles) and at least one member of the
      Committee will be a financial expert within the meaning of the rules and
      forms adopted by the Securities and Exchange Commission (except in the
      circumstances, and only to the extent, permitted by all applicable legal
      and regulatory requirements).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|2.3 | The Board, at its organizational meeting held in
      conjunction with each annual general meeting of the shareholders, will
      appoint the members of the Committee for the
ensuing year. The Board may at any time remove or replace any
      member of the Committee and may fill any vacancy in the
  Committee.                                                                                                                                                                                                                                                                                                                                             

---

- 4 -

|2.4 | Unless the Board has appointed a chair of the Committee,
      the members of the Committee will elect a chair from among their
      number.                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.5 | The Committee will select an individual to act as
      secretary for the Committee, who will be either:                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.6 | The quorum for meetings will be a majority of the members
      of the Committee, present in person or by telephone or other
      telecommunication device that permits all persons participating in the
      meeting to speak and to hear each other. Decisions by the Committee will
      be by the affirmative vote of a majority of the members of the Committee,
      or by consent resolutions in writing signed by each member of the
      Committee.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.7 | The Committee will have access to such officers and
      employees of the Company and to the Company's external auditors, and to
      such information respecting the Company, as it considers to be necessary
      or advisable in order to perform its duties and
responsibilities.                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.8 | Meetings of the Committee will be conducted as
      follows:                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |     | in each case at such times and at such locations as may
      be determined by the Committee or the chair of the Committee. Except in
      respect of a regularly scheduled meeting of the Committee, notice of such
      meeting, together with a proposed agenda, will be delivered to each member
      of the Committee not less that forty-eight (48) hours prior to the
      proposed meeting time (which notice may be waived by all of the members of
      the Committee); and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (b) | the external auditors and management representatives will
      be invited to attend as necessary in the discretion of the
    Committee.                                                                                                                                                                                                                                                                                                                                                 

|2.9 | The internal accounting staff, any external accounting
      consultant(s) and the external auditors will have a direct line of
      communication to the Committee through its chair and may bypass management
      if deemed necessary. The Committee, through its chair, may contact
      directly any employee in, or consultant of, the Company as it deems
      necessary, and any employee of, or consultant to, the Company may bring
      before the Committee any matter involving questionable, illegal or
      improper financial practices or transactions.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 5 -

|2.10 | The Committee may, in its sole discretion, retain, at the
      expense of the Company, such legal, financial or other advisors or
      consultants as it may deem necessary or advisable in order to properly and
      fully perform its duties and responsibilities
hereunder.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ARTICLE 3 - DUTIES AND RESPONSIBILITIES

|3.1 | The overall duties and responsibilities of the Committee
      will be as follows:                                
|--- | ------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                   
|    | (a)                                                                                                               
|    |                                                                                                                   
|    |                                                                                                                   
|    |                                                                                                                   
|    |                                                                                                                   
|    |                                                                                                                   
|    |                                                                                                                   
|    |                                                                                                                   
|    | (b)                                                                                                               
|    |                                                                                                                   
|    | (c)                                                                                                               
|    |                                                                                                                   
|    | (d)                                                                                                               
|    |                                                                                                                   
|    | (e)                                                                                                               
|    |                                                                                                                   
|    | (f)                                                                                                               
|    |                                                                                                                   
|3.2 | The duties and responsibilities of the Committee as they
      relate to the external auditors will be as follows:
|    |                                                                                                                   
|    | (a)                                                                                                               
|    |                                                                                                                   
|    | (b)                                                                                                               
|    |                                                                                                                   
|    | (c)                                                                                                               
|    |                                                                                                                   
|    | (d)                                                                                                               

---

- 6 -

| | (e) | to obtain confirmation from the external auditors of the
      Company that they will report directly to the Committee;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (f) | to obtain confirmation from the external auditors of the
      company that they will report in a timely matter to the Committee all
      critical accounting policies and practices to be used, all alternative
      accounting policies and practices, the ramifications of each of such
      accounting policies and practices and the accounting policy and practice
      preferred by the external auditors of the Company, for the financial
      information of the Company within applicable generally accepted accounting
      principles (GAAP) which have been discussed with management of the
      Company and will provide a copy of all material written communications
      between the external auditors of the Company and management of the Company
      including, without limitation, any management letter or schedule of
      unadjusted differences;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (g) | obtain confirmation from the external auditors of the
      Company that they will ensure that all reports filed under the United
      States Securities Exchange Act of 1934, as amended, which contain
      financial statements required to be prepared in accordance with Canadian
      GAAP and/or are reconciled to, United States GAAP, reflect all material
      correcting adjustments identified by the external auditors of the
      Company;                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (h) | to review and approve the Companys hiring policies
      regarding partners, employees and former partners and employees of the
      present and any former external auditors of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (i) | to review and pre-approve all non-audit services to be
      provided to the Company (or any of its subsidiaries) by the external
      auditors, provided that such pre- approval authority may be delegated by
      the Committee to any member of the Committee who is independent and
      unrelated on the condition that any such pre-approval must be presented
      to the Committee at its first schedule meeting following any such
      approval;                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (j) | review the audit plan of the external auditors prior to
      the commencement of the audit;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (k) | to review with the external auditors, upon completion of
      their annual audit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | (vi)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

- 7 -

|    |                                                                                                                                 | (vii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | any significant proposed adjustments and recommendations for improving
      internal accounting controls, accounting principles or management systems,
      and            
|--- | ------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    |                                                                                                                                 | (viii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | the non-audit services provided by the external auditors
      during the year under audit;                                                                                  
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (l)                                                                                                                             | to discuss with the external auditors not just the
      acceptability, but also the quality, of the Companys accounting
      principles; and                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (m)                                                                                                                             | to implement structures and procedures to ensure that the
      Committee meets the external auditors on a regular basis in the absence of
      management.                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|3.3 | The duties and responsibilities of the Committee as they
      relate to the internal control procedures of the Company are to:
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (a)                                                                                                                             | review the appropriateness and effectiveness of the
      Company's policies and business practices which impact on the financial
      integrity of the Company, including those relating to internal accounting,
      the use of and services provided by any external accounting consultant(s),
      insurance, information services and systems and financial controls,
      management reporting and risk management, and to ensure that the Company
      maintains:                                                          
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    |                                                                                                                                 | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | the necessary books, records and accounts in reasonable
      detail to accurately and fairly reflect the Companys financial
      transactions,                            
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    |                                                                                                                                 | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | effective internal control systems, and                                                                                                                                      
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    |                                                                                                                                 | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | adequate processes for assessing the risk of material
      misstatement of the financial statements and for detecting control
      weaknesses or fraud;                    
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (b)                                                                                                                             | establish procedures for:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    |                                                                                                                                 | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | the receipt, retention and treatment of complaints
      received by the Company regarding accounting, internal accounting controls
      or auditing matters, and           
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    |                                                                                                                                 | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | the confidential, anonymous submission by employees or
      any external consultants of the Company of concerns regarding questionable
      accounting or auditing matters;
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (c)                                                                                                                             | to periodically review this policy and recommend to the
      Board any changes which the Committee may deem appropriate;                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (d)                                                                                                                             | review any unresolved issues between management and the
      external auditors that could affect the financial reporting or internal
      controls of the Company;                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (e)                                                                                                                             | periodically review the Company's financial and auditing
      procedures and the extent to which recommendations made by the internal
      accounting staff, by any external accounting consultant(s) or by the
      external auditors have been implemented;                                                                                                                                                                                                                                                                       
|    |                                                                                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                                                                              
|    | (f)                                                                                                                             | assist in the preparation of any internal control report
      by management, which provides that management of the Company is
      responsible for establishing and maintaining an adequate control structure
      and procedures for financial reporting by the Company, assessing the effectiveness of
      such control structure and procedures, and ensuring that the external
      auditors of the Company attest to, and report on, the assessment of such
  control structure and procedures by management of the Company;

---

- 8 -

|    | (g)                                                             | assist the Chief Executive Officer and the Chief
      Financial Officer of the Company in their assessment of the effectiveness
      of the Companys internal control over financial reporting and in
      determining whether there has been any material change in the Companys
      internal control over financial reporting which has materially affected or
      could materially affect such internal control subsequent to the date of
      the evaluation; and                                                      
|--- | --------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (h)                                                             | assist the Chief Executive Officer and the Chief
      Financial Officer of the Company in identifying and addressing any
      significant deficiencies or material weaknesses in the design or operation
      of the Companys internal control over financial information and any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the Companys internal control
      over financial reporting.                                                          
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3.4 | The Committee is also charged with the responsibility
      to:
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (a)                                                             | review the Company's quarterly statements of earnings,
      including the impact of unusual items and changes in accounting principles
      and estimates and report to the Board with respect thereto;                                                                                                                                                                                                                                                                                                                            
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (b)                                                             | review and approve the financial sections of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                 | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                 | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                 | (iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                 | (iv)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                 | (v)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                 | and report to the Board with respect thereto including,
      without limitation, as to the approval (or otherwise) thereof by the
      Board;                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (c)                                                             | review regulatory filings and decisions as they relate to
      the Company's consolidated annual and interim financial statements,
      including any press releases with respect thereto;                                                                                                                                                                                                                                                                                                                                         
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (d)                                                             | ensure that the Company discloses in the periodic reports
      of the Company, as appropriate, whether at least one member of the
      Committee is a financial expert within the meaning of the rules and
      forms adopted by the Securities and Exchange Commission;                                                                                                                                                                                                                                                        
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (e)                                                             | ensure that all non-audit services approved by or on
      behalf of the Committee are disclosed in the periodic reports of the
      Company;                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | (f)                                                             | ensure that each annual report and, to the extent
      required by any applicable legal or regulatory requirement, any quarterly
      report of the Company includes disclosure with respect to all material
      off-balance sheet transactions, arrangements, obligations (including contingent
      obligations) and other relationships of the Company with unconsolidated
      entities which may have a current or future effect on the Company in
      accordance with all applicable legal and regulatory requirements;

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|    | (g)                                                      | ensure that all financial statements and other financial
      information, including pro forma financial information, included in any
      report filed by the Company with any regulatory authority or contained in
      any public disclosure or press release of the Company is presented in a
      manner which does not contain a material misstatement or omission and
      reconciles the pro forma information contained therein to Canadian GAAP,
      and if appropriate, reconciles such pro forma information contained
      therein to United States GAAP, and which otherwise complies with all
      applicable legal and regulatory requirements;
|--- | -------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (h)                                                      | review the appropriateness of the policies and procedures
      used in the preparation of the Company's consolidated financial statements
      and other required disclosure documents, and consider recommendations for
      any material change to such policies;                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (i)                                                      | review and report on the integrity of the Companys
      consolidated financial statements;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (j)                                                      | review the minutes of any audit committee meeting of any
      subsidiaries of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (k)                                                      | review with management, the external auditors and, if
      necessary, with legal counsel, any litigation, claim or other contingency,
      including tax assessments that could have a material effect upon the
      financial position or operating results of the Company and the manner in
      which such matters have been disclosed in the consolidated financial
      statements;                                                                                                                                                                                                                                                                           
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (l)                                                      | review the Companys compliance with regulatory and
      statutory requirements as they relate to financial statements, tax matters
      and disclosure of material facts; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (m)                                                      | develop a calendar of activities to be undertaken by the
      Committee for each ensuing year and to submit the calendar in the
      appropriate format to the Board within a reasonable time following each
      annual general meeting of shareholders.                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3.5 | The Committee shall have the authority to
    determine:
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (a)                                                      | subject to the grant by the shareholders of the authority
      to do so, if required, the compensation to be received by the external
      auditors of the Company in connection with all audit services, and
      non-audit services, to be performed by the auditors;                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (b)                                                      | the compensation to be received by any legal, financial
      or other advisors or consultants engaged by the Committee to assist it in
      performing its duties and responsibilities hereunder; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (c)                                                      | the appropriate funding for the ordinary administrative
      expenses of the Committee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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ARTICLE 4  GENERAL

|4.1 | The Committee will:                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                      
|    | (a)                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                      
|    | (b)                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                      
|    | (c)                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                      
|    | (d)                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                      
|4.2 | No member of the Committee will receive any compensation
      from the Company, other than fees for being a director of the Company, or
      a member of a committee of the Board.                                                                 
|    |                                                                                                                                                                                                                                                      
|4.3 | In addition to the foregoing, the Committee will perform
      such other duties as may be assigned to it by the Board from time to time
      or as may be required by any applicable stock exchanges, regulatory
      authorities or legislation.

Composition of the Audit Committee

Carderos Audit Committee is made up of
the following directors:

|Name           | Independent (Y/N) | Status              
|-------------- | ----------------- | --------------------
|Leonard Harris | Independent       | Financially Literate
|Murray Hitzman | Independent       | Financially Literate
|Stephan Fitch  | Independent       | Financially Literate

Relevant Education And Experience

The experience and education of
each member of the Audit Committee that is relevant to the performance of his
responsibilities as a member of the Audit Committee is as follows: Leonard
Harris: Mr. Harris is a professional engineer with Metallurgy diploma
and 50 years experience in all aspects of mineral processing and mining
operations worldwide, a significant part of which has been in South America. Mr.
Harris spent 16 years with Cerro de Pasco Corporation before joining Newmont
Mining Corporation, where he served as President and General Manager of Newmont
Peru Limited and Vice-President and General Manager of Newmont Latin America.
Mr. Harris was General Manager (involved in construction and operation) of the
Minera Yanacocha gold mine in Peru. Since 1995, Mr. Harris has been a consultant
and director of several small capitalized mining companies including Glamis Gold Ltd., Solitario Resources Inc., Alamos Gold Inc.,
Corriente Resources Inc., Endeavour Silver Corp. and Cardero. In such roles, he
has had extensive experience with the review and understanding of the accounting
principles relevant to the financial statements of public natural resource
companies, including companies comparable to Cardero.

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Murray Hitzman: Dr. Hitzman received BA degrees
in Earth Science and Anthropology from Dartmouth College in 1976, an MS in
geology from the University of Washington, Seattle in 1978, and a Ph.D. from
Stanford University in 1983. Dr. Hitzman began work in the mining industry with
Anaconda in 1976 at the Yerington porphyry copper mine in Nevada and
subsequently worked for Anaconda in Alaska from 1977 through 1982. From 1982
through 1993, Dr. Hitzman worked throughout the world for Chevron Resources
Company and initiated and managed base and precious metal exploration projects
in Papua New Guinea, Brazil, Spain, Ireland, France, Germany, Italy, Tanzania,
Canada, and the United States. In 1990 he discovered the Lisheen
zinc-lead-silver deposit in Ireland. From 1990 through 1993, Dr. Hitzman was
manager of the Lisheen project, guiding it through exploration and
pre-feasibility, including engineering and environmental studies. In 1993, Dr.
Hitzman was named Geological Society of America Congressional Fellow and served
from September, 1993 to August, 1994, on the staff of U.S. Senator Joseph
Lieberman (D - CT) working on natural resource and environmental issues. Dr.
Hitzman was named Executive Branch Fellow by the American Association for the
Advancement for Science/Sloan Foundation during 1994. As the Executive Branch
Fellow he served as a senior policy analyst in the White House Office of Science
and Technology Policy from September, 1994 through March, 1996 specializing in
natural resource, environmental, and geoscience issues. In June, 1996, Dr.
Hitzman became the Charles F. Fogarty Professor of Economic Geology at the
Colorado School of Mines, and in 2000 was named Head of the Department of
Geology and Geological Engineering at the Colorado School of Mines (he stepped
down as such in August, 2007). Mr. Hitzman has been a director of a number of
public companies similar to Cardero and, in such roles, he has had experience
with the review and understanding of the accounting principles relevant to the
financial statements of public natural resource companies.

Stephan Fitch: Stephan Fitch is a co-founder and
a managing director of the London based International Asset Group, Ltd. (IAGL),
a private company which specializes in international merchant banking
activities. He has been involved in a broad range of international corporate
finance/investment banking activities for over 18 years specializing primarily
in start up, venture capital and small-capitalized public companies. Prior to
joining IAGL, Mr. Fitch was co-founder and Executive Vice President of New World
Capital, Inc. New World was established in 1992 and was involved in corporate
finance and investment banking activities throughout Europe and the US. The
firm's activities included the raising of capital from European institutional
investors for small-capitalized US public companies, corporate restructuring,
technology transfers between U.S. high tech companies and European conglomerates
and, numerous M & A/strategic advisory projects. During this time, he
assisted with the purchase and management of Eastern Securities, a fully
licensed, NASD member, and New York City based broker/dealer. Prior to joining
New World, Mr. Fitch co-founded in 1986, Somerset Partners Ltd., a Denver based
partnership specializing in M & A activities. From 1984 to 1986, Mr. Fitch
worked as an assistant research analyst for Cambridge Research and Management
Group, a registered commodities trading advisor, based in Century City,
California. In 1984, Mr. Fitch earned a Bachelor of Arts degree from the
University of California, Los Angeles in Political Science with a specialization
in International Relations. In connection with these activities, Mr. Fitch has
had extensive experience in reviewing, interpreting and assessing financial
statements and the underlying accounting principles, and has been involved in
the development and analysis of internal controls and procedures for financial
reporting.

Reliance on Certain Exemptions

At no time since November 1,
2010, being the commencement of Carderos most recently completed financial
year, has the Company relied on the exemptions in the following sections of MI
52-110:

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- 12 -

|1. | Section 2.4 (De Minimis Non-audit Services);                                              
|-- | ------------------------------------------------------------------------------------------
|2. | Section 3.2 (Initial Public Offerings);                                                   
|3. | Section 3.3(2) (Controlled Companies);                                                    
|4. | Section 3.4 (Events Outside Control of Member);                                           
|5. | Section 3.5 (Death, Disability or Resignation of Audit
      Committee Member);           
|6. | Section 3.6 (Temporary Exemption for Limited and
      Exceptional Circumstances);        
|7. | Section 3.8 (Acquisition of Financial Literacy);
  or                                     
|8. | an exemption from MI 52-110, in whole or in part, granted
      under Part 8 of MI 52-110.

Audit Committee Oversight

At no time since November 1,
2010, being the commencement of Carderos most recently completed financial
year, was a recommendation of the Audit Committee to nominate or compensate an
external auditor not adopted by the Board.

Pre-Approval Policies and Procedures

The Audit Committee is authorized
by the Board to review the performance of Carderos external auditors and
approve in advance provision of services other than auditing and to consider the
independence of the external auditors, including reviewing the range of services
provided in the context of all consulting services bought by Cardero. The
Chairman of the Audit Committee is authorized to approve, in advance, any
non-audit services or additional work which the Chairman deems as necessary and
is required to notify the other members of the Audit Committee of such non-audit
or additional work.

External Auditor Service Fees (By Category)

The aggregate fees billed by the
Companys external auditors in each of the last two fiscal years for
professional services rendered are as follows:

Financial Year Ending
    Audit
      Fees(1)
    Audit Related
      Fees(2)
    Tax
      Fees(3)
    All Other
    Fees(4)October 31, 2011
    $152,000
    $50,000(5)
    $8,000
    $77,000(6)October 31, 2010
    $193,000
    $56,000(5)
    $7,000
    $7,500(6)


(1) The aggregate audit fees billed for the audit of the
financial statements for the fiscal year indicated, including with respect to
the audit of the Companys internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

(2) The aggregate fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Companys financial statements which are not included under the heading
Audit Fees.

(3) The aggregate fees billed for professional services
rendered for tax compliance, tax advice and tax planning. The work performed in
each year was assistance in the preparation and review of Carderos tax
returns.

(4) The aggregate fees billed for products and services other
than as set out under the headings Audit Fees, Audit Related Fees and Tax
Fees.

(5) The services rendered are in connection with the review of
the Companys quarterly financial statement and of its Form 40F and AIF
disclosure documents and management discussion and analysis for the fiscal years
indicated.

(6) The services rendered are in connection with the
consideration of consolidating accounting issues (2011 - $30,000), plan of
arrangement (2011 - $17,000) and the sale of the Pampa de Pongo property in Peru
(2011 - $30,000; 2010 - $7,500).

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